Practice News:
- Leah Malone, Head of Sustainability and ESG Practice, and Karen Hsu Kelley, Head of Public Company Advisory Practice, to speak at Cornell Tech event, Proxy Season Preview: Insights for a Successful Season, on Thursday, January 30 at 12:00 p.m. ET. For additional information and to register, see here.
- Leah Malone to speak at PLI program, ESG Considerations for Asset Managers – The Emerging Regulatory Framework Applying to Investment Funds and Investment Advisers 2025 on Monday, February 10 at 1:00 p.m. ET. For more information and to register, see here.
- Leah Malone, together with Simpson Thacher partners Joseph Kaufman and Karen Hsu Kelley, and Sustainability and ESG Counsel Emily Holland, authored Fifth Circuit Vacates SEC’s Approval of Nasdaq Board Diversity Rules, published by the Harvard Law School Forum on Corporate Governance.
- Leah Malone, quoted in Bloomberg Law article, “Corporate DEI Programs Recoil and Rebrand as Pressure Mounts.”
- Leah Malone and Partner Erica Rozow and Senior Counsel George Gerstein published a client memo, Texas District Court Finds ESG Elements of American Airlines’ 401(k) Plans Violate ERISA Fiduciary Duties.
- Sustainability and ESG team published an alert, Business and Human Rights Regulation: Where Are We Headed?, detailing recent business and human rights-specific regulatory developments, as well as what to watch in 2025.
Upcoming Reporting Deadlines:
Americas
Texas District Court Finds American Airlines in Breach of ERISA Fiduciary Duties
On January 10, in a noteworthy district court decision related to the ERISA duty of loyalty in the context of hiring an investment manager with outspoken ESG views, the U.S. District Court for the Northern District of Texas held that American Airlines and its employee benefits committee breached their ERISA fiduciary duty of loyalty by hiring a 401(k) investment plan manager that pursued ESG-related interests and held a significant percentage of American stock, and by pursuing corporate ESG-related goals. The Court has requested that parties submit supplemental briefs on potential damages and remedies by January 31. For additional information, see our client memo.
California Air Resources Board Solicits Information for Climate Disclosures Implementation
On December 16, the California Air Resources Board (CARB) issued an Information Solicitation with respect to the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Act (SB 261). CARB requests feedback from stakeholders on questions relevant to their drafting of regulations to implement the climate disclosure laws, including regarding the definition of “doing business in California,” potential standardization of greenhouse gas (GHG) emissions reporting, frequency of reporting and the scope of reporting that entities are currently subject to, among other targeted questions and topics. CARB is gathering feedback under this Solicitation through February 14, and is obligated under SB 219 to publish regulations on the climate disclosure laws by July 2025.
SB 253 and SB 261 remain subject to ongoing litigation in the U.S. District Court for the Central District of California. For additional information on scoping and reporting requirements for California’s climate disclosure laws, please see our alert.
37 Entities Added to UFLPA Entity List in Largest Single Expansion to Date
On January 14, the U.S. Department of Homeland Security (DHS) announced the addition of 37 PRC-based companies to the Uyghur Forced Labor Prevention Act (UFLPA) Entity list–the largest single expansion to date. Listed entities cover a range of industry sectors, including 26 entities in the cotton sector, textile manufacturers, companies that mine and process Xinjiang critical minerals, silicon materials producers, and solar/green energy companies or input manufacturers. The UFLPA Entity List now contains 144 entities. From January 15, UFLPA’s rebuttable presumption that all goods produced by these entities were made with forced labor (and thus prohibited from entry) will apply, unless the presumption is rebutted with clear evidence. For additional information on UFLPA, see our alert.
Wall Street Banks Cleared by Texas AG After Leaving NZBA
On January 7, Texas Attorney General Ken Paxton announced the closing of his review of three major U.S. banks under Texas’ anti-boycott statute (SB 13)–which prohibits state governmental entities from contracting with financial companies that engage in boycotts against fossil fuel-based energy industries. The banks were being reviewed by the state AG to investigate whether they were engaged in the statutorily prohibited boycotting behavior, in part through their activities as members of the Net-Zero Banking Alliance (NZBA). These three banks recently withdrew from NZBA, which Paxton cited as the reason for closing the state’s review. Six large U.S. banks have departed NZBA in 2025 thus far.
