July 2025 — EU Climate Law, China’s new green finance taxonomy, California climate disclosure guidance

Regulation is shaping the sustainability agenda and changing the way companies do business in different jurisdictions, but keeping pace with constant regulatory updates has become a mammoth task for businesses and investors. In this recurring series, S&P Global Sustainable1 presents key developments to sustainability regulations and standards from around the world.

 In this month's update, we look at proposals to amend the EU Climate Law, China’s updated green finance taxonomy and guidance for companies reporting under California’s climate disclosure rules.

INTERNATIONAL    EUROPE   ASIA PACIFIC    UNITED STATES AND CANADA

INTERNATIONAL

ISSB proposes amendments to industry-specific sustainability standards

The International Sustainability Standards Board on July 3 published draft amendments to nine of the 77 industry-specific Sustainability Accounting Standards Board (SASB) standards and its climate-related standard IFRS S2. The amendments concern standards for eight industries in the extractives and minerals sector, plus the processed foods industry. They also align metrics in another 41 industries for topics such as water management and workforce health and safety. They also propose updates to industry-based guidance on implementing IFRS S2 and relate to the nine SASB standards and 37 of the 41 industries to improve alignment between the ISSB’s standards and the SASB standards. When applying the ISSB standards, “companies are required to ‘refer to and consider the applicability of’ the SASB standards,” the ISSB said. The proposed amendments are designed to support companies in the application of the ISSB standards, the ISSB said. The consultation is open until Nov. 30. The ISSB plans to issue the amendments in 2026, subject to stakeholder feedback.

EUROPE

European Commission proposes amendment to EU climate law

The European Commission on July 1 proposed an amendment to the 2021 EU Climate Law, setting a target of a 90% reduction in net greenhouse gas (GHG) emissions in 2040 compared to 1990 levels. To achieve the legally binding target, the Commission is planning a set of legislative proposals, including allowing the use of international carbon credits under Article 6 of the Paris Agreement of 3% of the EU’s 1990 net emissions and allowing the use of domestic permanent removals in the EU Emissions Trading System to compensate for residual emissions from hard-to-abate sectors. The Commission also said it was planning to update the EU’s Nationally Determined Contribution, which is its plan for achieving the goals of the Paris Agreement, before COP30, the UN climate conference being held in November. The European Climate Law currently calls for a reduction in net GHG emissions by at least 55% by 2030 compared to 1990 levels and net-zero emissions by 2050. It includes a process for establishing a 2040 target. The Commission on July 21 opened a public consultation on the amendment. The call for comment runs to Sept. 15.

European Commission adopts measures to simplify EU Taxonomy 

The European Commission on July 3 adopted a set of measures to simplify implementation of the EU Taxonomy, following the publication of its Omnibus Simplification Package. Under the measures, companies would have the choice of reporting on activities that are partially aligned with the EU Taxonomy. The measures also introduce a financial materiality threshold of 10% of revenues, capital or operating expenditure for assessing EU Taxonomy eligibility or alignment. They simplify key performance indicators (KPIs) like the green asset ratio for banks, which have the option not to report detailed Taxonomy KPIs for two years. They also simplify reporting tables for companies, reducing the number of datapoints to report by about 64% for nonfinancial companies and by 89% for financial companies.

European Commission approves delay in sustainability reporting for large companies 

The European Commission on July 11 adopted amendments postponing the application of disclosure requirements for large companies required to report under the Corporate Sustainability Reporting Directive (CSRD). The Commission is seeking to simplify the CSRD, which uses a set of disclosure standards called the European Sustainability Reporting Standards (ESRS). Under the current standards, large companies do not have to report on expected financially material sustainability‑related risks for financial year 2024. The amendment will allow them to omit that same information for financial years 2025 and 2026. Furthermore, large companies with more than 750 employees will benefit from most of the same phase‑in provisions that currently apply to companies with up to 750 employees, for financial years 2025 and 2026. The Commission is working on a revision of the ESRS that would substantially reduce the amount of data points that companies are required to report on. It expects to complete the review by 2027.

European Commission holds consultation on simplifying environmental laws 

The European Commission on July 22 launched a call for evidence to simplify the EU’s environmental legislation relating to the circular economy, industrial emissions and waste management. It said its aim is to ease the administration burden on companies and other stakeholders without compromising environmental objectives. The potential measures undertaken would ease reporting requirements such as discontinuing the substances of concern in products database under the Waste Framework Directive; harmonize rules for extended producer responsibility schemes in EU member states; streamline reporting obligations and encourage increased digital reporting; and address permitting challenges related to environmental impact assessments. The call for comment runs to Sept. 10. Feedback will form the basis of a legislative proposal in the fourth quarter of 2025. The consultation comes after the Commission proposed on Feb. 26, 2025, simplifying the EU’s sustainable finance reporting framework, as part of the Commission’s bid to reduce the overall reporting burden for companies by at least 25% and for SMEs by at least 35% by the end of the Commission’s current mandate in 2029.

