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United States
2025 Environmental and Social (E&S) Developments
2025 is off to a fast start with a number of changes in the legal landscape of the environmental and social categories of ESG. President Donald J. Trump has signed several executive orders that target diversity, equity, and inclusion, and clean energy and climate initiatives. The Acting Chairman of the U.S. Securities and Exchange Commission (SEC) instructed SEC staff to request a delay in scheduling arguments in the litigation over The Enhancement and Standardization of Climate-Related Disclosures for Investors, and the SEC revised its guidance related to beneficial ownership reporting and excluding shareholder proposals from proxy statements. At the state level, New York state senators reintroduced two climate bills to the State Senate's Environmental Conservation Committee, which would require annual reporting and disclosure of greenhouse emissions and climate-related financial risks for companies that qualify under the climate bills' reporting threshold. Several proxy advisors and institutional investors updated their sustainability and/or diversity guidance. And internationally, leaders in the European Union (EU) have signaled upcoming shifts in sustainability regulation.
For more information on these recent developments, please see our newly published client alert.
Wilson Sonisini is hosting a three-part webinar series on March 18-20, 2025, to discuss the shifts in E&S and its impact on public companies. Register here to attend the sessions.
U.S. Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) Release New Safe Harbor Election for Domestic Content Bonus Credits
On January 16, 2025, the Treasury and the IRS released Notice 2025-08 (the Notice), providing further guidance on domestic content bonus credit amounts applicable under Sections 45, 45Y, 48, and 48E of the Internal Revenue Code of 1986, as amended (the Code) pursuant to changes authorized by the IRA. The Notice modifies previously issued guidance under Notice 2024-41 (the Previous Guidance) and provides for a first updated elective safe harbor (the First Updated Elective Safe Harbor) for taxpayers claiming domestic content bonus credits.
The domestic content bonus credit provides i) a 10 percent increased production tax credit amount for a qualified facility or ii) a 10 percentage point (or 2 percentage point if prevailing wage and apprenticeship requirements are not satisfied) increased investment tax credit amount for an energy project, qualified facility, or energy storage technology, if the applicable project satisfies the "domestic content requirement," and the taxpayer timely submits a certification statement to the IRS.
For more information on the domestic content bonus credit, please see our previous white paper. Please also see our past client alerts for guidance regarding the new elective safe harbor and Notice 2023-38.
Europe
French Competition Authority (FCA) Publishes Opinions on Antitrust Implications of Product Sustainability Ratings, System for Collective Financing of Costs Associated with Agro-Ecological Transition
On January 9, 2025, following a 2024 public consultation, the FCA published an opinion on product sustainability ratings. The FCA stated that product ratings should be based on objective factors and not be used to avoid competition on the factor being rated.
On February 5, 2025, the FCA published an informal opinion providing guidance on a system of collective financing for costs associated with the agro-ecological transition. The proposed association would bring together manufacturers and distributors in the agri-food and luxury sectors, collectors, private and public financial partners (e.g., banks, insurers, water agencies, etc.), and other stakeholders (trade unions, agricultural development agencies, nonprofit organizations).
The association would assess the level of agro-ecological transition of each participant and develop a methodology for determining and financing on a collective basis the additional costs incurred by farmers in the agro-ecological transition of their landholdings. The FCA underlined that participation in such a project could only be limited using objective, transparent, and nondiscriminatory conditions. The FCA expressed reservation about the possibility of the association collecting commercially sensitive information from the participants, including financing needs and model financing options.
Participating companies should be careful about exchanging information during preparatory work for the rating system and be transparent about the governance of the rating system including funding, design, and links to third-party entities.
European Union (EU) Issues Regulation on Packaging and Packaging Waste
On January 22, 2025, the EU published a new Regulation on packaging and package waste (the Regulation). The Regulation seeks to reduce the generation of packaging waste and covers the full lifecycle of packaging. It restricts certain types of single-use packaging, while economic operators will be obligated to minimize the amount of packaging used.
The Regulation sets 2030 and 2040 targets for a minimum percentage of recycled content in packaging, such as up to 65 percent for single-use plastic bottles by 2040. Packaging designed solely to increase the perceived volume of a product may no longer be placed on the market. The Regulation also tightens rules on certain substances of concern, such as lead, cadmium, mercury, and hexavalent chromium, and there will be limits to packaging in contact with food if it exceeds certain limit values for per- and polyfluoroalkyl substances (PFAS). The Regulation will apply beginning August 12, 2026.
EU Platform on Sustainable Finance (PSF) Publishes Report on Transition Plans
On January 23, 2025, the PSF published a report on corporate transition plans. The PSF is an advisory body to the European Commission (EC) consisting of experts on issues of finance, business, and sustainability from the private, public, and NGO sector.
The PSF's report is intended to help companies develop their transition plans and to assist financial market participants (FMPs) in assessing these plans. The report also contains policy recommendations for the EC. The report suggests that FMPs should assess whether the targets outlined in the transition plan are compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5°C, in line with the Paris Agreement. FMPs should examine whether the transition plan aligns with the company's business strategy and whether mitigation actions are feasible, given dependencies and relevant time horizons. FMPs should encourage companies to make their transition plans publicly available and include all relevant information to assess them.
EU to Publish Sustainability Omnibus Proposal on February 26, 2025
In November 2024, European Commission (EC) President Ursula von der Leyen announced a so-called omnibus proposal to simplify the obligations of companies under the Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive, and the EU Taxonomy Regulation, reducing the administrative burden. The EC's register of documents indicates that the omnibus proposal will be published on February 26, 2025. It is unclear whether the omnibus proposal will consist of a mere work program or actual legislative proposals.
On January 29, 2025, previewing the omnibus proposal, the EC published its Competitiveness Compass. It stated that the omnibus proposal will ensure better alignment of the requirements of the mentioned rulebooks with the needs of investors, proportionate timelines, financial metrics that do not discourage investments in smaller companies in transition, and obligations that are proportionate to the scale of activities of different companies. It explicitly mentions preventing smaller companies along the supply chains from being subjected in practice to excessive reporting requests that were never intended.
Further, a new category of small mid-caps will be proposed, allowing more companies to benefit from regulatory simplification. The EC also promised to simplify the Carbon Border Adjustment mechanism for smaller market players. It is still unclear whether the EC will include these points in the omnibus proposal or in a later simplification package.
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