The Joint Committee of the European Supervisory Authorities (comprising the European Banking Authority, the European Insurance Occupational Pensions Authority and the European Securities and Markets Authority - ESAs) has published its fourth annual report on Principal Adverse Impact disclosures (PAI) under the Sustainable Finance Disclosure Regulation (SFDR). The report refers to PAI disclosures published by 30 June 2024 for the reference period from 1 January to 31 December 2023. The analysis included both mandatory and voluntary disclosures by financial market participants (FMPs). Building on the progress identified in previous reports, the report notes an effort from FMPs to publish more complete information and in full compliance with the SFDR's disclosure requirements, with a general improvement in the quality of information provided. The findings confirm the trends of previous years, such as that the FMPs that are part of larger multinational groups disclose the information on sustainability in a more detailed and appropriate manner, and that smaller entities mix information on ESG / general marketing information with SFDR disclosures, for example a lot of text, but no clear information whether principal adverse impacts are considered or not.

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The European Securities and Markets Authority (ESMA) and the European Environment Agency (EEA) have announced the signing of a Memorandum of Understanding (MoU) to enhance cooperation in the area of sustainable finance. The MoU seeks to reinforce the integration of environmental considerations into the EU's sustainable finance framework, including its supervisory practices. It outlines how ESMA and the EEA will exchange expertise, data and information to promote collaboration between national securities regulators and environmental authorities. This partnership is expected to create synergies, reduce duplication of efforts, and support the EU's broader goals in addressing biodiversity loss, climate change, and pollution.

The Transition Finance Council, co-launched by the City of London Corporation and HM Government, has issued a consultation on draft entity-level Transition Finance Guidelines. The aim of the Guidelines is to establish a consistent framework for assessing the credibility of transition finance at entity-level across asset classes and jurisdictions, particularly for high-emitting sectors, to shift toward lower-carbon, more sustainable models and transition to net zero in line with the Paris Agreement. Designed to complement existing disclosure frameworks such as those from the Transition Plan Taskforce and the International Sustainability Standards Board, the Guidelines introduce four core principles, each addressing a dimension of credibility. This includes credible ambition, action into progress, transparent accountability, and addressing dependencies. The principles are supported by: (i) universal factors, which serve as minimum criteria applicable in all cases to assess whether the principles are met; and (ii) contextual factors, which apply depending on the materiality of the issue to the entity or the policy environment in which it operates. The consultation specifically seeks feedback on the structure, content, and usability of the Guidelines. The deadline for responses is 19 September, with a second consultation planned for later this year and final publication expected in 2026.

The President of the European Central Bank (ECB), Christine Lagarde, has issued a letter responding to Members of the European Parliament regarding the Eurosystem's evolving approach to climate-related financial risks. Firstly, the letter confirms the ECB's plan to introduce a "climate factor" in the second half of 2026, which will adjust the collateral value of marketable assets from non-financial corporations based on climate risk data. This replaces previously proposed collateral pool concentration limits, which were not implemented due to insufficient data granularity. The climate factor is part of the ECB's broader Climate and Nature Plan, aimed at strengthening climate risk management across the Eurosystem's balance sheet and collateral framework. Secondly, the letter emphasises the importance of high-quality climate data and raises concerns about the Omnibus I sustainability package, which proposes amendments to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive that would reduce reporting obligations. As highlighted in the ECB opinion dated 8 May on the Omnibus proposal, it is their view that the proposed changes risk reducing firm-level sustainability reporting, weakening the Eurosystem's ability to assess climate-related financial risks, and causing delays in the transposition of the CSRD into the national laws of euro area member states. The letter therefore concludes by stressing the need to "strike the right balance" between preserving the benefits of sustainability reporting and ensuring proportionality in the requirements.

The UK Financial Conduct Authority (FCA) has published a letter to heads of sustainable finance on the sustainability-linked loan (SLL) market and by way of update since the FCA's previous letter on this topic in 2023. The FCA report improvements in the market for SLLs, with better practice and more robust product structures, but continue to observe barriers to scaling the SLL market and some concerns around incentives. The FCA will continue to monitor the SLL market and will work closely with the Transition Finance Council (TFC) to promote the competitive position of the UK as a transition finance hub. Firms are encouraged to engage collaboratively with the TFC's work and the Loan Markets Association, to build alignment in approaches to transition finance.

The UK Financial Conduct Authority (FCA) has published the findings from its multi-firm review of climate reporting by asset managers, life insurers and FCA-regulated pension providers under the Taskforce on Climate-related Financial Disclosures (TCFD) regime. The review found that the rules have strengthened firms' consideration of climate risks and improved transparency, but challenges remain around data availability and consistent, well-developed methodologies. Firms reported that while the disclosures are useful for institutional investors, they are often too complex for retail investors, particularly at the product level, where reports were also harder to find. Most firms were generally able to report on backward-looking data, such as carbon emissions, but struggled with providing quantitative data to support forward-looking disclosures like scenario analysis, limiting comparability between reports. Asset managers, in particular, viewed the rules as overly granular given their broader, overlapping sustainability disclosure obligations and called for simplification of the requirements. Firms also sought clarity on the future of the TCFD rules in light of the global shift towards ISSB standards, urging the FCA to ensure international alignment and a practical, industry-informed approach.