EU advisor issues draft changes to EU sustainability reporting standards 

The European Financial Reporting Advisory Group (EFRAG), which serves as technical adviser to the European Commission, on July 31 announced the publication of draft changes to the ESRS. The revisions streamline the double materiality assessment, which considers both a company’s internal value creation and its external impact on the environment and society. They also reduce overlaps across standards, clarify language and structure, and remove all voluntary disclosures. Mandatory datapoints have been cut by 57%, and the full set of disclosures, both mandatory and voluntary, was reduced by 68%. The overall length of the standards has been shortened by more than 55%, making ESRS easier to implement, EFRAG said. A comment period is open until Sept. 29, 2025.

ASIA-PACIFIC

China launches updated green finance taxonomy

Chinese financial regulators on July 14 issued the publication of China’s new green finance taxonomy, the Green Finance Endorsed Project Catalogue. The catalogue merges China’s existing taxonomy regulations on green loans and green bonds. Loans approved but not issued before the catalogue’s publication will be subject to the previous standards, as will bonds that have already been approved or registered, the People’s Bank of China, the National Financial Regulatory Administration and the China Securities Regulatory Commission said in a statement. Issuers that have not yet received approval or registration for a bond issue can choose whether to use the historical standards or the catalogue. The updated taxonomy covers projects across a wide range of industries and objectives, including energy conservation and carbon reduction, environmental protection, resource recycling, green and low-carbon energy transition, ecological protection and restoration, green infrastructure upgrades, as well as green services and trade, the government said. The catalogue will come into effect on Oct. 1, 2025.

Nepal holds consultation on adoption of global sustainability disclosure standards

Nepal’s Accounting Standards Board on July 16 launched a consultation on the development of sustainability-related disclosure standards aligned with the two disclosure standards developed by the International Sustainability Standards Board (ISSB), IFRS S1 and IFRS S2. The board said the adoption of the Nepal Sustainability Reporting Standards would help the country reach its goal of achieving net-zero emissions by 2045, open access to capital for Nepalese companies and respond to investor demand for consistent and comparable sustainability information. The board is seeking information on the benefits or concerns about adoption of the standards for Nepalese companies, specific challenges unique to the Nepalese market and how the board can support stakeholders in adoption of the standards.

Australia opens consultation on amendments to Modern Slavery Act 

Australia's Attorney General on July 21 opened a consultation on amendments to the 2018 Modern Slavery Act, which requires companies based or operating in the Australian market with an annual revenues of at least A$100 million to submit annual statements about how on they address modern slavery risks in their operations and supply chains. The consultation comes after a review, which made several recommendations to the government on strengthening the act. The proposed amendments include introducing civil penalties for noncompliance and streamlining voluntary reporting. They also clarify criteria on reporting modern slavery risks, including monitoring the effectiveness of companies’ assessments, introducing a new criterion to require an entity to report on grievance mechanisms and a separate criterion requiring a company to report on what action it is taking to remediate modern slavery incidents.

Philippines markets regulator releases draft sustainability reporting standards

The Philippines Securities and Exchange Commission on July 30 issued draft sustainability reporting standards based on the ISSB standards and draft reporting guidelines for publicly listed companies and large non-listed firms. Companies with a market capitalization of more than 50 billion Philippine pesos will be required to start reporting in 2027 for financial year 2026. Companies with a market capitalization of more than 3 billion Philippine pesos and up to 50 billion Philippine pesos will be required to start reporting in 2028 based on financial year 2027. Companies with a market capitalization of 3 billion Philippine pesos or less and large non-listed firms with annual revenue of more than 15 billion Philippine pesos are required to start reporting in 2029 for financial year 2028. The first two groups of companies are permitted to disclose information on only climate-related risks and opportunities for the first year of reporting, and the third group will receive this allowance for the first two years. Companies will be allowed a two-year delay to disclose Scope 3 emissions, or those up and down their supply chains.

UNITED STATES AND CANADA

California regulator issues guidance on implementation of climate disclosure rules

The California Air Resources Board (CARB) on July 9 issued guidance on how companies should implement the state’s two climate disclosure rules enacted in 2023. The guidance clarifies which companies should report to the rules, including those that are “commercially domiciled” in California and those that have sales in the state exceeding $735,019 in 2024. Companies reporting under California’s SB-253 Climate Corporate Data Accountability Act are required to report Scope 1 and Scope 2 emissions from 2026 at a date to be determined by CARB, the regulator said. They will also be required to obtain independent third-party assurance for their Scope 1 and Scope 2 emissions at a limited-assurance level beginning in 2026 and at a reasonable-assurance level beginning in 2030, CARB said. Companies reporting under California’s SB-261 Greenhouse gases: climate-related financial risk must publish their first climate-related financial risk report by Jan. 1, 2026, and then every two years after that. CARB said it will open a public docket from Dec. 1, 2025, to July 1, 2026, for companies to post the link to their first climate-related financial risk report. To help companies phase in the rules, the disclosures may be based on the best available information, including 2023 to 2024 or 2024 to 2025 fiscal years.