USTR Publishes First U.S. Trade Strategy to Combat Forced Labor
On January 13, the U.S. Trade Representative (USTR) released the U.S. Government’s Trade Strategy to Combat Forced Labor—the first time the U.S. Government has set forth a comprehensive approach to using trade tools to combat forced labor in traded goods and services. The Strategy identifies four goals and related priority actions for utilizing existing and potential new tools to address forced labor, including: improved implementation/enforcement of Section 307 of the Tariff Act of 1930/the Uyghur Forced Labor Prevention Act (e.g., streamlining UFLPA Entity List additions, examining the current de minimis rule); seeking improvements on alignment with worker protection provisions of free trade agreements, including the U.S.-Mexico-Canada Agreement (USMCA); supporting work under the National Action Plan on Responsible Business Conduct to advance enforcement of public procurement requirements; elevating forced labor issues at the World Trade Organization; and enhanced multilateral action with trade partners to address forced labor issues. For additional information on trade-related means to combat forced labor in the U.S. and globally, see our recent alert.
Canada CSSB Releases IFRS-Based Sustainability and Climate Reporting Standards
On December 18, the Canadian Sustainability Standards Board (CSSB) published finalized Canadian Sustainability Disclosure Standards (CSDSs). CSDS 1, General Requirements for Disclosure of Sustainability-related Financial Information, and CSDS 2, Climate-related Disclosures, are voluntary sustainability disclosure standards largely aligned with IFRS S1 and S2, with additional transition relief timing relative to IFRS. The transition relief changes result in CSDS 1’s beyond climate-related disclosures initial annual reporting period beginning January 1, 2027 and CSDS 2’s quantitative scenario analysis and Scope 3 GHG emissions requirements initial annual reporting period beginning January 1, 2028. The CSDS are currently voluntary.
California Social Compliance Audit Reporting Law Takes Effect
As of January 1, California’s AB 3234 has taken effect, requiring California employers that voluntarily subject themselves to social compliance audits, either in whole or in part, to determine whether child labor is involved in the employer’s operations or practices, to report on child labor findings from those audits. See our alert on recent developments in business and human rights for additional information.
California VCCs Diversity Reporting Period Begins
On January 1, the first reporting period under California’s Fair Investment Practices by Investment Advisers Act, as amended by SB 164 in 2024, began. Covered venture capital companies (VCCs) must annually report diversity data about the founding teams of the businesses in which they invest, beginning with investments made from January 1, 2025. The first reports will be due by April 1, 2026, with initial registration required prior on March 1, 2026 (a year later than originally proposed in SB 54).
EU/U.K.
EU Forced Labor Regulation Enters into Force, with Requirements Beginning in 2027
On December 13, the EU’s Forced Labor Regulation entered into force, one day after being published in the EU’s Official Journal. The Regulation bans economic operators from placing or making available (including online and by other means of distance sales) products made with forced labor in whole or in part, at any stage of its extraction, harvest, production or manufacture, which includes in the working or processing related to a product at any stage of its supply chain, on the EU market, or exporting such products (see press release). The Regulation will apply from December 14, 2027. For additional information on this and other forced labor-related regulatory regimes, see our recent alert.
Platform on Sustainable Finance Publishes Proposal for Categorization of Products under SFDR
On December 17, the Platform on Sustainable Finance, an advisory body to the European Commission, published its recommendations for a categorization scheme for sustainable finance products. The Platform recommends categorizing products according to their overarching sustainability objective: (i) Sustainable, including products that make contributions through Taxonomy-aligned investments or sustainable investments with no significant harmful activities, or assets based on a more concise definition consistent with the EU Taxonomy; (ii) Transition, including investments or portfolios supporting the transition to net zero and a sustainable economy, avoiding carbon lock-ins, in line with the EU Commission’s recommendations on facilitating finance for the transition to a sustainable economy; and (iii) ESG collection, which excludes significantly harmful investments and activities and focuses on investing in assets with better environmental and/or social criteria or applying various sustainability features. All other products should be identified as unclassified products.
