Q2 2025 was defined by proposals, consultations, and policy recalibrations signaling where ESG regulation is headed next.
In the US, a polarized federal landscape continues to generate uncertainty, even as state-level action and market innovation forge ahead. Europe focused on simplifying and aligning existing frameworks, with regulators responding to business concerns about reporting burdens and complexity. The UK, meanwhile, progressed plans to integrate sustainability more deeply into financial regulation and trade strategy, while strengthening its alignment with global disclosure standards.
Together, these developments reflect a global shift toward ESG policy that is more targeted, financially integrated, and operationally grounded.
This article offers a snapshot of the key takeaways from Datamaran’s Q2 2025 Policy Brief, a comprehensive quarterly report available exclusively to clients that highlights what leaders should watch as policy continues to evolve.
The US Landscape: Fragmented but Fast-Moving
In the US, ESG regulation continues to polarize. Federal efforts to unwind environmental protections, including the repeal of GHG emission standards for the power sector and the rollback of clean energy funding, contrast sharply with a wave of state-level action.
California advanced new producer responsibility rules for plastic packaging (SB 54), New York proposed mandatory emissions reporting for major entities, and the SEC approved the nation’s first sustainability-focused stock exchange. While the federal picture remains mixed, the market and states are forging ahead.
What this means for companies: ESG strategy must account for jurisdictional complexity. US-based firms need to navigate a patchwork of federal inaction and proactive state-level regulation, all while aligning with international expectations.
A Global Push to Simplify and Clarify Sustainability Rules
In Europe, the “Omnibus” review kicked into high gear, with the EU moving to reduce reporting burdens and sharpen the focus on materiality. EFRAG delivered its first update to the European Sustainability Reporting Standards (ESRS), with simplifications that will ease the path to compliance, especially for SMEs and companies grappling with overlapping regulations.
Meanwhile, several countries, including France and Germany, proposed or enacted their own simplification measures. Globally, efforts to harmonize standards are underway: China published a draft sustainability disclosure standard, and India launched a consultation on a new climate finance taxonomy.
What this means for companies: Don’t interpret simplification as a retreat. ESG reporting is becoming more targeted, but expectations are rising on data quality, governance, and clarity of narrative.
Climate Risk Moves to the Heart of Financial Regulation
A growing number of financial regulators are treating climate risk as a core financial stability issue, not just a reputational or voluntary concern.
In the US, a bill was introduced to require the Federal Reserve to formally integrate climate into its risk oversight. The UK’s Prudential Regulation Authority proposed tighter supervisory expectations for banks and insurers on climate risk governance, while the Singapore Sustainable Finance Association released a roadmap on nature-related finance.
Globally, the Basel Committee announced it will launch a voluntary climate risk disclosure framework, expected to become a benchmark for national regulators.
What this means for companies: Financial institutions and corporates alike will need to prove their resilience to climate shocks, with credible data, scenario analysis, and transparent transition planning.
Focus Sharpens on ESG Ratings, Data Integrity, and Carbon Markets
Regulators are tightening oversight on ESG ratings and voluntary carbon markets, responding to long-standing concerns over quality, comparability, and greenwashing.
In the EU, ESMA released draft standards for ESG ratings providers. France published a charter for high-integrity carbon credit use, and the UK launched a consultation on voluntary carbon and nature markets. India also introduced new rules for ESG rating withdrawal procedures, aiming to improve accountability.
What this means for companies: ESG data must now stand up to third-party scrutiny. Ratings, claims, and decarbonization strategies should be auditable, consistent, and tied to real business performance.
Industrial Strategy and Trade Policy Go Green
In the EU and UK, climate policy is increasingly woven into industrial and trade frameworks. The EU’s proposed Industrial Decarbonisation Accelerator Act and Circular Product Strategy both aim to reshape competitiveness through low-carbon innovation. Meanwhile, the UK moved forward with its Carbon Border Adjustment Mechanism (CBAM), targeting high-emission imports.
At a global level, the IMO proposed mandatory marine fuel standards to tackle shipping emissions, while bilateral agreements, such as the UK-EU carbon market linkage and the Singapore-Chile carbon credit deal, underscore the importance of cross-border collaboration.
What this means for companies: ESG is not just a reporting issue; it’s now central to competitiveness, supply chains, and trade. Decarbonization is no longer optional in high-emission sectors.
Final Word: It’s All About Intelligent ESG
The Q2 developments confirm a clear trend: ESG policy is moving from “checklists” to strategic integration. Materiality, data quality, and alignment with core business objectives are taking center stage. Companies must embed ESG into risk, governance, and financial systems, not just reporting templates.
This transition is already reshaping global policy, regulation, and capital flows. The companies that respond early and intelligently will be best positioned to lead in the next chapter of sustainable business.
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