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The European Banking Authority (EBA) has issued an Opinion in the form of a no-action letter dated 5 August, addressing the application of ESG Pillar 3 disclosure requirements under the EBA disclosure implementing technical standards (ITS). The letter includes recommendations to national competent authorities aimed at easing the implementation timeline for revised ESG Pillar 3 disclosure requirements under the Capital Requirements Regulation (CRR). The objective is to alleviate operational burdens on institutions pending the adoption and publication of amendments to Commission Implementing Regulation (EU) 2024/3172 in the Official Journal of the European Union.

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Commission Recommendation (EU) 2025/1710 of 30 July 2025 on a voluntary sustainability reporting standard for small and medium-sized undertakings (SMEs) has been published in the Official Journal of the European Union. The Recommendation serves as an interim measure ahead of a formal delegated act, which will establish a future voluntary standard as part of the Omnibus I simplification package. Among other things, the Omnibus I package amends the EU Corporate Sustainability Reporting Directive (CSRD) to make sustainability reporting more accessible and efficient.

The European Supervisory Authorities—the European Banking Authority, European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority—have published an updated version of their consolidated Q&A document (JC 2023 18) on the Sustainable Finance Disclosure Regulation (SFDR) and on Commission Delegated Regulation (EU) 2022/1288 supplementing the SFDR. The latest update includes four new Q&As addressing: (i) the definition of the term "water usage"; (ii) how to calculate useful internal floor area for owned real estate assets; (iii) best practice about disclosure of percentages for environmentally and socially sustainable investments; and (iv) whether financial products should calculate top investments or shares of investments in periodic disclosures in a specific way over the reference period.

The European Commission (EC) has adopted a recommendation on a voluntary sustainability reporting standard for small and medium-sized enterprises (SMEs). The recommendation serves as an interim measure ahead of a formal delegated act, which will establish a future voluntary standard as part of the Omnibus I simplification package. Among other things, the Omnibus I package amends the EU Corporate Sustainability Reporting Directive (CSRD) to make sustainability reporting more accessible and efficient.

The EC's standard is intended to make it easier for SMEs not covered by CSRD to respond to requests for sustainability information from large companies and financial institutions that are subject to CSRD. SMEs may also choose to voluntarily report sustainability information in line with the standard to enhance their access to sustainable finance and improve their internal sustainability performance monitoring. The EC encourages large companies and financial institutions to base their sustainability information requests to SMEs on this voluntary standard as far as possible. The upcoming delegated act, which may differ in content from the recommendation, will also introduce a "value-chain cap" to protect SMEs from disproportionate data demands from their value chain partners. Its adoption will depend on the timing and outcome of negotiations between the co-legislators on the Omnibus I proposal.

Three Commission Delegated Regulations supplementing the EU Green Bonds Regulation (Regulation (EU) 2023/2631) have been published in the Official Journal of the European Union (OJ), namely:

• Commission Delegated Regulation (EU) - 2025/753 establishing the content, methodologies and presentation of the information to be voluntarily disclosed by issuers of bonds marketed as environmentally sustainable or of sustainability-linked bonds in the templates for periodic post-issuance disclosures.
• Commission Delegated Regulation (EU) - 2025/754 specifying rules of procedure for the exercise of the power to impose fines or periodic penalty payments by the European Securities and Markets Authority on external reviewers.
• Commission Delegated Regulation (EU) - 2025/755 specifying the type of fees to be charged by ESMA to external reviewers of European Green Bonds, the matters in respect of which fees are due, the amount of the fees, and the manner in which those fees are to be paid.

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The UK government has announced the signing of a Free Trade Agreement (FTA) with India, agreed in May this year. According to the government’s press release, for financial and professional services the deal provides locked-in market access and legal certainty and ensures UK firms are treated on par with domestic suppliers. Separately, the UK government has also renewed the Comprehensive and Strategic Partnership with India, enhancing cooperation on defence, education, climate and technology. Both countries also agreed to strengthen collaboration in tackling serious fraud, organised crime and illegal migration. This includes agreeing to finalise a new criminal records sharing agreement to support proceedings, maintain accurate watchlists and enforce travel bans.

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has adopted its opinion on the Omnibus I package that proposes targeted amendments to key directives on corporate sustainability reporting and due diligence. The opinion recommends significantly narrowing the scope of reporting obligations by raising the applicability thresholds from 1000 to over 5000 employees and a net worldwide turnover exceeding EUR 450 million. ECON also proposes aligning reporting standards with international frameworks such as those of the International Sustainability Standards Board. It also calls for the deletion of certain due diligence obligations, including the requirement to implement climate transition plans and suggests capping financial penalties at 5% of net profits. The Council of EU has already adopted its negotiating mandate. Trilogue negotiations between the Council of the EU and European Parliament will begin once the latter has adopted its own formal negotiating position.

