© Sarah Hina
Legal risk around the EU’s omnibus proposals balloon after ICJ’s advisory opinion on climate, the ECB poised to issue a groundbreaking climate fine, and Egypt prepares for the EU’s carbon border tax.
ICJ climate opinion raises legal risks for EU Omnibus procedure
The International Court of Justice’s (ICJ) advisory opinion on climate change “reinforces” the likelihood the EU’s omnibus proposals will be legally challenged, Amandine Van Den Berghe, senior lawyer at environmental law firm ClientEarth, told Environmental Finance.
The ICJ opinion, delivered last month, confirmed that countries have a legal obligation to enforce emissions cuts “including by adopting and enforcing effective policies to reduce private sector emissions”.
One area of the EU’s simplification agenda which may be particularly vulnerable in courts is transition planning. Cutting key elements of the EU’s transition plan framework could substantially increase legal risks, Van Den Berghe suggested.
This comes amid new research from the European Central Bank (ECB) showing that climate litigation risk is already being priced into corporate lending. The study found that firms involved in climate lawsuits face interest rates approximately 4% higher than companies without such legal exposure, with the effects being strongest for cases involving unprecedented legal arguments.
ECB may issue climate fine for Credit Agricole
The ECB is poised to make history by issuing its first-ever fines for climate risk management failures, with Bloomberg reporting that Credit Agricole is among the institutions facing potential penalties.
The fine of no more than €7mn would likely be modest relative to balance sheets of France’s second largest lender, but the ECB hopes to show that climate supervision has teeth and financial institutions that do not take their obligations seriously may face regulatory consequences.
This represents a significant escalation in the ECB’s supervisory approach. Since 2023, the central bank has warned financial institutions about potential penalties, initially targeting 22 lenders based on materiality assessments. However the number of banks being considered for fines has dropped significantly, ECB board member Frank Elderson said last month, due to the “notable strides” most banks have taken in response to the central bank’s supervisory decisions.
Credit Agricole is reportedly contesting the periodic penalty payment and no final decision has been made.
Japan’s green taxonomy gap
The lack of a sustainable taxonomy means Japan increasingly finds itself the odd one out in Asia’s green finance development race and remains the “weakest point” in Japan’s sustainable bond and loan market, industry experts told Environmental Finance.
The absence of clear government-backed definitions of what counts as “green” or “sustainable” represents a significant gap when several neighbours including China, Indonesia and the Philippines all have such criteria in place.
While Japan has been a leader in areas like transition finance, the approach has been fragmented across different government departments, according to the anonymous source.
There is hope that the green transformation (GX) programme and acceleration agency could provide the central coordination needed to develop a national taxonomy. However, it is currently unclear which government body would take the lead.
Elsewhere, a United Nations report recommended the Japanese Financial Services Agency should play a leadership role in taxonomy development.
Egypt launches green finance platform as EU’s carbon border tax deadline looms
Egypt is launching a new platform to mobilise green financing for private sector factories, reports Enterprise, in preparation for Europe’s carbon border adjustment mechanism (CBAM) which comes into full effect in 2026.
Developed with the European Bank for Reconstruction and Development and other international partners, the platform will offer funding for decarbonisation, energy efficiency and clean production technologies, and aims to maintain export competitiveness in EU markets. CBAM is expected to heavily impact key Egyptian exports from carbon-intensive sectors including fertilisers, steel, aluminium, chemicals and glass.
Industry players are cautiously optimistic,with many larger factories already beginning their transition processes, but emphasise the need for developing internationally certified emissions data regimes to pass European compliance checks.
Previously, a report from Menafem and Greenpeace has warned against exclusively export-focused green development in Egypt, arguing that the current renewable energy model has worsened economic dependence and ecological degradation. According to the research, green finance initiatives must address domestic energy insecurity and environmental damage alongside export growth.
UK’s biggest pension scheme steps up climate lobbying efforts
Simon Pilcher, CEO of the Universities Superannuation Scheme (USS) Investment Management, told Reuters that the pension fund is “turning the dial up” on climate lobbying, pushing governments, regulators and standard setters to take firmer climate action.
While USS’s latest climate disclosure report shows the group has successfully achieved a 51% decline in portfolio emissions between 2019 and 2024, officials say a decarbonised investment portfolio driven by asset reallocation may not equate to real reductions in underlying businesses. Pilcher argues that changing rules to make it easier for companies to overhaul climate-damaging practices is the real lever for change.
Rather than just divesting from dirty assets, USS is focusing on creating the policy environment where low-carbon action becomes financially rational for businesses. “Corporates will change when it’s sane for them to do that,” Pilcher said.
Research Highlights
Does Green Bond Issuance Reduce the Cost of Bank Loans? Evidence from China
A new study in the Journal of Corporate Finance finds that Chinese firms’ first-time green bond issuance lowers their average cost of bank loans by 66 bps, compared to just 55 bps for first-time issuance of non-green bonds. The authors attribute this green advantage to two channels: stronger signaling effects from the mandatory disclosures tied to green bonds, and enhanced bargaining power from access to an alternative financing market.
The Impact of Climate Litigation Risk on Firms’ Cost of Bank Loans
This ECB working paper finds that firms targeted by climate-related lawsuits pay significantly higher interest rates on bank loans, with larger penalties for firms with frequent ESG controversies. The research shows lenders perceive climate litigation as a material risk, leading to smaller, shorter-maturity loans for affected firms, and pricing novel lawsuits more punitively due to heightened legal uncertainty.
This page was last updated August 19, 2025
Written by
Ike Walker, a Green Central Banking contributor since 2023, has a decade's experience in research writing. An Utrecht-based scholar, Ingrid specialises in transformative justice, green finance, law and systems change. They are an Utrecht University's Bright Minds scholar and previously worked for Cambridge University and various justice-based NGOs.
