Gibson Dunn ESG: Risk, Litigation, and Reporting Update (May 2025)

Client Alert  |  June 24, 2025

We are pleased to provide you with Gibson Dunn’s ESG update covering the following key developments during May 2025. Please click on the links below for further details.

I. GLOBAL

  1. State Street Global Advisors (SSGA) launches sustainability engagement and voting service

On May 7, 2025, SSGA launched a new opt-in Sustainability Stewardship Service. The Sustainability Stewardship Service was created for clients seeking to prioritize engagement with portfolio companies on sustainability issues. The service incorporates sustainability considerations in proxy voting and engagement in line with SSGA’s 2025 Sustainability Stewardship Service Proxy Voting and Engagement Policy, and across certain key topics, including climate change, nature, human rights, and diversity. The service is available globally to SSGA’s institutional separately managed account clients. The new Sustainability Stewardship Service is in addition to SSGA’s existing proxy voting choice program, which provides eligible clients the option to choose a third-party proxy voting policy (rather than continuing to have SSGA vote in accordance with SSGA’s proxy voting policy).

  1. The Network of Central Banks and Supervisors for Greening the Financial System (NGFS) publishes its first short-term climate scenarios

The NGFS short-term climate scenarios, released on May 7, 2025, provide the first publicly available framework for central banks and other financial institutions to analyze the potential near-term impact of climate change and climate policies on the economy and the financial sector. The scenarios examine how extreme weather events, climate policies, economic trends, and sectoral shifts may affect economies and financial systems over the next five years.

II. UNITED KINGDOM

  1. EU-UK Summit leads to commitment on Emissions Trading Scheme (ETS)

On May 19, 2025, the UK Prime Minister met with the President of the European Council and the President of the European Commission at the inaugural UK-EU Summit and unveiled a Common Understanding that reframes post-Brexit engagement. The UK and EU committed to negotiate a full link between the UK ETS and the EU ETS, coupled with mutual exemption from each side’s Carbon Border Adjustment Mechanism (CBAM), the carbon tax on imported goods. The sectors that are expected to be covered are electricity generation, industrial heat generation (excluding the individual heating of houses), industry, domestic and international maritime transport, and domestic and international aviation. The parties further agreed to explore UK participation in EU electricity trading platforms and to intensify cooperation on hydrogen, carbon capture, use and storage, and decarbonized gases, bolstering North Sea renewables, energy security and future innovation. The EU Commission will now seek out an EU Council mandate. The UK’s consultation on CBAM closes on July 3, 2025.

  1. UK Government launches two consultations on biodiversity net gain (BNG)

On May 28, 2025 the Department for Environment, Food & Rural Affairs (DEFRA) launched two parallel consultations on expanding England’s mandatory BNG regime. The first consultation seeks views on applying a minimum 10% BNG requirement to nationally significant infrastructure projects, which is scheduled to commence in May 2026. This is aimed at ensuring that major infrastructure projects improve biodiversity during the course of their development (i.e., a net gain). The second consultation addresses how BNG operates for minor, medium, and brownfield developments. The reforms are intended to reduce costs for builders while delivering the Environment Act 2021’s biodiversity targets. Both consultations close on July 24, 2025.

  1. UK Government launches Emerging Markets and Developing Economies Investor Taskforce (Taskforce)

On May 15, 2025, the UK government launched its Taskforce, an industry-led forum designed to channel UK private capital into climate-aligned opportunities across Latin America, Asia, Africa and the Caribbean. The Taskforce unites 15 major financial services firms, including insurers, pension funds, asset managers, banks, investment consultants and development finance institutions, with His Majesty’s Treasury and the Foreign, Commonwealth and Development Office. Its mandate is to explore the recommendations of “The UK as a Climate Finance Hub” report into opportunities, such as tailored products, capacity-building, and regulatory reform. The Institutional Investors Group on Climate Change will serve as the Secretariat of the Taskforce.

Other highlights:

  • On May 16, 2025, the UK Government published comprehensive guidance on embedding gender equality, disability, and social inclusion (GEDSI) across all UK International Climate Finance (ICF) programmes. The publication establishes mandatory minimum standards such as requirements to conduct a GEDSI analysis to assess and mitigate risks of exacerbating inequalities and comply with UK legal obligations on equality and non-discrimination. It also sets an overarching ambition that every new ICF intervention be, at a minimum, “GEDSI-empowering.”
  • On May 16, 2025, the UK Government opened an independent review of greenhouse gas removals (GGRs) and issued a Call for Evidence inviting views from all stakeholders on how engineered and nature-based GGR options can help deliver the UK’s statutory net zero goals. The Call for Evidence closed on June 20, 2025.