HM Treasury (HMT) has published its response confirming the outcome of its consultation on the potential development of a green taxonomy in the UK. The consultation had sought views on whether such a taxonomy would be an appropriate tool for the UK to facilitate an increase in sustainable investment and mitigate the risk of greenwashing. In the response, HMT confirmed that the decision has been taken not to develop a green taxonomy in the UK, as such a taxonomy would not support the government's vision for the UK sector. Key themes evident in the feedback, which contributed to the conclusion that a taxonomy would not be the most effective tool for realising the UK's green finance ambitions, included: (i) the existence of a number of standards, frameworks and taxonomies that were already available; (ii) the difficulties with fragmentation and reconciling different approaches across jurisdictions; (iii) the complications of adding further data points into existing processes and procedures; and (iv) the limited evidence that a taxonomy would itself meet the objective of channelling capital towards net zero transition. While the work to develop a green taxonomy for the UK will not be proceeding, the response confirms the UK government's commitment to its other work on clean energy and growth, including the Financial Services Growth and Competitiveness Strategy — in respect of which sustainable finance is identified as a priority growth focus area.

The Financial Stability Board (FSB) has published its 2025 progress report on the implementation of its 2021 Climate Roadmap. The report provides a factual overview of progress made across four key areas: disclosures, data, vulnerability analysis, and regulatory and supervisory practices. Its publication does not imply that all G20 members endorse every aspect of the initiatives described. In addition to reviewing past progress, the report outlines the FSB's medium-term strategy for addressing potential climate-related financial risks, continuing its focus on the same four areas listed below.

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The European Commission has adopted a Delegated Regulation amending Delegated Regulation (EU) 2023/2772, introducing targeted amendments, referred as a "quick fix", to postpone the application of certain disclosure requirements under the European Sustainability Reporting Standards. These changes aim to reduce the reporting burden and enhance legal certainty for companies already subject to sustainability reporting for financial year 2024 ("wave one" companies). The amendments allow these companies to continue omitting certain disclosures, such as anticipated financial effects of sustainability-related risks, among others, for financial years 2025 and 2026. Additionally, larger wave one companies (with over 750 employees) will now benefit from the same phase-in provisions previously reserved for smaller entities. These changes are set out in an annex to the Delegated Regulation, which replaces Appendix C of ESRS 1 and provides a revised list of phased-in disclosure requirements. The amendments address the gap left by the "stop-the-clock" Directive, which deferred reporting obligations for wave two and three companies but excluded wave one. A broader ESRS review is underway, targeting simplification and alignment, with completion expected by financial year 2027.

The European Banking Authority (EBA) has published a consultation paper on proposed revisions to its product oversight and governance (POG) guidelines for retail banking products. The EBA considers the update necessary in light of its June 2024 greenwashing report, which identified growing risks across the financial sector and to align with recent legislative amendments to the Capital Requirements Directive (CRD) and Capital Requirements Regulation (CRR) concerning Environmental Social Governance (ESG) risk management.

The revised guidelines aim to strengthen safeguards against greenwashing and ensure that financial institutions maintain high standards of conduct when offering products with ESG features. The EBA proposes a proportionate and targeted approach, adjusting a limited set of existing requirements related to the product's subject matter, manufacturers internal controls, the target market, distribution channels and information flows for the manufacturer's arrangements. A small number of consequential updates are also proposed. The deadline for comments on the consultation is 9 October, with the final guidelines expected to be published in Q1 2026 and effective from 1 December 2026. A virtual public hearing is scheduled for 11 September.

The European Commission has adopted a Delegated Regulation amending Delegated Regulation (EU) 2021/2178 to simplify reporting requirements for environmentally sustainable activities under the EU Taxonomy Regulation. It also amends Delegated Regulations 2021/2139 and 2023/2486 to simplify certain technical screening criteria for determining whether economic activities cause no significant harm to environmental objectives.

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The European Securities and Markets Authority (ESMA) has issued a thematic note to assist firms when making sustainability claims to ensure that they are clear, fair and not misleading. The aim of the thematic note is to provide market participants with information and build on observed market practices. The note focuses on environmental, social and governance (ESG) credentials and outlines four guiding principles on making sustainability claims: (i) accurate—sustainability claims should fairly and accurately represent the entity's sustainability profile without exaggeration and avoiding falsehoods, omissions and cherry-picking; (ii) accessible—sustainability claims should be based on information that is easy to access and understand, with the appropriate level of detail and clarity, avoiding oversimplification; (iii) substantiated—sustainability claims should be backed by clear, credible reasoning, facts and processes, with transparent methodologies and limitations; and (iv) up to date—sustainability claims should be up to date with any material changes disclosed promptly, including a clear indication of the analysis' date and perimeter.

