ESG Market Alert UK – May 2025

North Sea Transition Taskforce Report with recommendations for the UK’s energy transition

A report published by the North Sea Transition Taskforce on 31 March 2025 calls on the UK government to urgently develop a comprehensive, long-term strategy to facilitate a fair and effective energy transition in the North Sea. Recognised as a mature oil and gas basin, the North Sea must undergo a transformation from traditional fossil fuel extraction to scalable, commercially viable renewable energy technologies. The report highlights that a successful, just transition will guarantee energy security, accelerate the journey towards net zero and protect the livelihoods of workers associated with the North Sea. 

To achieve these objectives, the report presents three key recommendations:

1. Revise the Windfall Tax regime: Replacement of the current Energy Profits Levy (commonly known as the Windfall Tax) with a more stable and predictable tax framework. 
2. Create a clear regulatory regime with government investment support: Development of a comprehensive regime to regulate the extraction and exploratory drilling for the remainder of the projected life of the North Sea as a viable oil and gas basin (including licensees’ environmental obligations), together with a long-term framework of government support for investment in key technologies such as offshore wind (both fixed and floating), carbon capture, usage and storage, and hydrogen.
3. Establish a North Sea Transition Committee: Creation of a ministerially led committee to take responsibility for North Sea transition which unites the relevant UK government departments, the Scottish government, appropriate agencies, industry representatives and unions. 

New B Corp rules unveiled 

The “B Corp” certification is one of the world’s most recognisable corporate sustainability initiatives. The number of certified companies has increased from 3,758 in 2020 to over 9,500 today. However, B Lab, the non-profit organisation that awards the B Corp certification, recently faced criticism from some B Corp members in respect of a perceived lack of rigor in its certification process, particularly in relation to the previous scoring system that allowed businesses to offset poor performance against some criteria with strong performance in others. 

Against this backdrop, B Lab unveiled a new framework for certifying businesses as B Corps in April 2025. This new framework, set to be introduced in 2026, aims to enhance accountability and provide greater clarity. Businesses will now be required to demonstrate responsible business practices across seven key ESG “Impact Topic” areas, including “Climate Action”, “Human Rights” and “Purpose & Stakeholder Governance”. The framework is designed to impose higher standards on larger companies seeking B Corp status, requiring them to meet more stringent criteria for verification, transparency, and other factors. In the UK, businesses must legally incorporate commitments to positively impact society and the environment into their constitution to achieve certification. 

Delay to application dates of certain sustainability reporting and due diligence requirements: 'Stop-the-Clock' Directive approved by the Council of the EU

On 14 April 2025, the Council of the EU formally approved the ‘Stop-the-Clock’ Directive, which postpones the application dates for certain sustainability reporting obligations under the Corporate Sustainability Reporting Directive (EU) 2022/2464 (CSRD) and due diligence obligations under the Corporate Sustainability Due Diligence Directive (EU) 2024/1760 (CS3D), as well as extends the transposition deadline of the latter. The directive entered into force on 17 April 2025 and EU countries have until 31 December 2025 to transpose it into national law.

The ‘Stop-the-Clock’ Directive introduces the following changes: 

• CSRD: The CSRD mandates that companies report on the environmental and social impacts of their business activities. Under the ‘Stop-the-Clock’ Directive, these reporting obligations have been postponed for large EU companies to 2028 (previously 2026) and for SMEs with securities listed on EU regulated markets to 2029 (previously 2027). However, the application date remains unchanged (2025) for large public-interest entities and issuers on EU regulated markets with more than 500 employees. 
• CS3D: The CS3D requires certain companies operating in the EU to incorporate human rights and environmental due diligence into their management systems. The transposition period of the CS3D has been extended to 2027 (previously 2026), and the application of CS3D requirements to the largest in-scope companies (EU companies with over 1,000 employees and net worldwide turnover of over €1.5bn and non-EU companies with net EU turnover of over €1.5bn) to 2028 (previously 2027). 

ESMA analysis report on the use of ESG terms in fund names 

On 10 April 2025, the European Securities and Markets Authority (ESMA) released a risk analysis report on the impact of incorporating ESG terms into EU domiciled fund names since 2009. The report revealed that the proportion of funds with ESG related names grew from less than 3% before 2015 to approximately 9% by mid-2024. The terminology has evolved towards more standardised terms, with “ESG” accounting for over 40% of all ESG-related words added to fund names after 2021. Other frequently used terms include “climate,” “impact” and “transition,” while broader sustainability and social/governance terms remain less common. 

The report indicates that adding an ESG term increases net quarterly inflows by approximately 2.2% during both the quarter of the name change and the following quarter, resulting in a cumulative increase in inflows of 8.9% over the first year. However, the impact varies depending on the specific ESG terms used. To mitigate the potential risk of greenwashing, the report highlights the importance of the ESMA Guidelines, which include an 80% portfolio alignment threshold and exclude companies involved in certain sectors. 

Landmark agreement on International Maritime Organisation Net-Zero Framework 

After extensive negotiations, the International Maritime Organization (IMO) reached a landmark agreement in April 2025 to introduce a global carbon levy on shipping emissions. The “IMO Net-Zero Framework”, which is expected to be formally adopted in October and to enter into force in 2027, represents a significant shift in the international regulation of maritime emissions – and has important implications for UK companies involved in shipping, logistics, and global trade. 

Under the binding IMO Net-Zero Framework, ships exceeding 5,000 gross tonnes will be subject to charges starting at $100 per tonne of CO₂ emitted above specified decarbonisation targets. These thresholds, which become increasingly stringent through 2030, are intended to steer the global fleet towards cleaner fuel alternatives. 

For UK businesses engaged in global trade, it will be crucial to track the framework’s development and consider its financial and operational impacts before they are expected to enter into force in 2027. 

ESG Counsel 

The Hogan Lovells ESG team is here to help, including on all the issues raised in this snapshot. Hogan Lovells is one of the leading ESG firms in the world, delivering uniquely tailored cross-practice and geographic holistic advice as ESG Counsel to clients globally. Our holistic and solutions-driven approach to managing ESG issues draws on the full scope of our global practice and sector capabilities (including our leading global corporate, environmental, governmental relations and regulatory, employment, and dispute resolution teams) to drive sustainable value and maximize positive impact for clients. Please contact us to discuss next steps or for our latest ESG-related materials, including our ESG Academy. 

Upcoming events 

To hear about upcoming UK events in our Hogan Lovells ESG Gamechangers series, please contact Sarah Laughton to be added to our mailing list. 

Authored by John Livesey, Sarah Tillmann, Adam Barratt, Aimee Fullen, Ashali Herai, Oliwia Puto, Nikita Rajkumar, Joe Viles, and Rolando Virardi.