III. EUROPE

  1. Omnibus Simplification Package (CSRD, CSDDD): New Proposals by European Parliament’s lead rapporteur, Jörgen Warborn, and by the European Council and related discussions; Status update on ESRS revision

The legislative process on the Omnibus Simplification Package is moving further along:

The European Parliament’s lead rapporteur, Jörgen Warborn, published his draft report on June 12, 2025. Inter alia, he suggests deleting the requirement for companies to file mandatory climate transition plans in the Corporate Sustainability Due Diligence Directive (CSDDD) and raising the threshold for both, the CSDDD and the Corporate Sustainability Reporting Directive (CSRD), to companies with more than 3,000 employees and EUR 450 million in net turnover. For a more detailed analysis of the report by the European Parliament’s lead rapporteur, please see our client alert of June 18, 2025. It is expected that the European Parliament will vote on the proposed amendments in October 2025.

On June 23, 2025, the Council of the EU issued a press release briefly outlining its position on the Omnibus Simplification Package. Regarding the CSRD, the Council of the EU introduces a worldwide net turnover threshold of over EUR 450 million, in addition to the European Commission’s proposal to raise the employee threshold to 1,000 employees.

Regarding the CSDDD, the Council of the EU proposes increasing the applicability threshold to more than 5,000 employees and a worldwide net turnover exceeding EUR 1.5 billion. It maintains the proposed limitation of the CSDDD’s due diligence requirements to the company’s own operations, those of its subsidiaries, and those of its direct business partners, but it intends to shift the focus from an entity-based approach to a risk-based one and the companies should now only conduct a more general scoping exercise instead of a comprehensive mapping exercise. The Council of the EU suggests limiting the companies’ obligation to adopt a climate transition plan and postpones this obligation by two years. The Council of the EU also suggests postponing the CSDDD’s transposition deadline by one further year, pushing it back to July 26, 2028 and maintains the European Commission’s proposal to remove the EU harmonised liability regime.

On June 23, 2025, a status report on the revision of the European Sustainability Reporting Standards (“ESRS”) has been published by the European Financial Reporting Advisory Group (EFRAG). According to this report, it is intended to reduce the number of mandatory data points by 50 % or even more. In addition, the ESRS shall, inter alia, be aligned with the International Sustainability Standards Board (ISSB) Standards, there shall be a clear distinction and separation of mandatory and non-mandatory data points and the General Disclosure section (ESRS 2) shall be “drastically reduced” to avoid duplication.

Meanwhile, the EU Ombudsman, Teresa Anjinho, has launched an inquiry into the European Commission’s process for drafting the Omnibus Simplification proposal. While the Commission defends the expedited process as necessary to reduce complexity and implementation costs for companies facing CSRD reporting obligations in 2026, non-governmental organizations have filed complaints alleging insufficient stakeholder engagement and undue influence by fossil fuel interests. The Commission maintains that it used a staff working document—a shorter internal analysis intended to justify urgent proposals in lieu of full impact assessments—based on prior input from CSRD, CSDDD, and EU Taxonomy workstreams. It further cites stakeholder roundtable discussions conducted in February 2025 as a means of collecting targeted feedback on implementation hurdles and points to Directorate-General for Financial Stability, Financial Services, and Capital Markets Union-led outreach, including technical workshops and a stakeholder request mechanism, as evidence of broader engagement across sectors.

Furthermore, the European Central Bank (ECB) issued a statement in which it warned that reducing the scope of the CSRD could lead to systematic and unquantifiable bias due to unverifiable and selective voluntary disclosures. The ECB also opposed excluding financial institutions from the CSDDD, arguing this would weaken risk management and legal clarity. Additionally, it criticized the weakened requirements for implementing climate transition plans, warning that this may lead to increased litigation risks and regulatory fragmentation.