European Commission Sends Reasoned Opinion to Sweden on Incorrect CSRD Transposition
In December 2024, the European Commission sent a reasoned opinion, i.e. a formal request to comply with EU law, to Sweden for failing to correctly implement the start date for reporting periods under CSRD. The legislation as transposed by Sweden effectively delayed implementation for the first group of in-scope companies by a year, by requiring disclosure in management reports in respect of financial periods beginning on or after July 1, 2024, rather than January 1, 2024, as had been set out under the Directive. The Commission noted that by delaying the implementation of the first wave of reporting, Sweden risks creating an unlevel playing field between EU companies in different Member States. Sweden will have until February 2025 to respond and address the shortcomings raised. In the absence of a satisfactory response, the Commission may decide to refer the case to the Court of Justice of the European Union.
U.K. Modern Slavery Act 2015 Developments
Following a call for evidence launched in February 2024, in October 2024, the House of Lords Modern Slavery Act 2015 Committee published its report “The Modern Slavery Act 2015: becoming world-leading again,” which included various recommendations on potential future changes to the Act, such as requiring in-scope companies to undertake modern slavery due diligence in their supply chain. Following the Committee’s report, the U.K. Government issued its response in December 2024, accepting many of the committee’s recommendations.
Contemporaneously, the U.K. has introduced amendments to the Modern Slavery Act 2015 through the Illegal Migration Law 2023 and via the recently introduced Employment Rights Bill 2024-25. Although these changes are still pending, they are reflective of the U.K. Government’s overall aim to update the Act to bring the U.K. back to the global forefront of driving for change and becoming a world leader on the fight against modern slavery.
EFRAG Publishes Voluntary Sustainability Reporting Standard for Non-Listed SMEs
On December 17, 2024, the European Financial Reporting Advisory board (EFRAG) released the VSME, i.e. the voluntary reporting standard for non-listed micro, small, and medium sized companies (SMEs). The VSME is designed for companies that are not within the mandatory reporting scope of the CSRD and are seeking to standardize the various ESG data requests and questionnaires. EFRAG will launch a series of initiatives during 2025 to complement the VSME with digital online tools, additional support guidance and educational materials, outreaches, awareness raising events, and monitoring of emerging tools and platforms. These initiatives are intended to facilitate the uptake of the VSME by SMEs and strengthen market acceptance.
EBA Publishes Guidelines on the Management of ESG Risks
On January 9, pursuant to obligations under the EU Capital Requirements Directive, the European Banking Authority (EBA) published final guidelines on the management of ESG risks by financial institutions. The guidelines acknowledge that ESG risks, and in particular environmental risks through transition and physical risk drivers, pose challenges to institutions, and set out requirements for the internal processes and ESG risk management arrangements that institutions should have in place in response. Under the guidelines, institutions should conduct regular and comprehensive materiality assessments of ESG risks to ensure that they are able to properly identify and measure those risks, as well as integrate them into the regular risk management framework and processes, including in the company’s risk appetite, internal controls and internal capacity adequacy assessment process (ICAAP). The guidelines will apply from January 11, 2026, with a one year delay for small and non-complex institutions.
AMEA
Hong Kong Institute of Certified Public Accountants Publishes Sustainability Disclosure Standards
On December 12, the Hong Kong Institute of Certified Public Accountants (HKICPA) published Hong Kong Financial Reporting Standards Sustainability Disclosure Standards, which are fully aligned with the International Financial Reporting Standards Sustainability Disclosure Standards (ISSB Standards), with an effective date of August 1, 2025. The Hong Kong Standards consist of S1 – General Requirements for Disclosure of Sustainability-related Financial Information and S2 – Climate-related Disclosures and provide a standardized framework for enhancing the consistency and comparability of corporate sustainability reports in Hong Kong. On December 10, 2024, the Hong Kong government launched a roadmap for publicly accountable entities (PAEs) to adopt the standards. The HKICPA will host a webinar on the Hong Kong Standards on January 16 and has published corresponding FAQs.
