Other Notable Developments

EFRAG Releases Briefing on Non-EU ESRS: The European Financial Reporting Advisory Group (which provides technical advice to the European Commission) released a briefing on future planned European Sustainability Reporting Standards for non-EU groups in scope of CSRD from their 2028 financial years. The briefing indicates the direction of travel for these future standards, including a focus on impact materiality only, and an intention to avoid double counting between these and ISSB standards.

U.S.: SEC Proposes to Rescind Climate Disclosure Rules

On May 29, 2026, the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”) proposed to rescind in their entirety its Climate-Related Disclosure Rules (the “Rules”). The proposed rescission follows the SEC staff’s May 4 submission to the Office of Information and Regulatory Affairs of a proposed rulemaking entitled “Rescission of Climate-Related Disclosure Rules” and the SEC’s May 7 notification to the U.S. Court of Appeals for the Eighth Circuit (the “Eighth Circuit”) that the Commission would not renew its defense of the Rules.

In a statement accompanying the proposal, the SEC wrote that the Rules exceed its statutory authority. The Commission also cited independent policy grounds for rescission, including that the Rules, in the Commission’s view, are unnecessary and inconsistent with a registrant-specific, materiality-based disclosure framework; extend beyond the policy concerns of federal securities laws; impose costs not justified by their informational benefits; and conflict with the Commission’s objectives of facilitating capital formation and promoting public company status. In announcing the proposed rescission, SEC Chair Paul S. Atkins observed: “SEC disclosure obligations should comply with the Commission’s statutory authority, be guided by materiality as the North Star, avoid the practical effect of dictating corporate behavior, and be imposed only when the expected benefits justify the likely costs and burdens.”

Adopted in March 2024, the Rules required registrants, including foreign private issuers, to disclose climate-related information in registration statements and annual reports, including information regarding greenhouse gas emissions, climate-related risks and, in certain cases, the financial statement effects of severe weather events and other natural conditions. The Rules were quickly challenged in multiple federal courts, and the petitions were consolidated in the Eighth Circuit. In April 2024, the SEC stayed the Rules pending judicial review. In March 2025, the SEC voted to end its defense of the Rules, and in September 2025, the Eighth Circuit held the consolidated petitions in abeyance until the Commission either reconsidered the Rules through notice-and-comment rulemaking or renewed its defense.

The proposed rescission was published in the Federal Register on June 3 and has been assigned File No. S7-2026-19. The public comment period will remain open through August 3, after which the SEC will determine whether to take the final action as proposed.

Regardless of the SEC’s actions related to the Rules, California’s Climate Corporate Data Accountability Act—known as SB 253—will require many large companies doing business in California to disclose certain direct and indirect greenhouse gas emissions to the California Air Resources Board by August 10, 2026. Similar laws are under consideration in other states, including New York, New Jersey, Illinois, Colorado and Washington.

Links:
SEC Proposed Rule: Rescission of Climate-Related Disclosure Rules
SEC Press Release: SEC Proposes Rescission of Climate-Related Disclosure Rules

U.S.: EPA Moves to Roll Back Biden-Era PFAS Drinking Water Standards

On May 20, 2026, the Environmental Protection Agency (the “EPA”) announced two proposed rules that would scale back the scope and implementation timeline of the federal government’s first-ever drinking water limits on perfluoroalkyl and polyfluoroalkyl substances (“PFAS”), commonly known as “forever chemicals.” The Biden administration finalized those standards in 2024, establishing enforceable limits for certain PFAS compounds after the EPA linked long-term exposure to adverse health effects, including cancer, immune system suppression, and developmental delays.

Under the first proposed rule, titled “Rescission of Regulatory Determinations and Removal of Related Provisions for Four PFAS Substances (PFHxS, PFNA, HFPO-DA (GenX), and the Mixture of These Three PFAS Plus PFBS),” the EPA would rescind the regulatory determinations and regulations on four PFAS substances and a mixture of PFAS plus perfluorobutane sulfonic acid. Standards for the remaining two regulated compounds—perfluorooctanoic acid (“PFOA”) and perfluorooctane sulfonic acid (“PFOS”), two of the most studied PFAS—would remain at the current maximum contaminant level (“MCL”) of 4.0 parts per trillion.

The second proposed rule, titled “Extending the Compliance Deadline for the PFOA and PFOS Maximum Contaminant Levels,” would establish a federal exemption framework allowing eligible public water systems to request a two-year extension of the compliance deadline for the PFOA and PFOS MCLs, from April 2029 to April 2031. The EPA has stated that the proposal would not alter the underlying 4.0 parts per trillion MCLs for PFOA and PFOS, and that monitoring and reporting requirements would continue to apply under the 2024 rule. Public comments on both proposed rules are due by July 20, 2026, and the EPA has scheduled a virtual public hearing for July 7, 2026.

The decision has drawn criticism from environmental groups, who argue that rescinding the limits may violate the Safe Drinking Water Act’s anti-backsliding provision, which prohibits the weakening of established standards. Conversely, these roll backs will likely be welcomed by the chemical manufacturers and water utilities that had already challenged aspects of the 2024 PFAS regulations in court. If finalized, the proposed rules are likely to intensify litigation over the EPA’s authority to revisit recently issued drinking water standards and the process required to regulate emerging contaminants under the Safe Drinking Water Act.

