Q1 2025 brought a stark contrast in regulatory direction across global markets. ESG policy became increasingly politicized in North America, while Europe focused on recalibrating reporting obligations. Asia Pacific continued its alignment with global standards, while the first climate disclosure regulatory framework in the Middle East was launched. For businesses, this quarter reinforces the need to track developments closely and remain agile in the face of shifting expectations and requirements.
In this article, we summarize the key ESG-related policy developments from around the world that occurred in Q1 2025.
The US government initiated a broad rollback of ESG-related policies. The administration formally withdrew from the Paris Agreement, eliminated diversity and inclusion mandates across federal agencies, and repealed key climate and financial regulations. New executive orders suspended clean energy incentives, fast-tracked fossil fuel projects, and halted offshore wind development. Federal agencies were instructed to prioritize energy affordability and economic output over environmental and social concerns.
Despite this federal shift, individual states are maintaining and, in some cases, expanding ESG-focused mandates. Colorado unveiled a new bill mandating that companies generating over $1 billion in annual revenue disclose their Scope 1 and 2 emissions by 2028 and Scope 3 emissions by 2029. In New York, lawmakers reintroduced legislation focused on greenhouse gas emissions and climate-related financial risks. These bills largely align with California’s existing climate disclosure laws, which include stringent reporting timelines and steep penalties for non-compliance. The result is an increasingly fragmented regulatory landscape, with businesses needing to comply with different rules depending on where they operate.
At the federal level, legislative developments also raised concerns for international businesses. The PROTECT USA Act, introduced in March, seeks to shield US firms from foreign sustainability regulations, particularly the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). If passed, it would prohibit federal contractors from complying with certain international ESG rules and allow companies to pursue legal action if harmed by foreign requirements. At the same time, a series of new tariffs targeting low-carbon technologies and raw materials have increased costs for companies investing in clean supply chains.
In Canada, the government announced the removal of the national carbon rebate system and fuel charge. These changes signal a policy shift away from carbon pricing mechanisms, reducing incentives for emissions reductions in the private sector.
In Q1 2025, the European Commission proposed significant revisions to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) to address concerns about administrative burden. The proposals included increasing company size thresholds, removing sector-specific standards, softening assurance requirements for smaller entities, and introducing fewer demands for reporting on smaller suppliers. While these changes aimed to reduce the number of businesses subject to mandatory sustainability disclosure, they did not alter requirements for large public-interest entities already in scope.
In April, the European Parliament reinforced this simplification agenda by voting to delay the CSRD application timeline for wave two and wave three companies by two years — pushing their first reporting years to FY2028 and FY2029, respectively. It also extended the transposition deadline for the CSDDD by one year. Member States that had already implemented national legislation aligned with the original CSRD timeline must now update their laws by the end of 2025 to reflect the revised deadlines.
Despite these relaxations, momentum around clean energy and emissions reduction continues. The EU’s Clean Industrial Deal reaffirmed the Union’s commitment to climate neutrality by 2050 and a 90% reduction in emissions by 2040. Key initiatives include expanding renewable energy production, boosting electrification, and improving grid infrastructure. A €100 billion Industrial Decarbonisation Bank was proposed to finance the transition, alongside incentives for clean public procurement and private-sector investment.
Switzerland released new guidance on corporate net-zero planning for companies looking to secure funding for novel technologies. Plans must cover Scope 1 and 2 emissions and may optionally include Scope 3. Companies must update their plans at least every five years, ensuring alignment with emissions reduction targets for 2030, 2040, and 2050. France, Germany, and Switzerland also confirmed alignment with ISSB standards, reinforcing cross-border consistency in ESG disclosure.
Asia Pacific jurisdictions advanced significantly on ESG disclosure and governance. Japan introduced its first mandatory ISSB-aligned sustainability reporting standards for listed companies. These standards require disclosures on climate risk, governance, strategy, and performance metrics and are now part of annual reporting obligations. This move places Japan among the first countries to integrate ISSB frameworks at scale.
In Hong Kong, climate-related disclosure requirements took effect in January 2025. All listed issuers must report Scope 1 and 2 emissions, with phased Scope 3 requirements for large issuers by 2026. The rules adopt a “comply or explain” model and reflect IFRS S2 standards, with full mandatory reporting set to begin in 2026. Issuers may apply for limited implementation relief where justified by cost or data constraints.
Vietnam passed a new Electricity Law supporting renewable energy development and private investment. The law establishes licensing obligations and promotes offshore wind, creating opportunities for foreign investors. The policy framework is aligned with Vietnam’s broader goal of modernising its energy infrastructure and increasing energy security.
Australia continued restructuring its financial and sustainability reporting architecture. A new proposal would merge key oversight bodies into a single institution, improving flexibility and capacity for developing technical standards. The focus is on supporting high-quality disclosures while aligning with investor expectations for transparency.
Jordan launched the first climate disclosure regulatory framework in the Middle East. Developed in partnership with the International Finance Corporation and the Kingdom of the Netherlands, the framework is aligned with IFRS S1 and S2. Large companies listed on the Amman Stock Exchange will need to begin climate-related disclosures by 2027, with optional adoption encouraged in 2026. The initiative reflects a growing interest in aligning regional ESG practices with international frameworks and improving capital market competitiveness.
South Africa responded to the US withdrawal from the Just Energy Transition Partnership by reviewing its national climate strategy. The cancellation of US financial commitments and related grant projects may delay transition timelines, although the South African government reaffirmed its support for the Paris Agreement. The situation introduces uncertainty for companies engaged in renewable energy or related supply chains in the region.
The regulatory environment remains unpredictable. The divergence between jurisdictions means businesses must take a location-specific approach to compliance while keeping pace with global disclosure trends. Even in regions pulling back on ESG regulation, stakeholder expectations continue to drive demand for credible, transparent reporting. Standardization efforts like ISSB, TNFD, and SBTi will continue shaping investor expectations and raising the bar for data quality and governance.
Companies should treat this period as a strategic inflection point. Those that maintain ESG oversight and integrate global frameworks into core operations will be better positioned to manage risk, retain investor confidence, and maintain long-term value. The political shift in the US is significant, but it doesn’t change the broader direction of travel — towards increased accountability, stakeholder scrutiny, and regulatory alignment in most major markets.
The information above is summarized from our latest comprehensive quarterly policy brief, which is shared with Datamaran clients.
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