Australia’s First Mandatory Climate Disclosure Reporting Period Begins
On January 1, Australia’s first mandatory climate disclosure reporting period began. Under the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, the largest covered entities (with revenue of $500M AUS or more, end of FY gross assets of $1B AUS or more, and end of FY employees of 500 or more) must prepare annual climate-related financial disclosures. The mandatory disclosure regime will be rolled out in a phased in approach, with additional covered entities being required to begin reporting for reporting periods on or after July 1, 2026, and the final group of covered entities being phased in for annual reporting periods on or after July 1, 2027. For additional information, the Australian Securities & Investments Commission has created a sustainability reporting guidance webpage, available here.
New Zealand Financial Markets Authority Publish Reports on Climate Statements and Disclosures
On December 3 and December 4, 2024, New Zealand’s Financial Markets Authority (FMA) published its reports reviewing the first group of climate statements and climate-related disclosures (CRDs) from climate-reporting entities (CREs). Both reports assess compliance with the Aotearoa New Zealand Climate Standards disclosure requirements (NZ CS 1, 2, and 3). The report on climate statements contains nine key insights for CREs to improve disclosures in future climate statements, while the report on climate-related disclosures identifies ten significant areas of improvement for CREs to consider, as well as some additional technical aspects. Looking ahead, the FMA will begin monitoring climate statements for reporting periods beginning on or after January 1, 2024, in May 2025. Initial feedback will be given directly to CREs, with future monitoring reports only to be published if the FMA deems it appropriate.
New Zealand External Reporting Board Releases Guidance on Climate Transition and Reporting
On December 16, 2024, the External Reporting Board (XRB) released the Climate Transition Planning (CTP) overview and guide for executives. CTP refers to entities repositioning and transforming their business models in response to climate-related risks and opportunities. Examples of transition planning include decarbonization roadmaps and risk assessment and management. The CTP guide provides practical guidance on how executives can leverage their skillset and apply familiar tools to plan, lead, and execute in uncertain situations. The XRB also published a document on differential climate-related reporting, which refers to the ability of climate standards to differ in time and circumstance, or to have general or specific application. XRB plans to consult on Aotearoa New Zealand Climate Standards (NZ CS) and will begin its comprehensive post-implementation review (PIR) of NZ CS by the end of 2025. The PIR aims to determine whether the principle-based manner in which NZ CS was written was able to meet users’ needs.
China Aims to Establish Unified Sustainable Disclosure Standards by 2030
On December 18, 2024, officials from the PRC’s Ministry of Finance answered questions from reporters on the recently issued “Pilot Version of China Corporate Sustainability Disclosure Standards - General Standards” (Standards) (Q&A available in Chinese here, Standards available in Chinese here). The Ministry of Finance of China, along with eight other ministries, jointly issued the Standards in November, aiming to standardize the disclosure of sustainable development information by enterprises. The standards include the introduction of disclosure objectives and principles, information quality requirements, elements of disclosure, and other requirements, with a phased implementation strategy focusing on listed companies and large enterprises before expanding to unlisted companies and smaller firms. The overall goal is to have a unified national sustainable disclosure criteria system by 2030, starting with the establishment of basic standards for corporate sustainable disclosure, climate-related disclosure standards, and application guidelines by 2027. The standards also clarify that enterprises are encouraged to implement these requirements on a voluntary basis.
Standards
GRI Finalizes Banking, Capital Markets, and Insurance Sector Standards
In January 2024, the Global Reporting Initiative (GRI) finalized the draft Banking, Capital Markets and Insurance Sector Standards aimed to directly assist the various financial services companies that report under GRI frameworks. These standards are established as part of GRI’s overall Sector Standards Project for Financial Services and are developed by 13 financial services experts representing civil society, business enterprises and investment institutions. These draft standards will be reviewed at the Global Sustainability Standards Board meeting on January 23, with an opportunity for the public to join live. Following this meeting, a public consultation period will commence in March 2025 and the standards are expected to be finalized in Q2 of 2026.