Europe’s Omnibus Goes Global

What’s in this week’s newsletter:

1. EFRAG estimates that non-EU companies in scope fall from 10,000 to 1,200

2. UN report warns AI adoption is outpacing environmental governance

3. ISO launches a new net-zero transition standard for finance

4. CDP and TNFD advance nature-related reporting metrics

5. World Cup faces growing sustainability scrutiny

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How the ‘Omnibus Simplification’ directive affects European companies subject to the Corporate Sustainability Reporting Directive (CSRD) has been clear since it was adopted earlier in the year.

But how it impacts non-European companies remained less clear until this week. The European Financial Reporting Advisory Group (EFRAG) shared that the number of non-EU companies covered under mandatory reporting has been slashed by 90%. A breakdown of the company locations is in the infographic below. US companies dominate the list, but are down to 350-450 from the original estimates of 4,000 companies covered.

EFRAG’s breakdown of how many companies in each country will be impacted

Last week, EFRAG released an update announcing that it will resume development of sustainability standards for non-EU groups (N-ESRS). The update provides information on how they expect the N-ESRS to differ from the general ESRS, launches a call for interest from potential reporters to participate in a field test, and outlines a timeline for the standard, with a draft release in July, followed by a 100-day comment period.

This announcement from EFRAG comes as the comment period for the simplified European Sustainability Standards (ESRS) closes, where a growing chorus of European stakeholders has called for the ESRS to be more in line with international standards to simplify compliance and comparability.

One comment from Norges Bank Investment Management (NBIM), the manager for Norway’s sovereign wealth fund, requested that EFRAG allow reporters to be in compliance with the ESRS and International Sustainability Standards Board’s standards (ISSB) within one report. Similarly, in another comment from GRI, they asked for stronger alignment with other international standards to improve competitiveness.

And in related news, a group of leading practitioners, lawyers, and academics issued an open letter prompting Europe to move ahead with the Corporate Sustainability Due Diligence Directive (CS3D) to avoid further delays and more business uncertainty.

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2. ISO’s Net Zero Transition Standard For Finance

Last week, the International Organization for Standardization (ISO) announced a new landmark standard for helping the financial sector transition to net zero. The “ISO 32212, Sustainable finance — Net zero transition planning for financial institutions,” will provide financial institutions with the requirements and recommendations they need to conduct investing, lending, and other financial activities in line with net-zero emissions and to mitigate risks and capture opportunities.

Scott Steedman, Director-General, Standards at ISO’s UK member body, BSI, said, “Financial institutions have a pivotal role in the transition to a net zero and climate-resilient economy. ISO’s new international standard, ISO 32212, is a best practice tool developed with input from leading organizations across the financial sector and will be globally adopted by countries throughout the ISO membership.”

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3. Standard Makers Advance Nature Reporting

Nature continues to be an area of focus for sustainability standards, and there were two new developments this week:

• CDP will include ocean-related risks and opportunities in its questionnaire for the first time this year, when the 2026 disclosure cycle opens next week (June 15th).

• The Taskforce on Nature-related Financial Disclosures (TNFD) issued a discussion paper on how reporting companies can include environmental crime in their nature assessments and disclosures. It aims to help companies identify illegal environmental activities in their value chain to better understand their impacts, risks, opportunities, and dependencies.

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4. AI Adoption Outpacing Governance

This week, a damning new report from the UN revealed that the environmental and social costs of AI adoption are outpacing the governance structures needed to mitigate these risks. It found that by 2030, AI infrastructure will use energy equivalent to the needs of 650 million people, and occupy land twice the size of the megacity of Jakarta.

It also provides a series of principles that companies and policymakers can use to ensure AI adoption is sustainable, ethical, transparent, and equitable.

But it’s not all bad news, AI is enabling better environmental performance and simplifying reporting:

• New AI software is enabling more efficient use of aging boilers, saving New Yorkers $5 million and reducing emissions, too.

• This new report from PwC revealed that the majority of investors and other public disclosure users are using AI to read and simplify reports. The report also provides guidance on how reporters can adapt their reporting to be easily accessible by AI readers.

5. World Cup Sustainability Woes

This week, the biggest global sporting event, the Soccer (Football) World Cup, kicks off in the US, Canada, and Mexico. This year has been controversial for many reasons, but environment-related issues have been hitting the headlines this week, leading up to the games.

• Despite FIFA’s goal of halving emissions by 2030, a Greenly analysis found that this year emissions from the event will almost double Qatar’s in 2022, coming in at over 7 million tons of CO2e, the equivalent of 1.7 million cars’ annual emissions.

• FIFA was also forced to reverse its decision not to allow reusable water bottles in stadiums after a backlash, a move that would have meant fans could only use single-use plastics.

• Health risks from potentially very high summer temperatures are also growing, with at least a quarter of games expected to be played in dangerous wet-bulb conditions.

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.

Other Notable News:

Climate Investing

• The annual ‘Banking on Climate Chaos’ report from a group of leading NGOs found that the top 65 global banks increased fossil fuel spending by 27% and that fossil investing is dominated by the top 12 banks, mainly in the US and Japan.

• The UK’s Financial Conduct Authority has proposed replacing its current Taskforce on Climate-related Financial Disclosures (TCFD)-aligned reporting for investors with a simplified version to save more than £20 million ($26 million) a year.

CDP

• CDP launched a new AI tool to help cities identify climate risks and find funding for adaptation.

Energy Transition

• A new Energy Information Administration analysis reveals that China’s nuclear output has almost doubled in the last 10 years.

• In May, Solar energy overtook coal energy for the first full month on record, with coal’s share of US energy generation falling nearly 50% over the last five years.

Global Weirding

• Increasingly common 125°F heatwaves are making the Dadu region of Central Pakistan uninhabitable.

• After Europe suffered the hottest May on record, scientists warn that the continent should get used to dramatic temperature swings.

Trump 2.0

• The Trump administration has pledged a $700 million fund to bolster the rapidly declining coal industry and invest in the first new coal power plants in more than 13 years.

Notable Podcasts:

• In this week’s episode of Bloomberg’s Zero podcast, host Akshat Rathi explores what 100 days of the Iran War have done to the global energy transition. Focusing on Asia, he claims that the continent is having its Ukraine moment and realizing how fragile its energy supply chains are, which is driving it to adopt renewables at a faster pace.

• In this week’s edition of The Climate Question on the BBC, the presenters ask whether oppressive heat will affect this World Cup. It also explores the carbon emissions of this year’s event and how future sporting events can adapt to a warming world.