12 June 2025

7 min read

ESG Watch | June 2025 | European Parliament votes to delay CSRD

Logs of wood
ESG Watch | June 2025 | European Parliament votes to delay CSRD
12:33


Key news in this edition:

  • European Parliament votes to delay CSRD implementation deadline.
  • Brazilian Senate backs bill easing environmental oversight for businesses.
  • Texas removes BlackRock from state ESG blacklist.

Editorial

Over the past weeks there has been a noticeable change in the direction of ESG regulation. In Europe, the recent vote to delay key CSRD and CSDDD deadlines has now been followed by discussions about postponing the first wave of CSRD reporting. If confirmed, this would be a significant reset in the EU’s sustainability agenda, as they try to ease pressure on businesses without fully retreating from existing commitments. Relaxing of rules has also taken place in Brazil, where the Senate has approved a bill to relax environmental licensing rules for major projects. Supporters argue it will streamline approvals, but civil society groups warn it could threaten ecosystems and undermine the country’s climate commitments. In the US, Texas has removed BlackRock from its ESG blacklist after the firm stepped back from two global climate alliances. It’s the latest example of the tension between ESG policy and political positioning in American markets.

Some of this month’s coverage returns to key developments from earlier this year, which remain indicators of where ESG regulation is heading. This includes the SEC stepping back from defending its own climate disclosure rule, and — on the other hand — Japan’s adoption of ISSB-aligned standards, seeking to improve disclosure while staying in step with global norms.


European Parliament votes to delay CSRD implementation deadline

On 3 April, the European Parliament voted to postpone certain deadlines for the implementation of the corporate sustainability reporting directive (‘CSRD’) and the corporate sustainability due diligence directive (‘CSDDD’). This decision confirms part of the earlier ‘Omnibus I’ directive, proposed in February 2025, and introduced with the intention to reduce compliance burdens on European companies. The Omnibus package proposed the delayed implementation deadlines and other adjustments to the format and scope of the CSRD and CSDDD requirements. The delays include:

  • EU member states have been given an extra year to transpose the new due diligence requirements into national legislation, extending the deadline to 26 July 2027.
  • The delay of one year also applies to the first tranche of companies affected by the due diligence requirements, which includes EU companies with over 5,000 employees and net turnover of higher than EUR 1.5 billion, as well as non-EU companies with the same turnover or more in the EU, which will only have to apply the rules from 2028.
  • Application of the sustainability reporting requirements has been delayed by two years for the second and third wave of companies, meaning that large companies with more than 250 employees will now report on their social and environmental activities in 2028, and listed small- and medium-sized companies will report from 2029. Large public-interest entities that have already begun reporting for the 2024 financial year are largely unaffected.

In a new and potentially more significant development reported in late May, the European Commission is now considering whether to delay the first wave of CSRD reporting, which currently applies to around 11,000 of the largest companies operating in the EU. While no formal proposal has been tabled, the move would mark a major shift.

So what?

This vote confirms the European Parliament’s commitment to scaling back the CSRD and CSDDD requirements. The decision has been made within a wider global context of significant challenges to corporate sustainability initiatives from political and business figures alike. However, although the Omnibus adjustments have called into question the EU’s overall dedication to corporate environmental and social assessment, it is notable that these changes include delays and adjustments to facilitate implementation, rather than removing the reporting guidance entirely. The EU will continue to encourage voluntary reporting, and large companies will be required to conduct corporate sustainability due diligence and reporting in the near future, if over a delayed timeline.

[Contributor: Emma Shewell]


Brazilian Senate backs bill easing environmental oversight for businesses

On 21 May 2025, the Brazilian Senate voted overwhelmingly in favour of new legislation that would significantly relax the country’s environmental licensing framework. The bill, strongly supported by the agribusiness and infrastructure sectors, is now before the Chamber of Deputies. If passed, it will move to President Luiz Inácio Lula da Silva for approval or veto.

One of the most contentious aspects of the bill is the introduction of the Licence by Adhesion and Commitment, which would allow companies to self-authorise projects without regulatory review. It also establishes a fast-track process for projects deemed strategic by the federal government, such as oil exploration and large-scale infrastructure, while exempting upgrades to existing projects from further scrutiny. In addition, the bill limits the role of indigenous rights bodies to fully demarcated territories and extends the self-licensing model to around 80 percent of all projects, including smaller agricultural and sanitation ventures. Environmental groups have warned that the reforms could weaken protections for ecosystems and indigenous land.

The legislation has been nicknamed the “devastation bill” by environmental activists and journalists in Brazil. In a recent interview, Suely Araújo, the former president of the Brazilian Institute of the Environment, a government agency, described it as “the biggest setback in environmental legislation in the last 40 years”.

