Climate change, biodiversity, and energy transition are key components of the “E” in ESG, and they are of increasing importance across an array of sectors. The outlook differs across jurisdictions, as laws and regulations concerning these issues vary in scope and impact.
At the national level, climate change, biodiversity, and energy transition are addressed in legislation, and implementing rules regulate private companies’ actions in an effort to impact these issues. In addition, international law imposes related obligations, including on signatory nations to instruments such as the Paris Agreement on Climate Change, the Convention on Biological Diversity, the Convention on the Law of the Sea, and the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal.
Sidley is at the forefront of these developments. With lawyers in Europe, the United States, and Asia, we have deep cross-jurisdictional expertise and experience on all aspects of climate change, biodiversity, and energy transition. Companies – especially those with lengthy international supply chains – face a complex, interrelated, and overlapping network of legal requirements. They face challenges in ensuring compliance with national and international rules, preserving market access, and mitigating legal and reputational risks.
Sidley’s cross-jurisdictional team is uniquely placed to support our clients in this challenging landscape, seamlessly fitting the “E” piece of the puzzle into our broader ESG and Sustainability practice. We guide a wide range of clients, from across economic sectors, as they develop their businesses, products, services, technologies and solutions, counseling them on sustainability strategy, due diligence, transactions, and compliance.
The EU has adopted a sweeping package of ESG and sustainability-related measures that establish strict legal requirements covering climate change, biodiversity, and energy transition. For example:
- The EU’s Corporate Sustainability Reporting Directive (CSRD) requires companies with significant EU presence to report in detail on their impacts, risks, and opportunities relating to these environmental issues, following mandatory reporting standards that cover metrics such as the global value chain greenhouse gas (GHG) emissions. Complementing CSRD, the EU’s Taxonomy Regulation requires companies to disclose the extent to which their activities are aligned with environmental objectives, including climate change, biodiversity, and circular economy.
- The EU’s Corporate Sustainability Due Diligence Directive (CS3D) requires all companies with significant EU sales to manage potential impacts on people and the environment, according to the protections awarded in international instruments. CS3D also requires companies to adopt and implement a climate transition plan in line with the Paris Agreement 1.5 °C temperature goal, including effective emission reduction actions and limited reliance on carbon offsets.
- The EU further regulates the environmental footprint of products sold in its market, including through the Carbon Border Adjustment Mechanism (CBAM), Deforestation Regulation, the Batteries Regulation, the Ecodesign for Sustainable Products Regulation, and the Packaging and the Packaging Waste Regulation.
- The EU also imposes requirements on environmental aspects of road, air, and maritime transport, including the use of renewable fuels (e.g., Renewable Energy Directive, ReFuelEU Regulation).
We have been privileged to counsel our clients on this full range of EU laws and regulations that address climate change, biodiversity, and energy transition.
Further, we are advising clients on the EU’s so-called omnibus process, launched in early 2025, to simplify, in particular, ESG reporting and due diligence. We are assisting clients as they prepare for compliance following completion of the omnibus.
In the U.S., the rules are not as expansive, and the Trump administration has begun to roll back federal initiatives on climate, including its announced intention to withdraw from the Paris Agreement. However, at the same time, certain states – led by California, New York, and others – are expected to maintain their requirements and programs.
- The U.S. Securities and Exchange Commission’s (SEC) climate disclosure rules have been stayed pending the outcome of litigation challenging the rules, but California has adopted expansive disclosure requirements for large companies that do business in that state.
- The U.S. Environmental Protection Agency has a series of GHG-related regulations, including GHG emissions-reporting requirements, limits on carbon dioxide (CO2) emissions in the power sector, methane emission limits on oil and gas upstream, midstream and pipelines, federal renewable fuel standards, tailpipe restrictions on CO2 emissions from motor vehicles, and a “social cost of GHGs” to evaluate the cost/benefit of federal actions on climate, all of which are currently being reconsidered. Even as federal requirements may be revised, states have a range of rules, such as California’s mobile source rules and methane limits in Colorado, New Mexico, Pennsylvania and others.
- Federal legislation (the Inflation Reduction Act and the Big Beautiful Bill Act) provide tax credits to incentivize renewables and carbon capture and underground storage projects, which will be phased out over time. Meanwhile, California, in partnership with Quebec, has a cap and trade program designed to force GHG emission reductions across sectors.
- U.S. law protects biodiversity through the Endangered Species Act (ESA), which protects endangered and threatened species listed by the government. The ESA and applicable state laws must be considered when undertaking any major development.
- Federal U.S. EPA guidance supports recycling and the circular economy, through a National Recycling Strategy and National Strategy to Prevent Plastic Pollution, as well as guidance on battery recycling. There are likewise state efforts to consider.