The European Securities and Markets Authority (ESMA) has published its final report on the 2023-2024 common supervisory action (CSA) carried out with national competent authorities (NCAs)on the integration of sustainability risks and disclosures in the investment management sector. The CSA assessed how NCAs supervise compliance with the Alternative Investment Fund Managers Directive (AIFMD), the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive and the Sustainable Finance Disclosure Regulation (SFDR). ESMA concludes that while there is a satisfactory level of compliance, significant vulnerabilities remain, including: (i) inconsistent integration of sustainability risks into investment processes; (ii) deficiencies in entity-level and product-level SFDR disclosures; and (iii) ongoing greenwashing risks. The report highlights the need for enhanced supervisory convergence, urging NCAs to maintain proactive engagement with market participants and to follow up on cases where vulnerabilities were identified. NCAs are also encouraged to apply the European Supervisory Authorities' (ESAs) common understanding of greenwashing as a reference point in their ongoing supervision.

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The European Supervisory Authorities (the European Banking Authority, European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority) have launched a joint consultation on their joint draft guidelines for integrating environmental, social and governance (ESG) risks into financial stress tests for banks and insurers. These guidelines, mandated by the Capital Requirements Directive (CRD) and the Solvency II Directive, aim to harmonise how competent authorities across the EU consistently incorporate ESG risks into their supervisory frameworks. They establish a common framework for designing ESG-related stress testing methodologies and standards, ensuring consistency across the financial sector. They allow authorities to either integrate ESG risks into existing stress testing frameworks or conduct complementary assessments under adverse ESG scenarios, depending on the applicable sectoral legislation. Key elements of the draft guidelines include: (i) detailed guidance on the design and features of ESG stress tests; and (ii) organisational and governance requirements, including sufficient human resources with ESG expertise, data collection and management systems and appropriate timelines for scenario analysis. The guidelines are also designed to be forward-looking, allowing for future methodological advancements and improvements in ESG data availability. The deadline for responses is 19 September, with a public hearing scheduled for 26 August. The guidelines are expected to be finalised by the end of the year and published by 10 January 2026.

The UK Government's Department for Energy Security & Net Zero has published a series of three consultations on proposals to help UK-regulated financial institutions and large companies to develop climate transition plans. The first consultation seeks views on proposals to implement climate-related transition plan requirements, including mandating that entities develop and disclose transition plans or explain why they have not disclosed a plan and making it a legal requirement to take steps in line with a transition plan. The consultation also considers the scope of companies that should be captured (with a focus on ensuring the requirements are proportionate and concentrate on economically significant entities).

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The UK Government has published a policy paper outlining its industrial strategy. The strategy centres around eight priority sectors (the IS-8), including financial services. The UK government's ambition is to establish the UK as the world's most innovative full-service financial centre by 2035. A dedicated sector plan is expected to be published alongside the mansion house speech on 15 July.

Key measures to achieve this objective include:

• Ensuring financial services enables growth across the real economy, with retail banks and wholesale markets providing credit and liquidity.
• Mobilising pensions capital into the UK.

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The Council of the EU has announced it has adopted its negotiating mandate on the Omnibus I package which proposes targeted amendments to, amongst other things, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D). The EU has already published Directive (EU) 2025/794 which implemented the "stop-the-clock" proposal, postponing the application date of aspects of CSRD and CS3D.

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The European Securities and Markets Authority (ESMA) has issued a public statement on its intended approach to supervision of the European Sustainability Reporting Standards (ESRS), confirming its commitment to transparent sustainability reporting while acknowledging the need for proportionality. During the first few years of ESRS application, the Guidelines for Enforcement of Sustainability Information will need to be applied proportionately and realistically. National regulators can also help by conducting informal dialogues with issuers on areas for improvement in their reporting and by bearing in mind that uncertain regulatory context in which issuers are operating. ESMA confirms national regulators will also continue to promote a harmonised supervisory approach under its coordination.

The Taskforce on Nature-related Financial Disclosures (TNFD) has announced a new phase of work to improve market access to decision-useful nature data with plans to release a set of recommendations at COP30 this year. This new phase of work will involve pilot testing and market consultations to develop technical design specifications for a proposed Nature Data Public Facility (NDPF). The pilot programme will: (i) test nature-data principles; (ii) test data quality of nature-related data set; (iii) identify nature-data gaps in need of long-term funding; and (iv) test the NDPF with downstream users to define their data needs and inform design specifications. TNFD will also launch a grand challenge to encourage the development of new technology solutions to enable small and medium-sized enterprises to rapidly assess their nature-related issues globally. The pilot testing will run until October and involve a wide range of global implementation partners as well as a diverse group of over 40 upstream nature data providers and more than 20 downstream nature data users and market intermediaries across markets and sectors.

The Basel Committee on Banking Supervision (BCBS) has released a framework for the voluntary disclosure of climate-related financial risks, alongside an updated webpage and press release. This framework, which builds on the November 2023 consultative document and forms part of the BCBS's broader efforts to strengthen the resilience of the banking system to climate-related risk, is designed to operate within the Pillar 3 disclosure framework. It aims to enhance financial stability by providing banks with structured guidance for disclosing both qualitative and quantitative climate-related financial risks. While the BCBS agreed for the framework to be voluntary in nature, jurisdictions may choose to implement it domestically. The framework is structured around a series of qualitative tables and quantitative templates.

