ESG Market Alert UK – June 2026

Revised European Sustainability Reporting Standards (ESRS) published as part of the European Commission’s broader effort to simplify sustainability reporting under the EU Corporate Sustainability Reporting Directive (CSRD) 

Who will this affect?

On 6 May 2026, the European Commission launched a consultation on the revised ESRS, building on the technical advice delivered by EFRAG in December 2025. We included insights on this revised version here and in last month's alert – see ESG Market Alert UK – May 2026.

These developments will impact the larger organisations which fall in scope of CSRD sustainability reporting, particularly multinational companies navigating overlapping and diverging sustainability reporting requirements.

How could this affect you?

The revised ESRS are intended to take this wealth of experience and (i) clarify existing ESRS provisions which are deemed unclear; (ii) simplify the structure and presentation of the Standards and (iii) take into account the difficulties undertakings might encounter when gathering relevant data especially from actors in their supply chain not subject to CSRD.

The revisions are intended to introduce greater flexibility and international alignment, including improved interoperability with ISSB standards and optional approaches to greenhouse gas reporting boundaries.

However, while aggregate reporting costs are expected to fall by over 30%, organisations with more than 10,000 employees still face recurring costs of at least €1.37 million annually (EFRAG Cost-Benefit Analysis), with total costs often reaching two to four times that figure. For large organisations, the question is therefore no longer whether AI can facilitate ESG reporting, but how it can be deployed to reduce compliance costs while improving the quality and reliability of disclosures.

Increased adoption of AI: 

Research published by BCG (BCG | White Paper AI-enabled ESG Reporting), which maps AI applications across ESG reporting, highlights the complexities that remain even after the significant simplification and consolidation efforts presented by the ESRS.  The following use cases demonstrate how AI can be utilised effectively to streamline the overall ESG reporting process:

• Automation: Automated data collection and quality assurance from Enterprise Resources Planning (ERP), Environment, Health and Safety (EHS), and Human Resource (HR), and Procurement systems reduce materiality assessment timelines from months to weeks.
• Generative AI: Disclosure drafting and consistency checks enable investor-grade, assurance-ready disclosures with improved traceability.
• Agentic AI: Regulatory monitoring and workflow coordination reduce manual tracking whilst maintaining human-led accountability for final sign-off.

Notwithstanding the above, although it should be noted that the effectiveness of a product rests on the good data governance and collection, as well as ongoing assessment. 

Growing prevalence of ESG-related class-action litigation

Who will this affect?

On 27 April 2026, the High Court saw the first procedural hearing in what has been described as the largest environmental claim seen by the UK courts, in which more than 4,500 individuals living and working along the Rivers Wye, Lugg, and Usk on the Anglo-Welsh border have brought claims against Avara Foods (together with its subsidiary, Freemans of Newent Limited), one of the UK's largest chicken producers, and water company Welsh Water.

The increasing prevalence of such class-action litigation in the UK presents growing financial and reputational risks to investors and businesses alike.

How could this affect you?

The claim, issued in August 2025, alleges that the Defendants’ actions have resulted in a nutrient increase in the affected rivers, whereby nutrients from the manure used in chicken sheds and frequently washed off the soil into waterways has caused "algal blooming" (where the rivers turn green due to a combination of high nutrient levels and warm weather).

The Defendants face claims in negligence, private and public nuisance, under section 73(6) of the Environmental Protection Act 1990, and in trespass (where the riverbed has been affected on a Claimant's property).  The Claimants seek remedies including substantial damages and a court order mandating action to improve the state of the rivers. These claims are contested by the Defendants, who have described the claims as “fundamentally misconceived in law and in fact”.  Welsh Water, which has been accused of increasing the rivers' nutrient levels through sewage spills, noted that it had invested more than 76m in reducing nutrient levels on the Wye, Lugg and Usk in recent years.  

At this first procedural hearing, the way that the Claimants had gone about the claim led to criticism from High Court Judge David Cook. It has been reported that the Judge described the claim as an "omnibus" which "anybody can get on board". It has also been reported that the Judge added that "anyone who wishes to get on board the bus must plead a case" , that “[t]he way the claimants have gone about this is more akin to signing a petition”.

Notwithstanding the Judge's apparent comments about the way in which the Claimants have approached the claim, this is the latest in an upward trend of large-scale class-action environmental claims in the UK and is being followed closely by investors and businesses across multiple sectors. Further hearings are expected, and no findings of liability have yet been made. Nonetheless, regardless of how the claim ultimately develops, it serves as a reminder for businesses looking to expand their supply chain of the reputational consequences of large-scale environmental litigation. For investors, this is another illustration of the importance of completing robust environmental due diligence across business operations.