In our transactional work for the energy transition, we stand out among our peers for the sheer number, breadth, and complexity of transactions and projects on which we have advised that involve battery, hydrogen, carbon capture and sequestration, sustainable fuels and biofuels (including sustainable aviation fuels), energy storage and efficiency projects (including vehicle to grid technology), clean transportation, and carbon and emissions credits and allowances, in addition to traditional renewable power generation. Our experience includes advising investors in and developers of the most cutting-edge technology that will facilitate the energy transition. We assist our clients through an expansive array of project development, financing, M&A, joint ventures, complex transactions, and environmental and regulatory matters. Sidley, with one of the largest and strongest legal teams available to entities, has unparalleled experience in this evolving space.
Sidley has a strong international law practice that enables us to advise clients on international law instruments that inform national regulation and litigation on climate change, biodiversity, and energy transition. Sidley served as lead counsel to a sovereign nation in climate change proceedings before the International Court of Justice; in similar proceedings, we represented an international organization before the International Tribunal for the Law of the Sea. Under international trade law, we have also advised governments and companies on trade measures that pursue climate change and biodiversity objectives.
We counsel clients on cutting-edge legal issues regarding climate change, biodiversity, and the energy transition. For example, with critical minerals taking on significant economic and geopolitical importance in the energy transition, the United States recently announced its intention to advance deep seabed mining in international waters. We have advised clients on the complex set of national and international rules addressing this issue.
We have advised clients on a range of international rules relating to climate change, biodiversity, and energy transition, including on climate mitigation and transition, human rights, deforestation, carbon taxes, carbon offsets, renewable energy credits, sustainable fuels for international aviation and shipping, chemicals and pollutants, and transboundary movements of hazardous waste.
Our Work
Our representative work includes:
- Advising companies on the applicability of global climate change and biodiversity requirements
- Assisting in the development of policies, programs, procedures, and controls to ensure the accurate collection and reporting of climate-related information (including Scope 1, Scope 2, and Scope 3 GHG emissions)
- Providing technical and strategic advice to global companies on compliance with sustainability disclosures across jurisdictions, including gap assessment and comparison of legal standards (e.g., EU and EU Member States, UK, U.S. federal and state level)
- Assisting on mandatory disclosures under the EU’s CSRD, including on scoping and reporting strategies, disclosure requirements across all sustainability topics, implementation across all 27 EU Member States, and the applicability of the EU Taxonomy Regulation in light of a given CSRD reporting strategy
- Advising on mandatory due diligence under EU’s CS3D, Batteries Regulation, Deforestation Regulation, German and Swiss supply chain due diligence laws, including developing a holistic approach to due diligence requirements across all applicable legislation
- Advising on Climate Transition Plans, including under the EU’s CS3D and CSRD, such as development of Paris-aligned targets; required features of plan; “best efforts” implementation requirements; and alignment with GHG emissions accounting standards
- Advising on (i) carbon pricing under domestic and international regimes (e.g., EU Emission Trading Scheme (ETS), EU CBAM, CORSIA, the development of IMO’s Net Zero Framework); and, (ii) carbon offset and capture projects, representing sponsors, lenders, investors, contractors, credit agencies, and service providers on complex renewable energy transactions. Helping companies to navigate the complex web of voluntary and mandatory carbon offset markets, including in light of rapidly changing domestic and international developments
- Advising on requirements relating to sustainable fuels under EU and international law, including the EU’s Renewable Energy Directive, ReFuelEU Aviation Regulation, and FuelEU Maritime Regulation; and ICAO’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)
- Advising on the EU Deforestation Regulation and the EU Batteries Regulation, including on scoping, compliance obligations, methodologies and legislative developments
- Providing strategic and technical advice on compliance with the UK’s climate-related reporting requirements including Task Force on Climate-related Financial Disclosures (TCFD) reporting under the UK Companies Act, and the upcoming UK Sustainability Disclosure Standards (UK SDS)
- Reviewing voluntary disclosures in ESG, sustainability, or corporate impact reports to identify potential regulatory, litigation, and reputational risks, including disclosures made under global frameworks such as the International Sustainability Standards Board (ISSB) and the Task Force on Climate-related Financial Disclosures (TCFD)
- Assisting in the preparation of mandatory disclosures required under U.S. securities laws, the California climate disclosure laws (SB253 and SB261 (as amended by SB219) and AB1305), UK disclosure laws, and CSRD
- Counseling on the establishment, revision, or revocation of targets and goals related to GHG emissions, biodiversity, and energy transition
- Representing clients in the purchase, sale, investment in, or funding of a wide array of renewable energy projects (e.g., onshore and offshore wind, solar, hydroelectric, hydrogen, battery storage, carbon capture and sequestration, and sustainable aviation fuel)
- Representing nations and international organizations in requests for advisory opinions clarifying States’ obligations under international law in response to climate change, before the International Court of Justice (ICJ) and the International Tribunal for the Law of the Sea (ITLOS)
- Advising companies on legal risks associated with participation in international deep-sea mining projects
- Advising a client in the negotiation of an international treaty to end plastic pollution