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The European Banking Authority (EBA) has published a consultation paper (CP) proposing amendments to Commission Implementing Regulation (EU) 2024/3172 on the EBA Pillar 3 disclosure framework, aligning it with the requirements of revised Capital Requirements Regulation (CRR3) on ESG-related risks, equity exposures and aggregate exposure to shadow banking entities. The CP also seeks to finalise the implementation of prudential disclosure requirements included in the EU banking package published in 2024. Through the amendments, the EBA aims to improve the transparency and consistency of disclosures while also simplifying the reporting process for institutions. The EBA also intends to provide an updated mapping tool to help institutions align Pillar 3 disclosures with supervisory reporting requirements. The deadline for comments to the consultation paper is 22 August. The final ITS are expected to be submitted to the European Commission by Q4 2025.

The International Organization of Securities Commissions (IOSCO) has published its sustainable bonds report with a press release, identifying key characteristics and growth trends for the sustainable bond market, which had surpassed USD 5.7 trillion in cumulative issuances in 2024.The report examines the characteristics of sustainable bonds, which include green, social, sustainability-linked and transition bonds. It also sets out five key considerations to assist regulators with addressing market challenges, including enhancing investor protection, ensuring fair and efficient sustainable bond markets and improving accessibility.

These are:

• To ensure greater clarity in existing or new regulatory frameworks to demonstrate alignment with internationally accepted principles and standards, support consistency, build investor confidence and support market participation.
• To establish guiding principles to help provide clarity and consistency when categorising sustainable bond types.
• To enhance transparency and disclosure requirements when it comes to reporting on issuers' progress toward sustainability-related goals or sustainability performance targets to promote public accountability.
• To promote the use of independent and credible external reviewers to mitigate conflicts of interest.
• To utilise capacity building and educational programs to increase awareness and understanding of sustainable bonds among issuers, investors, intermediaries and regulator.

The European Banking Authority (EBA) has published part 1 of its 2024 annual report, with a press release, reflecting on key regulatory and supervisory achievements under its work programme over the past year. These include: (i) progress in the implementation of the Basel III reforms; (ii) the further integration of ESG considerations into regulatory frameworks, via the issuance of guidelines and reports on ESG risks, greenwashing and scenario analysis; (iii) the assessment of financial stability amid high interest rates and geopolitical uncertainties, supported by two risk assessment reports; (iv) the enhancement of regulatory data infrastructure through the EUCLID platform; (v) the development of oversight and supervisory capacity for firms subject to the EU Digital Operational Resilience Act (DORA) and the EU Markets in Crypto-Assets Regulation (MiCAR); and (vi) an enhanced focus on innovation and consumers (including access to financial services) while preparing for the transition to the new anti-money laundering and counter-terrorist financing (AML/CFT) framework.

The European Securities and Markets Authority (ESMA) has published a consultation paper on draft regulatory technical standards (RTS) on the transparency and integrity of environmental, social and governance (ESG) rating activities under Regulation (EU) 2024/3005. This was published together with a press release. The Regulation introduces a common regulatory approach to enhance the integrity, transparency, comparability where possible, responsibility, reliability, good governance and independence of ESG rating activities, and seeks to contribute to the transparency and quality of ESG ratings and to the sustainable finance agenda of the EU. ESMA is mandated to deliver draft RTS in relation to authorisation, recognition, separation of activities and disclosures. The draft RTS sets out the aspects that apply to ESG rating providers, including:

• The information that should be provided in the applications for authorisation and recognition.
• The measures and safeguards that should be put in place to mitigate risks of conflicts of interest within ESG rating providers who carry out activities other than the provision of ESG ratings.
• The information that they should disclose to the public, rated items and issuers of rated items, as well as users of ESG ratings.

The deadline for comments is 20 June. ESMA encourages responses from prospective ESG rating providers, financial market participants, ESG ratings users or rated entities. ESMA will consider the feedback received and expects to publish a final report in Q4 2025. ESMA expects to submit the draft RTS to the European Commission by the end of October.

The European Commission (EC) has published a call for evidence to inform the revision of the Sustainable Finance Disclosure Regulation (SFDR), which is planned for Q4 2025. The focus of the review will be to address burdens (including regulatory reporting burdens) and simplify and streamline requirements. This call for evidence follows a previous assessment of the SFDR, which included both a targeted and a public consultation, and will inform an impact assessment to support the review of the regulation. To date, feedback on the SFDR has identified areas for improvement, including: (i) legal certainty on key concepts; (ii) relevance of certain disclosure requirements; (iii) overlaps and inconsistencies with other sustainable finance requirements; and (iv) issues in relation to data availability. In addition, there is broad support for a revised SFDR that would (i) cater for different types of investors and financial product; (ii) facilitate retail investor understanding; (iii) consider international reach and exposure; and (iv) direct investment towards diverse sustainability-oriented aims while avoiding greenwashing. In terms of broader impact, by improving clarity and consistency and addressing data-availability issues, the review should reduce operational and compliance costs, to achieve the objectives of the legislation, and facilitate sustainable investing. The deadline for comments is 30 May.

