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Key Topics
- California Risk Disclosure Law Delayed Pending Appeal
- European Commission Proposes Simplified ESG Fund Framework
- ICMA Issues New Guidance for Climate Transition Bonds
The Details
On November 18, the United States Court of Appeals for the Ninth Circuit granted a partial injunction blocking enforcement of California's climate-related financial risk disclosure law (SB 261). Inaugural reports under SB 261 were intended to be published by reporting entities by January 1, 2026. Akin wrote on the subject in full detail here.
- Implementation of the rule is effectively paused, and the California Air Resources Board (CARB) has indicated that it will provide further guidance regarding reporting under SB 261 once the appeal is resolved, including alternate reporting deadlines.
- On December 1, 2025, CARB issued an "Enforcement Advisory" stating that, in light of the Court's order, CARB will not enforce SB 261 against covered entities that do not publish reports by the January 1, 2026 statutory deadline. Nevertheless, CARB has activated a public docket for reporting entities that choose to voluntarily report at this time.
- Notably, the Ninth Circuit did not enjoin enforcement of California's greenhouse-gas reporting disclosure law, SB 253. However, CARB extended the SB 253 compliance deadline to August 10, 2026, in a FAQ document issued November 17.
On November 20, the European Commission published a comprehensive proposal to amend the Sustainable Finance Disclosure Regulation (SFDR), which has been in force since 2021. The move follows market feedback that the program is overly complex and has shifted from a disclosure-based framework to a de facto labeling system.
- Key elements of the proposed amendment:
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- Introduces a new categorization system to enable investors to align sustainability-related investment goals with related preferences and deletes the definition of "sustainable investment" to address practical considerations (e.g., inconsistent interpretations of the term).
- Removes entity-level disclosure requirements regarding the consideration of principal adverse impacts (PAIs) on investment decisions.
- Significantly reduces product-level disclosures by streamlining disclosures and reducing the scope of topics covered by the framework.
- The European Commission simultaneously published a comprehensive "Questions and Answers" document covering the proposal.
- The proposal is now subject to trilogue discussions among legislative stakeholders, as the European Union (EU) Parliament and the European Council proceed to develop their negotiating positions.
The International Capital Market Association (ICMA) released new guidance establishing Climate Transition Bonds (CTBs) as a distinct category within the labelled use-of-proceeds bond market.
- CTBs are intended to support credible climate transition strategies, particularly in high-emitting and hard-to-abate sectors, alongside existing green, social, sustainability and sustainability-linked bond frameworks.
- ICMA acknowledged that sustainability bonds have not sufficiently mobilized capital for the transition of high-emissions industries in the same way that it successfully financed renewable energy and clean transport.
- The updated guidelines aim to broaden investor participation and enable issuers to raise financing for the approximately $30 trillion of additional capital anticipated to be needed through 2050, to decarbonize eight high-emitting sectors.
To read the full newsletter for a comprehensive overview of other recent sustainability policy and regulatory developments and their implications, please click here.
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