Links:
Proposed EPA Rule - Rescission of Regulatory Determinations and Removal of Related Provisions for Four PFAS Substances (PFHxS, PFNA, HFPO-DA (GenX), and the Mixture of These Three PFAS Plus PFBS)
Proposed EPA Rule - Extending the Compliance Deadline for the PFOA and PFOS Maximum Contaminant Levels
EPA Advances Comprehensive PFAS Strategy with Legally Defensible, Practical, Scientifically Sound Drinking Water Protections

U.S.: Four States Sue Advisory Firm Institutional Shareholder Services Inc.

On May 20, 2026, the attorneys general of Texas, Nebraska, Iowa and West Virginia filed lawsuits against proxy advisory firm Institutional Shareholder Services Inc. (“ISS”), alleging that ISS violated state consumer protection and deceptive trade practices laws through its integration of ESG and DEI considerations into its recommendations.

ISS advises institutional investors, including pension funds, mutual funds and insurance companies, with respect to their shareholder votes on corporate resolutions. Along with Glass, Lewis & Co., LLC (“Glass Lewis”), ISS is one of the two most prominent firms in the proxy advisory market. These lawsuits follow a similar claim brought by the attorney general of Florida in November 2025 against both ISS and Glass Lewis.

The lawsuits’ arguments are broadly aligned and assert that ISS:

• falsely marketed its services as objective while deceptively prioritizing ESG ideology over clients’ financial interests;
• failed to conduct adequate cost-benefit or financial analysis on behalf of shareholders; and
• failed to disclose various alleged conflicts of interest, including with respect to its owners, Deutsche Börse AG and General Atlantic, which the suits allege are committed to ESG activism.

These developments are in line with the Trump administration’s renewed focus on the influence of proxy advisors, following a December 2025 executive order calling for increased oversight of proxy advisory firms, including ISS and Glass Lewis.

Links:
Texas Filing
Nebraska Filing
Iowa Filing
West Virginia Filing
Executive Order: Protecting American Investors From Foreign-Owned And Politically-Motivated Proxy Advisors

EU: European Commission Proposes ETS Benchmark Updates Expected to Increase Free Allowances by €4 Billion

On May 11, 2026, the European Commission announced proposed updates to the benchmark values used to determine free allocation of allowances under the EU Emissions Trading System (the “ETS”) for the 2026–2030 period. As these benchmark values are used to calculate the number of free allowances allocated to covered installations, changes to the benchmarks will directly impact the volume of free allowances companies receive. If adopted, the updated benchmarks could have an estimated financial impact of approximately €4 billion for covered European industries through increased free allowances.

The ETS is the EU’s cap-and-trade carbon market, designed to reduce greenhouse gas emissions from covered sectors, including power generation, manufacturing, and aviation. Under the system, the EU sets an overall cap on emissions, and companies must hold or purchase allowances, each representing the right to emit one ton of carbon dioxide equivalent. A portion of these allowances is allocated for free, based on product-specific emissions benchmarks that are required to be updated every five years.

Key features of the proposed updates include the following:

• Continued coverage of indirect emissions from electricity use. To support industrial competitiveness and incentivize electrification, the Commission has proposed maintaining coverage of indirect emissions from electricity consumption across 14 product benchmarks. According to the Commission, this approach is expected to result in higher benchmark values and approximately €4 billion in additional free allocations over the 2026–2030 period.
• Continued free allocation at approximately 75%. In response to industry concerns, the Commission confirmed that covered companies will continue to receive free allocations covering approximately 75% of emissions on average.
• Potential future sector-specific fallback benchmarks. The Commission indicated that, as part of its forthcoming review of the ETS, it intends to propose sector-specific fallback benchmarks in response to concerns raised by certain industrial sectors.

The proposed updates will be subject to a four-week consultation period with stakeholders and EU Member States before adoption. The Commission aims to finalize the new benchmark values by the end of June 2026.

Links:
European Commission Press Release
Updated EU ETS benchmarking values

EU: ECB Warns Banks May Be Underestimating Climate and Nature Risks

On May 8, 2026, the European Central Bank (the “ECB”) published an updated compendium of good practices for climate- and nature-related risk management and stress testing (the “Compendium”), drawing on approaches adopted by more than 60 institutions under ECB supervision. The Compendium is intended to assist banks with addressing gaps in their risk management frameworks, particularly in areas such as physical risk, prudential transition planning, scenario analysis, and nature-related risks.

In an announcement accompanying the Compendium, the ECB stated that although banks have improved their practices, methods for measuring physical and nature-related risks remain “in their infancy with risks very likely being underestimated.”

Against this backdrop, the Compendium provides banks with a practical toolkit of examples designed to strengthen their climate- and nature-related risk management capabilities, drawing on identified areas of good practice across the industry, including practices with varying levels of sophistication to reflect different business models, risk profiles, and levels of exposure.

While the Compendium is illustrative and non-binding, the ECB has indicated that banks should expect continued supervisory scrutiny in this area.

Links:
ECB Blog
Good practices for climate and nature risk management - Observations from the ECB’s five-year climate and nature risk programme (2020-2025)
ECB report on good practices for climate and nature-related risk stress testing

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