  1. Discussion on entire elimination of the EU’s CSDDD

German Chancellor Friedrich Merz called for a full elimination of the EU’s CSDDD, arguing that a postponement is insufficient, and that the directive imposes excessive regulatory burdens on businesses. This statement followed the German government’s plans in its coalition agreement to eliminate Germany’s own human rights and environmental supply chain due diligence law, the Supply Chain Act. A spokesperson for the German government later softened Merz’s statement and clarified that the goal should be to “streamline” and “de-bureaucratize” the directive rather than eliminate it entirely.

French President Emmanuel Macron echoed Merz’s original stance, explaining that the directive should be taken “off the table” to improve European competitiveness against the U.S. and China.

Belgium and Denmark strongly rejected the proposal, emphasizing the importance of maintaining and strengthening ethical standards in support of Europe’s green transition and calling for smarter, more digitalized, and manageable requirements that align with a competitive business environment.

In the meantime, also the European Parliament’s lead rapporteur Jörgen Warborn emphasized that while the CSDDD must remain in force to avoid a fragmented regulatory landscape across member states, the European Commission’s current simplification proposals do not go far enough.

  1. Corporate Climate Risk: German Court Breaks New Ground in decision on lawsuit brought by Peruvian farmer against German Energy Company

On May 28, 2025, the Higher Regional Court of Hamm, Germany, issued a long-awaited decision in the lawsuit brought by a Peruvian farmer against German multinational energy company RWE AG (RWE), marking a milestone in climate litigation.

The plaintiff claimed that RWE’s historical greenhouse gas emissions had significantly contributed to the melting of Andean glaciers, posing a threat of flooding to his property. Although the court dismissed the claim – finding the risk of damage in this specific case too low – it acknowledged in principle that major corporate emitters can be held liable for climate-related harm.

This ruling is significant: For the first time, a German appellate court explicitly recognized the potential for civil liability in transboundary climate claims. While the judgment sets a high bar for causation and imminence of harm, it underscores the evolving legal landscape in ESG and climate-related litigation.

  1. CSRD / Omnibus “Stop-the-clock” Directive transposition update

Since our last update, Denmark, Estonia, Finland, Hungary, Latvia, Lithuania, Luxembourg, Poland and Sweden have started the legislative process to transpose the Stop-the-Clock Directive into national law. Notably, Luxembourg has started the process even though it has not completed the transposition of the CSRD.

An overview of the current transposition status of CSRD into national laws and the “Stop-the-clock” process under the Omnibus Simplification Package can be found here.

Other highlights:

  • On May 22, 2025, the European Parliament agreed to the European Commission’s proposal to introduce a 50-tonne threshold to the CBAM, which would exempt 90% of importers—primarily small and medium-sized enterprises—from the scope of CBAM rules.
  • On May 27, 2025, the EU Council approved proposed amendments to a regulation on carbon dioxide (CO2) emissions standards for new passenger cars and vans. The amendments provide that compliance with specific emissions fleet targets of car manufacturers for the three years 2025, 2026, and 2027 will no longer be assessed annually, but on the basis of the average performance of each manufacturer over these three years, giving car manufacturers more time and flexibility to comply with CO2 targets and, thus, avoiding significant penalties.

IV. NORTH AMERICA

  1. Recent developments in the Trump Administration’s litigation of laws and regulations addressing climate change and ESG

Following the Trump Administration’s April 8th Executive Order setting forth limits on certain state climate-related initiatives, on April 30, 2025, the Trump Administration filed lawsuits against Hawaii and Michigan seeking to prevent the states from pursuing climate change lawsuits against fossil fuel companies. The Administration’s complaints indicate that the United States filed the lawsuits to ensure the states do not interfere with the Clean Air Act or the Trump Administration’s interpretation of the federal government’s “exclusive authority over interstate and foreign commerce, greenhouse gas regulation, and national energy policy.” The next day, Hawaii filed suit against oil and gas companies in Hawaii Circuit Court alleging that the state suffered harm as a result of the companies’ misrepresentations regarding the impact of fossil fuel products on the climate and sea levels, asserting various causes of action, including negligence, public nuisance, failure to warn, and civil aiding and abetting.

On May 1, 2025, the Trump Administration filed similar lawsuits against the states of New York and Vermont alleging that their climate Superfund laws are preempted by the Clean Air Act and foreign affairs doctrine, violate the Constitution’s limits on extraterritorial regulation, and violate the Foreign Commerce Clause and Interstate Commerce Clause. The complaints allege that the laws, which were enacted in 2024, force out-of-state fossil fuel companies to fund state climate change adaptation projects and attempt “to usurp the power of the federal government by regulating national and global emissions of greenhouse gases” in violation of federal law. Various other cases have been brought challenging these laws.