So what?

The bill represents the most significant overhaul of Brazil’s environmental licensing system in decades. It could lower regulatory barriers for business, but at the cost of oversight and consultation. Civil society groups have warned the reform will undermine Brazil’s climate pledges to end deforestation by 2030 and reach net zero by 2050. If enacted, the changes could put vulnerable ecosystems and indigenous populations at risk, while damaging Brazil’s credibility in global environmental negotiations.

[Contributor: Nickolas Bruetsch]


Texas removes BlackRock from state ESG blacklist

On 3 June 2025, the Texas Comptroller of Public Accounts announced that asset manager BlackRock would be removed from the state’s list of financial firms accused of “boycotting” the fossil fuel industry. The blacklist was introduced under a 2021 state law, which prohibits state bodies from contracting with firms found to be discriminating against oil and gas companies. BlackRock had been included on the list since August 2022, and consequently barred from managing funds for state-run entities such as the Teacher Retirement System of Texas and other large public portfolios.

Blackrock’s removal follows a number of recent actions taken by the firm, including its exit from the Climate Action 100+ initiative and withdrawal from the Net Zero Asset Managers alliance. The firm also emphasised its continued support for traditional energy, including fossil fuel investments, and recently joined the board of the newly announced Texas Stock Exchange. These steps were cited by the Texas Comptroller’s office as evidence of a “meaningful course correction” by the company.

So what?

BlackRock’s delisting is an indicator of the growing political pressures faced by financial institutions over ESG strategies in the US. Although the firm maintains that it never boycotted fossil fuels, it has shifted its public stance to maintain access to large state contracts. This change may also influence other asset managers currently under scrutiny. Texas, along with 12 other Republican-led states, continues to pursue legal action against major financial firms, alleging antitrust violations tied to climate-aligned investment practices.

[Contributor: Dominik Wilk]


SEC pulls back from defending corporate climate disclosure rule

At the end of March 2025, the US Securities and Exchange Commission (SEC) voted to stop defending its climate disclosure rule in court. The rule, finalised in 2024, requires publicly listed companies to disclose key climate-related information, including Scope 1 and 2 greenhouse gas emissions and material financial risks linked to climate change.

The rule faced immediate legal opposition. Business groups and Republican-led states launched lawsuits, claiming the SEC had exceeded its authority and placed unnecessary burdens on companies. Under its then Democratic leadership, the SEC defended the rule in court, submitting legal briefs and preparing to argue in its favour. Following a shift in leadership, the Commission voted 3–2 along party lines to withdraw from the legal process, and notified the court that it would no longer support the rule's defence.

The regulation was intended to bring the US closer to European standards on corporate climate reporting, although the EU has recently weakened some of its own requirements under corporate pressure.

So what?

The SEC’s retreat signals a broader shift away from federal climate regulation in the US. However, the real-world impact may be limited. Many US companies continue to report climate-related risks voluntarily, either to meet investor expectations or to comply with overseas obligations. States such as California are also introducing their own rules, which are likely to apply to many of the same companies the SEC had sought to cover.

[Contributor: Haddie Hamal]


Japan introduces new sustainability disclosure standards in line with ISSB

Back in March 2025, the Sustainability Standards Board of Japan (‘SSBJ’) published its first set of sustainability-related disclosure standards. The new framework is aligned with guidelines issued by the International Sustainability Standards Board (ISSB) and aims to bring Japan’s corporate sustainability reporting in line with international norms.

The standards consist of three core components: general requirements for applying sustainability standards, general disclosure guidelines, and climate-related disclosure rules. Initially, they will apply to companies listed on the Tokyo Stock Exchange (TSE) Prime Market with a market capitalisation of JPY 2 trillion (USD 13.8 billion) or more. The scope will gradually expand to cover companies with capitalisation thresholds of JPY 1 trillion (USD 6.9 billion), then JPY 500 billion (USD 3.44 billion), before being applied to all Prime Market-listed companies. These companies will be subject to a two-year voluntary compliance period, with mandatory application beginning in March 2027. The SSBJ has also indicated that the standards may later extend to smaller businesses and companies not listed on the TSE Prime Market.

Commentators have praised the new standards as a major step forward, increasing transparency, and the ISSB welcomed the announcement as a step towards ensuring the global comparability of disclosure standards.

So what?

The introduction of these new standards by the SSBJ is likely to be welcomed by international investors, as it is a step towards greater international consistency in corporate sustainability disclosure. For large Japanese firms, the standards provide clarity and are expected to ease investor engagement by reducing the reporting gap between Japan and other markets. The phased implementation will allow time for adjustment, but concerns remain among smaller and mid-sized businesses about the potential expansion of the rules.

[Contributor: James Breen-McDaid] 

 

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