The Financial Markets Standards Board (FMSB) has issued a Statement of Good Practice (SoGP) on the governance of sustainability-linked products (SLPs), along with a press release. SLPs are products where the financial and/or structural characteristics can vary depending on whether the user (i.e., borrower or issuer of, or counterparty to, SLPs) achieves specific sustainability or ESG objectives. They can be used for general corporate purposes, which allows many users (e.g., borrowers, issuers or counterparties to SLPs) to access the sustainable finance market in a more flexible way. With the growth of SLP issuances and accompanying concerns around the credibility of such instruments, the SoGP is intended to: (i) codify good practices for the governance of SLPs and (ii) support the adoption of consistent governance approaches across asset classes and jurisdictions. This is aimed to enhance the quality and integrity of SLPs; boost market confidence; help mitigate greenwashing risk; and support the development of a deeper, more robust sustainability-linked product market. The SoGP will apply to service providers (e.g., firms acting as sustainability-linked loan lenders, bookrunners or lead arrangers on a sustainability-linked bond issuance or counterparties to a sustainability-linked derivative) or users of SLPs in wholesale financial markets and to support, and be read in conjunction with, existing asset-class specific guidance (notably ICMA, LMA and ISDA principles).

The European Securities and Markets Authority (ESMA) has published official translations of the guidelines, on the enforcement of sustainability information under the Transparency Directive (for background, please see our update). The guidelines are based on Article 28d of the Transparency Directive and aim to establish consistent and effective supervisory practices for all competent authorities to ensure that sustainability information provided by issuers, who have securities admitted to trading on a regulated market and who are required to publish sustainability information under the Accounting Directive, comply with the requirements of Article 24(4) of the Transparency Directive. The guidelines cover, among other things: (i) the objective of enforcement, (ii) ensuring an effective enforcement process, (iii) sustainability information prepared under equivalent third country sustainability reporting requirements, (iv) enforcers maintaining adequate independence from all stakeholders, and (v) the choice of enforcement actions. The guidelines shall apply to the enforcement of sustainability information published from 1 January. Competent authorities must notify ESMA within two months whether they (i) comply; (ii) do not comply, but intend to comply, or (iii) do not comply and do not intend to comply with the guidelines, along with their reasons for not complying.

The UK Financial Conduct Authority (FCA) has updated its webpage summarising feedback to its consultation paper, CP24/8, on extending the sustainability disclosure requirements (SDR) and labelling regime to portfolio managers. This follows a previous update from the FCA, which announced it would no longer publish a policy statement this year. Key feedback to the consultation paper covers proposals on scope, implementation deadlines, labelling portfolios, naming and marketing and disclosures. While there is broad support for the proposals, the feedback highlights the need for more time to address practical challenges and ensure effective implementation of the regime before introducing requirements. As such, the FCA has decided it is not the appropriate time to finalise the rules on extending SDR to portfolio management. The FCA will instead prioritise the multi-firm review into model portfolio services to ensure compliance with the consumer duty and improve good outcomes from model portfolio services. Firms are also reminded to adhere to the anti-greenwashing rule, effective from 31 May 2024.

The Directive (EU) 2025/794, amending the EU Corporate Sustainability Reporting Directive (CSRD) and EU Corporate Sustainability Due Diligence Directive (CSDDD), was published in the Official Journal of the EU (OJ), implementing the "stop-the-clock" proposal discussed under the EU Omnibus I package. The Directive entered into force on 17 April. Member states must transpose the Directive by 31 December.

The Directive postpones:

• by two years, the application of CSRD reporting requirements to large companies that have not yet started reporting and SMEs. These entities will now have to report in 2028 and 2029, respectively, for financial years starting on or after 1 January 2027 and 1 January 2028 (as applicable); and
• by one year, the transposition deadline and first phase of application of certain due diligence provisions under CSDDD. EU Member States will now have until 26 July 2027 to transpose CSDDD, and the first companies will not have to apply the first phase of measures until 26 July 2028.

The proposal is part of the 'Omnibus I' package adopted by the Commission at the end of February, which aims to simplify EU sustainability-related legislation.

The European Securities and Markets Authority (ESMA) has published a trends, risks and vulnerabilities (TRV) risk analysis report on ESG-related changes to fund names and their impact on investment flows. The report examines whether the fund managers decision to incorporate environmental, social, governance or sustainability-related (ESG) terms into their funds' names leads to more investor interest. If so, this has the potential to incentivise greenwashing behaviour, undermine investor trust and hinder efforts to promote sustainability within EU financial markets.

