Other Notable Developments

Japan’s Emissions Target: Japan updated its Nationally Determined Contribution under the Paris Agreement, aiming to reduce its greenhouse gas emissions by 60% by 2035 and by 75% by 2040, compared to its 2013 levels.

EU: European Commission Publishes Simplification Omnibus Package

On February 26, 2025, the European Commission (the “Commission”) published the first of its much-anticipated Omnibus Simplification packages (the “Omnibus Package”). The Omnibus Package proposes significant amendments to several sustainability-related EU laws, including the Corporate Sustainability Reporting Directive (“CSRD”), Corporate Sustainability Due Diligence Directive (“CSDDD”), Taxonomy Regulation (“Taxonomy”) and Carbon Border Adjustment Mechanism. The amendments seek to reduce the compliance obligations of the laws in line with the Commission’s goal to reduce overall administrative and regulatory burdens by at least 25% for EU companies and at least 35% for small- and medium-sized enterprises (“SMEs”).

Regarding CSRD, the Commission proposed to increase the thresholds for EU and non-EU companies to be in scope, one expected result of which is that the number of companies subject to CSRD is likely to be reduced by 80%. For companies still in scope of CSRD, the Commission will publish a revised set of European Sustainability Reporting Standards with a significant reduction in the number of specific disclosure requirements under each of the environmental-, social- and governance-related topical standards; the Commission also will no longer publish additional sector-specific reporting standards. Moreover, companies in scope of CSRD will only have to report on their alignment with the Taxonomy if they have over EUR 450 million net annual turnover.

Regarding CSDDD, which imposes obligations on businesses to conduct due diligence to identify, mitigate and prevent harm to the environment and wider society derived from business operations for which they are deemed to be responsible, the Commission has proposed to reduce the scope of due diligence obligations to the activities of a company’s direct business partners. This is subject to the requirement that companies must avoid ignoring evident impacts in relation to indirect business partners, which are business partners in the second tier or beyond in their supply or distribution chains. The proposal also removes the requirement under CSDDD to create an EU-wide civil liability regime overlaying existing Member States’ laws. The requirement to adopt a transition plan will also be aligned with the similar requirement under CSRD.

In a separate Directive, the Commission proposed postponing the application date of CSRD to certain large companies and listed SMEs to 2027 and 2028, respectively, and of CSDDD for the first wave of companies in scope to July 2028. This Directive is expected to pass before the end of 2025.

The Commission’s proposals to amend the main content of CSRD, CSDDD and the Taxonomy will be subject to the regular EU legislative process. At this stage, it is not clear how long this process will take.

For more information, please see our Debevoise In Depth on this topic.

Link:
Simplification Omnibus Package

Hong Kong: Authority Tightens ESG Fund Disclosure Rules for Pension Funds

On February 24, 2025, Hong Kong’s pension regulator, the Mandatory Provident Fund Schemes Authority (“MPFA”), announced a new directive setting out disclosure standards for ESG-related pension funds.

The directive applies to 12 major pension fund managers under the MPFA’s jurisdiction, requiring them to enhance transparency in ESG investment strategies and risk management for investors. In particular, it provides that fund managers must clearly disclose their ESG investment strategies and risk management strategies in brochures, and disclose their progress in annual governance reports, to enable scheme members to evaluate whether the funds’ ESG performance aligns with their expectations. According to MPFA Executive Director Kenneth Chan, a total of 47 ESG-related funds, managing HK$36.6 billion (US$4.71 billion) in assets, will be subject to these rules. Future ESG-themed funds would also need to comply. The MPFA emphasized that proper ESG risk assessment aligns with broader efforts to make Hong Kong’s capital markets more sustainable. While the directive is effective immediately, fund managers have until September 30, 2025 to fully comply.

Additionally, the MPFA will launch the second phase of its “eMPF” platform on March 5, 2025, a centralized digital system that allows pension fund managers to streamline fund operations and to reduce costs and paper usage as part of the MPFA’s sustainability push.

The MPFA, established in 2000, is responsible for supervising the Mandatory Provident Fund system which regulates compulsory, privately managed, and fully funded contribution schemes for employees in Hong Kong. As of the last reported period, it currently includes approximately 4.75 million salaried workers and had a reported total of HK$1.326 trillion (US$170.6 billion) in total assets.

Link:
MPFA Announcement

UK: Regulator Announces Further Delay to Sustainability Disclosure Requirement

On February 14, 2025, the Financial Conduct Authority (“FCA”) announced an additional delay to the application of its Sustainability Disclosure Requirement (“SDR”) to portfolio managers. The FCA had been expected to publish a policy statement on this proposed application of the regime for the second quarter of 2025. The regulator’s announcement comes following a separate September extension of the deadline for fund managers to comply with the regime’s naming and marketing rule.

The SDR was first published in November 2023. The regime categorizes funds using four different labels: sustainability focus, sustainability improvers, sustainability impact, and sustainability mixed goals. The regime also requires fund managers to comply with anti-greenwashing and fund naming and marketing rules promulgated by the FCA. The anti-greenwashing rule and marketing rule went into effect for fund managers on May 31 and December 2, 2024, respectively.

The policy statement is the next step in the process for implementation of the SDR for portfolio managers. The statement is required to incorporate feedback from a public consultation period which ran between April 14 and June 14, 2024. Following feedback from fund managers related to the difficulties of compliance with the SDR, the FCA announced in September 2024 that it would permit certain fund managers “temporary flexibility” until April 2, 2025 to comply with aspects of the naming and marketing rules.

In its latest update, the FCA stated that more time was needed in order to deliver “good outcomes” for consumers and portfolio managers from the SDR, although no target date was provided.

Links:
FCA update
FCA ‘Temporary Flexibility’ for fund managers

Global: Governments Agree on a Strategy to Raise Funds Needed to Protect Biodiversity

Between February 25 and 28, 2025, global biodiversity talks resumed in Rome, with delegations from nearly 150 countries gathering to continue negotiations related to funding international efforts to address nature loss.

At the December 2022 Conference of the Parties (“COP15”) to the Convention on Biological Diversity, delegations concluded the Kunming-Montreal Global Biodiversity Framework (“GBF”). The GBF sets out the international community’s objectives to preserve and restore biodiversity between now and 2030 and towards a broader 2050 vision. When the delegations reconvened for COP16 in October 2024, however, states were unable to agree to either a monitoring mechanism to review countries’ progress towards the objectives, or to the creation of a new global nature fund to close the financing gap.

Two weeks ago in Rome, states parties came to agreements on biodiversity financing and on a set of indicators to measure, monitor, and report global and national progress towards implementation of the GBF. On financing, the parties agreed to establish a mechanism to provide financial resources to developing countries and adopted a Strategy for Resource Mobilization focused on public and private financing and the involvement of multilateral development banks. On monitoring, states agreed on how a set of indicators would be measured and used to ensure all states are tracking progress in a comparable way.

Links:
Kunming-Montreal Global Biodiversity Framework
Convention on Biological Diversity, Press Release
Debevoise In Depth: Guidance for Nature-Related Transition Planning
Debevoise In Depth: Biodiversity 101: A Guide to the Next Frontier in the “E” of ESG

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