As discussed in Gibson Dunn’s Transnational Litigation 2024 Year-End Update, courts disagree on whether federal law preempts these state law climate tort claims. Most state courts have concluded that federal law precludes states from using their own law to resolve claims seeking relief for injuries arising from interstate and global greenhouse gas emissions. However, on May 12, 2025, the Colorado Supreme Court joined the Hawaii Supreme Court in holding that these claims are not preempted by federal law. The Supreme Court has yet to weigh in on the issue, and decided not to hear a challenge to these state-law climate suits in March 2025. Our April 2025 ESG Update provides more information on the April 8, 2025 Executive Order that prompted the Trump Administration’s involvement in such litigation.

Additionally, on May 22, 2025, the Federal Trade Commission (FTC) and the U.S. Department of Justice (DOJ) Antitrust Division filed a joint Statement of Interest in a multistate antitrust case against BlackRock, Vanguard, and State Street. The lawsuit alleges that the asset managers used their management of stock in competing coal companies to drive reductions in output, resulting in higher energy prices for consumers. In their joint statement, the FTC and DOJ state that asset managers and other institutional investors may be liable under the Clayton and Sherman Acts when they use their stock holdings for anticompetitive purposes.

  1. Takeaways from the Securities and Exchange Commission’s (SEC) 2025 “SEC Speaks” conference

The annual “SEC Speaks” conference, which provides an update on the current initiatives and priorities at the SEC, took place on May 19 and 20, 2025. The program included remarks from SEC Chairman Paul Atkins and SEC Commissioners Mark Uyeda, Hester Peirce, and Caroline Crenshaw. In his remarks, Commissioner Uyeda reiterated his criticism on dedicating resources to “further attempts to use the SEC’s disclosure regime to achieve social or political goals” and emphasized the SEC’s return to its “core mission of regulating the capital markets.” Commissioner Uyeda also criticized the conflict minerals disclosures under Section 1502 of the Dodd-Frank Act as being ineffective and suggested the rule be re-evaluated. As of the date of publication, the SEC has not responded to the Eighth Circuit with an outline of the actions the SEC plans to take on the final climate-risk disclosure rule.

  1. Texas Governor signs bill increasing ownership thresholds for shareholder proposals under Rule 14a-8 of the Securities Exchange Act of 1934

On May 19, 2025, the Governor of Texas signed into law Senate Bill 1057 (SB 1057), which amends the Texas Business Organizations Code to allow certain publicly traded corporations to implement limitations on shareholder proposals submitted under Rule 14a-8 or the corporation’s advance notice bylaws. The law is set to take effect on September 1, 2025. As discussed in our recent client alert, SB 1057 applies to nationally listed corporations that either (a) have their principal office in Texas or (b) are admitted to a listing stock exchange that has its principal office in Texas or has received approval from the Texas Securities Commissioner. If the listed corporation follows certain requirements (including amending its governing documents and providing notice shareholders in a proxy statement in advance of adopting the amendment), it can require shareholders wishing to submit shareholder proposals to hold at least $1 million or 3% of the corporation’s voting shares and to solicit holders of shares representing at least 67% of the voting power of shares entitled to vote on the proposal. The new legislation, if implemented, would likely impact proponents that historically have advocated for or recommended in favor of ESG-related proposals.

Other highlights:

  • On May 29, 2025, the California Air Resources Board held a virtual public workshop on California’s climate disclosure laws (SB 253, or the Corporate Greenhouse Gas Reporting Program, and SB 261, or the Climate-Related Financial Risk Disclosure Program), discussing the rulemaking process and initial reactions to themes in early feedback received.
  • On May 22, 2025, the U.S. House of Representatives passed the “One, Big, Beautiful Bill,” which proposes repealing significant renewable energy tax credits.
  • On May 28, 2025, DOJ informed the Fifth Circuit that it will engage in new rulemaking regarding the U.S. Department of Labor’s rule allowing fiduciaries to consider ESG and other factors in determining investment options for employee benefit plans, ending its defense of this rule. Our February 2025 ESG Update provides an overview of the Northern District of Texas’ decision to uphold the rule in a related case, Utah v. Micone.
  • Senators Sheldon Whitehouse and Elizabeth Warren have launched an investigation into U.S. banks that have rolled back their climate commitments.
  • The U.S. Department of Energy announced 47 deregulation actions on May 12, 2025, in accordance with President Trump’s executive order, “Zero-Based Regulatory Budgeting to Unleash American Energy.”
  • New York City Comptroller Brad Lander announced that the city’s public pension funds have instructed their asset managers to submit a written plan describing their net zero plans by June 30, 2025.