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The European Securities and Markets Authority (ESMA) has published a final report on the outcome of the 2024 Common Supervisory Action (CSA) on ESG disclosures under the Benchmarks Regulation (BMR). The CSA was conducted by ESMA with national competent authorities and assessed how benchmark administrators supervised in the EU comply with the BMR's ESG disclosure requirements. The report presents the findings of the CSA, including that: (i) the lack of specific guidance on the definition and calculation of ESG factors has led to divergent and inconsistent calculation and disclosure practices across benchmarks and administrators; and (ii) there are inconsistent approaches to the underlying assumptions used by administrators for determining the factors. The CSA report recommends that the European Commission considers amendments such as rationalising ESG disclosure requirements, for which ESMA would be able to assist with technical advice. The report also provides clarifications for administrators on transparency expectations and guidance on definitions and methodology used for calculating ESG factors.

The European Parliament has voted in favour of its 'stop the clock proposal' to delay the application of new sustainability reporting and due diligence under the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD). The delay was proposed as part of the European Commission's (EC) "Omnibus I" simplification package, designed to address overlapping or disproportionate rules that are creating unnecessary burdens for EU businesses. The proposal postpones the application of CSRD reporting requirements for companies due to report in 2026 and 2027 (referred to as second and third wave companies), and postpones the transposition deadline and first wave application of the CSDDD by one year (to 2028). The EC had invited the co-legislators to prioritise this proposal in particular, and the Council of the EU endorsed the proposal on 26 March. The draft rules will need to be formally approved by the Council, and then can enter into force.

The UK Financial Conduct Authority (FCA) has published feedback on the views it received in response to its discussion paper DP 23/1 on finance for positive sustainable change. The discussion paper included sections on a number of areas including business strategy, senior management, accountability, incentives, remuneration and training. The feedback notes that a common theme across responses was the need to wait for new regulation in this area, for example the consumer duty and sustainability disclosure requirements (SDR), to become embedded and a number of responses considered that the existing rules were sufficient. The FCA confirms that it is not currently considering introducing new rules on the discussion paper topics (although notes that since DP 23/1 was published, certain new rules have been introduced including the SDR and labelling rules, and the anti-greenwashing rule). The FCA does, however, confirm that it will continue to monitor developments and promote the themes covered by the discussion paper to help the sustainable finance market grow and promote the UK as a leading financial centre.

Following its call for feedback on a draft report, The Platform on Sustainable Finance, an advisory body to the European Commission (EC) has published a final report on technical criterial for new activities and first review of the Climate Delegated Act. The report covers the activities and technical screening criteria to be updated or included in the EU taxonomy. The report sets out recommendations relating to: (i) the review of the criteria and analysis for the EU Taxonomy Climate Delegated Act; (ii) new activities mandated by the European Commission; (iii) new activities mandated by the European Commission but not completed; and (iv) further recommendations for climate change adaptation.

The Platform on Sustainable Finance, an advisory body to the European Commission (EC) has published an updated version of its handbook on Climate Transition Benchmarks and Paris-Aligned Benchmarks (version 2), and has also updated its webpage. The first version of the Handbook was published in December 2019, and was in response to frequently asked questions (FAQs) faced by the TEG benchmarks subgroup members when presenting the EU Climate Transition Benchmark (EU CTB), the EU Paris Aligned Benchmark (EU PAB) , and the benchmarks' disclosure guidance on environmental, social or governance (ESG) issues. The updated version covers clarifying (i) the 7% Reduction Trajectory, (ii) matters of terminology, explaining (iii) the anti-greenwashing measures, (iv) data sources and estimation techniques (v) related classification, and (vi) ESG disclosure matters. Each response to a FAQ in the updated version will also now indicate whether it is from 2019 or 2025, as well as referring to which publications of the TEG, may be relevant.

The Platform on Sustainable Finance, an advisory body to the European Commission (EC) established under Article 20 of the Taxonomy Regulation, has published its response to the EC's Taxonomy Delegated Act consultation.

The Platform is broadly supportive of the simplification proposal but makes a number of recommendations, including: (i) introducing a mechanism for all companies to report partial alignment; (ii) clarifying the materiality threshold; (iii) gradually integrating exposures into the Green Asset Ratio; (iv) postponement of KPIs for Banks; and (v) pausing, rather than excluding, reasonable assurance for Corporate Sustainability Reporting Directive (CSRD) reporting, including the EU Taxonomy entity-level reporting. The Platform raises concerns regarding the reduction of the Taxonomy's scope suggested in the Omnibus proposals, as regards certain corporate sustainability reporting and due diligence requirements. The Platform recommends aligning the scope of Taxonomy reporting with the scope of the CSRD, while preserving the CSRD's original scope. For non-SME companies below the 1,000-employee threshold, the Platform suggests that reporting should be focused on the most essential standards, including Taxonomy alignment.