UK Energy Independence Bill could sharpen focus on renewables, grid, and nuclear transactions

Who will this affect? 

The 2026 King's Speech, delivered on 13 May 2026, announced an Energy Independence Bill alongside a Nuclear Regulation Bill, framing energy security as a long-term national security goal in light of recent events in the Middle East. 

• The Energy Independence Bill will provide a legislative framework to transition the UK energy market away from fossil fuels and towards renewables and nuclear, with key measures including (i) planning and regulatory reforms to accelerate deployment of offshore wind, hydrogen and smart grid technologies; (ii) reforms to grid infrastructure regulation to reduce delays; and (iii) a ban on new North Sea oil and gas exploration licences.
• The Nuclear Regulation Bill will implement the Fingleton Review's recommendations on streamlining nuclear regulation, with the aim of delivering nuclear projects faster and more cheaply. A separate Electricity Generator Levy Bill will increase the EGL rate from 45 per cent to 55 per cent from 1 July 2026.

These Bills will primarily impact energy companies, renewable energy developers, grid and network operators, nuclear project sponsors, upstream oil and gas producers, infrastructure investors and private equity funds active in the UK energy sector.

How could this affect you? 

The Bills will reshape the regulatory and fiscal landscape for energy transactions across the UK, creating a more favourable deal environment across several key segments of the UK energy sector.

• In renewables, planning and regulatory reforms should reduce development risk and enhance the investability of offshore wind, solar and hydrogen platforms, encouraging both platform consolidations and asset-level transactions.
• In grid infrastructure, commitment to removing barriers to network build-out is likely to drive further capital into transmission, distribution, and grid-enabling technologies at a time when institutional appetite for regulated UK network assets remains strong.
• In nuclear, the streamlined regulatory framework envisaged by the Nuclear Regulation Bill should lower barriers to entry for utilities, infrastructure funds and technology developers seeking to participate in new-build and Small Modular Reactor programmes.
• Finally, the ban on new North Sea exploration licences and the higher Electricity Generator Levy are likely to prompt upstream oil and gas producers to sell non-core or mature assets and rationalise their portfolios, opening the door for specialist buyers willing to take on mature North Sea portfolios.

Transatlantic ESG divide widens for investors and asset managers

Who will this affect? 

Recent reporting highlights an increasing divergence between U.S. and European approaches to ESG investing. Driven by political, regulatory and litigation pressures on both sides of the Atlantic, this divergence increasingly appears structural rather than cyclical. Political and regulatory pressure at both a federal and state level in the U.S. has led some investors and asset managers to place reduced emphasis on ESG initiatives and disclosures. Whilst companies continue to work on resilience and energy security, voluntary reporting frameworks mean that less focus is given to ESG in the public sphere. Conversely, ESG continues to be a high-priority item for European investors and asset managers alike, particularly in light of the UK’s developing sustainability reporting framework, as included in April's alert – see ESG Market Alert UK – April 2026.

This primarily affects UK corporates with U.S. and/or European investor bases assessing ESG-related diligence and disclosure obligations, sponsors and asset managers operating across multiple jurisdictions, and management teams negotiating with bidders operating under different ESG regimes in cross-border M&A transactions.

How could this affect you? 

This divergence may have practical implications for UK-based clients involved in cross-border transactions, particularly where deals involve both US and European stakeholders. Transaction parties may increasingly approach ESG diligence, disclosure standards, and post-completion strategy differently depending on their jurisdictional exposure and investor expectations.

From an M&A perspective, European buyers and sponsors are likely to continue treating ESG issues as relevant to valuation and risk allocation, particularly in sectors with heightened regulatory or reputational exposure. By contrast, some U.S. market participants may adopt a more cautious approach to ESG positioning and disclosure, particularly where there is perceived political or litigation risk associated with ESG commitments.  Whilst voluntary ESG reporting

UK-based businesses operating internationally may therefore increasingly need to navigate differing investor expectations regarding ESG diligence, disclosure obligations and portfolio strategy depending on whether counterparties or investors are U.S.- or Europe-focused. Looking ahead, the transatlantic divide on ESG is unlikely to narrow in the short-term and parties contemplating cross-border M&A will need to take a tailored approach to ESG considerations on any given transaction.

Our Climate, Sustainability and ESG practice

The Hogan Lovells Climate, Sustainability and 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.

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Authored by John Connell, John Livesey, Hannah Piper, Emily Julier, Madeline Hirschfield, Scott Prior, Hope O'Dwyer, Callum Bobath, Camilla Cerruti, Simeng Fan, Lilyana Georgieva, Katelyn Groenewald, Shenaya Lalljee, Devina Patel, and Samuel Tahir.