In case you missed it…

The Gibson Dunn Workplace DEI Task Force has published its updates for May summarizing the latest key developments, media coverage, case updates, and legislation related to diversity, equity, and inclusion.

A collection of our analyses of the legal and industry impacts from the presidential transition is available here.

V. APAC

  1. State Bank of Vietnam (SBV) launches handbook to strengthen green finance and ESG risk management across Vietnam’s banking sector

On May 21, 2025, the SBV, in collaboration with the International Finance Corporation (IFC), launched the Environmental and Social Risk Management System (ESMS) Handbook to guide credit institutions in managing risks aligned with ESG principles. Deputy Governor Dao Minh Tu emphasized that green growth is now a mandatory requirement, especially for developing countries like Vietnam. The Handbook aims to provide practical and specific guidance for credit institutions to implement ESMS-related processes.

  1. EnergyAustralia settles with climate advocacy organization over allegations of “greenwashing”

On May 19, 2025, EnergyAustralia, one of Australia’s largest energy companies, confirmed that it has settled a landmark greenwashing lawsuit with climate advocacy group Parents for Climate, over allegations that the company misled over 400,000 customers by falsely marketing its Go Neutral program as carbon neutral. The program relied on carbon offsets while customers continued using fossil-fuel energy, with EnergyAustralia now acknowledging that offsets are not the most effective way to reduce emissions. The company admitted it should have communicated more clearly the limitations of offsetting and has shifted focus to supporting direct emission reductions. This settlement marks the first Australian case challenging “carbon neutral” marketing and is seen as a turning point in greenwashing litigation. EnergyAustralia has stopped offering the Go Neutral program to new customers and is phasing it out for existing ones.

  1. India consults on draft framework for Climate Finance Taxonomy

On May 7, 2025, the Indian government released a draft Framework of India’s Climate Finance Taxonomy and invited public comments by June 25, 2025. The framework outlines the approach, objectives, and principles that will guide the climate finance taxonomy. The taxonomy aims to facilitate greater resource flow toward sustainable activities that support the country’s 2070 net zero target and its 2030 climate goals and classifies activities into “climate supportive” and “transition supportive” categories to guide investments and prevent greenwashing. It focuses initially on hard-to-abate sectors like iron, steel, and cement, as well as sectors such as power, mobility, buildings, and agriculture.

Other highlights:

  • The Shenzhen Stock Exchange revised the methodology for the ChiNext Index to place greater emphasis on ESG.
  • The Accounting and Corporate Regulatory Authority of Singapore launched a guidebook for sustainability reporting training providers.

The following Gibson Dunn lawyers prepared this update: Lauren Assaf-Holmes, Carla Baum, Mitasha Chandok, Becky Chung, Mellissa Campbell Duru, Sam Fernandez*, Ferdinand Fromholzer, Saad Khan*, Vanessa Ludwig, Babette Milz, Kiernan Panish, Johannes Reul, Meghan Sherley, and Nicholas Tok.

Gibson Dunn lawyers are available to assist in addressing any questions you may have regarding these developments. Please contact the Gibson Dunn lawyer with whom you usually work, the authors, or any leader or member of the firm’s ESG: Risk, Litigation, and Reporting practice group:

ESG: Risk, Litigation, and Reporting Leaders and Members:
Susy Bullock – London (+44 20 7071 4283, [email protected])
Perlette M. Jura – Los Angeles (+1 213.229.7121, [email protected])
Ronald Kirk – Dallas (+1 214.698.3295, [email protected])
Julia Lapitskaya – New York (+1 212.351.2354, [email protected])
Michael K. Murphy – Washington, D.C. (+1 202.955.8238, [email protected])
Robert Spano – London/Paris (+33 1 56 43 13 00, [email protected])

*Sam Fernandez and Saad Khan are trainee solicitors in London and not admitted to practice law.

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