The Council of the EU has announced that it has agreed its position on the "stop-the-clock" mechanism to postpone the dates of application of certain corporate sustainability reporting and due diligence requirements, as well as the transposition deadline of the due diligence provisions. In particular, to postpone:

• by two years the entry into application of the Corporate Sustainability Reporting Directive (CSRD) requirements for large companies that have not yet started reporting, as well as listed SMEs; and
• by one year the transposition deadline and the first phase of the application (covering the largest companies) of the Corporate Sustainability Due Diligence Directive (CSDDD).

This mechanism is intended to grant the co-legislators time to agree on substantive changes to the CSRD and CSDDD, also proposed by the Commission as part of the "Omnibus I" package on sustainability. The European Parliament has scheduled 1 April for a vote on this fast-tracked proposal.

The Council of the EU has announced that it has adopted at first reading the financial benchmarks regulation with the aim of reducing red tape for EU companies, particularly SMEs. The regulation amends the Benchmark Regulation (Regulation 2016/1011) (BMR) to reduce the regulatory burden on administrators of benchmarks defined as non-significant by removing them from the scope of the legislation. Critical or significant benchmarks will remain within the scope of the revised BMR. EU administrators that are out of scope will be able to opt-in, under certain conditions.

Additionally, the regulation will establish a revised framework for non-EU benchmark administrators to access the EU markets by, among other things, allowing for recognition without requiring equivalence. The European Securities and Markets Authority (ESMA) is granted supervisory powers over non-EU benchmark administrators, aligning ESMA's oversight across both the recognition and endorsement regimes.

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The Financial Conduct Authority (FCA) has published a new webpage on a voluntary survey it issued to environmental, social and governance (ESG) ratings providers on 21 March, to help inform the future regulation of ESG ratings and broader sustainability disclosures. This follows a survey in November 2024 open to all who may be users of ESG ratings and sustainability disclosures. The FCA explains that the input from this survey will inform its cost benefit analysis, policy development and help ensure that the future regulation is both proportionate and tailored to the needs of the market. The information requested to help the FCA better understand the ESG ratings market, includes: (i) the business models and group structures used to provide ESG ratings; (ii) how ESG ratings are constructed and distributed: (iii) what policies and processes firms have in place; and (iv) how firms interact with the broader sustainability disclosures. The FCA is encouraging firms to respond by 2 May but no later than 16 May.

The Platform on Sustainable Finance, an advisory body to the European Commission (EC) established under Article 20 of the Taxonomy Regulation, has published a report on streamlining sustainable finance for SMEs. Despite the critical role that SMEs play in the transition to a net zero, resilient and environmentally sustainable economy, SMEs face significant challenges in accessing external financing for their sustainability efforts. To address the challenges faced by SMEs in relation to use of the Taxonomy, the Platform proposes a tailored streamlined approach – "the SME sustainable finance standard" – to be used by banks and other financiers to classify the loans or other type of financing they provide to SMEs as sustainable (green or transition) finance and simplify any related voluntary reporting.

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The European Securities and Markets Authority has published an overview of its planned consultations for 2025. The consultations relate to workstreams under the EU Listing Act, the Markets in Financial Instruments package, the latest European Market Infrastructure Regulation (known as EMIR 3), the review of the Alternative Investment Fund Managers Directive, sustainable finance and investor protection. ESMA states that it will update the list regularly.

The UK Financial Conduct Authority (FCA) has published a statement confirming that there is nothing in its rules, including its sustainability rules, that prevents investment in or finance for defence companies. The FCA confirms that it is up to individual lenders and investors whether they provide capital to defence companies.

The FCA's sustainability-related rules and regulations include: (i) its Sustainability Disclosure Requirements (SDR), including rules on investment labels for asset managers, and an anti-greenwashing rule applicable to all FCA-authorised firms; (ii) disclosure rules for listed issuers, asset managers and asset owners aligned with the Taskforce on Climate-related Financial Disclosures standards; and (iii) its proposed adoption of the International Sustainability Standards Board's standards in the UK. HM Treasury is also consulting on the proposed regulatory regime for ESG ratings providers. None of these rules require financial institutions to treat companies differently because they are in the defence sector.

The European Securities and Markets Authority (ESMA) has published a letter (dated 3 March) addressed to the European Commission on the prioritisation of ESMA's 2025 deliverables. ESMA's letter sets out specific items which ESMA intends to delay or which have been cancelled. In some instances the delays are made with the purpose of aligning ESMA's work with other initiatives. For example, the technical standards on buy-in under the Central Securities Depository Regulation Review are delayed until T+1 implementation is complete. The EU has committed to moving to T+1 by 11 October 2027. ESMA identifies the following as being included in its highest priority workstreams: (i) implementation of the latest amendments to the European Market Infrastructure Regulation, known as EMIR 3; (ii) the Markets in Financial Instruments Directive and Regulation Review; (iii) the Listing Act; (iv) the Central Securities Depository Regulation Review; (v) the T+1 project; and (vi) the review of the Alternative Investment Fund Managers Directive. ESMA is also prioritising new supervisory responsibilities relating to Consolidated Tape Providers, Green Bond verifiers, ESG Rating providers and oversight powers under the Digital Operational Resilience Act.