HM Treasury (HMT) has announced that the inaugural UK‑China Financial Working Group in Beijing resulted in several landmark agreements aimed at strengthening bilateral cooperation in financial services. According to the press release, the key commitments secured during the forum will make it easier for UK businesses to trade with China and will reinforce London's position as the world's leading international financial centre. Agreements were also reached to pursue new forms of cooperation between the UK and China on innovative financing, including the potential issuance of renminbi denominated sovereign biodiversity bonds to cement the UK's role as the global hub for green finance, as well as more efficient cross-border settlement services, supporting trade and investment flows.

A joint readout has also been published confirming that both sides have agreed to work towards the signing of a Memorandum of Understanding on cooperation in central counterparty (CCP) supervision between the People's Bank of China and the Bank of England, and to continue all necessary cooperation to support UK equivalence and recognition processes for Chinese CCPs and Chinese processes for UK CCPs.

The UK Financial Conduct Authority (FCA) has published consultation paper CP26/5 on the evolution of its sustainability disclosure rules for listed companies, following the government's draft UK Sustainability Reporting Standards (UK SRS). The FCA's current requirements are aligned with the Task Force on Climate-related Financial Disclosures (TCFD), which disbanded in 2023. With over 40% of jurisdictions, including the UK, transitioning to the International Sustainability Standards Board (ISSB) Standards, the government is developing the UK SRS to tailor the ISSB framework for the UK market. The FCA therefore needs to update its regime accordingly.

The FCA proposes replacing its TCFD aligned listing rules with requirements for in scope listed companies to report against the UK SRS. The scope would remain broadly aligned with existing TCFD-based obligations and consistent with the ISSB's approach.

Key proposals include:

• Mandatory reporting against UK SRS S2 (covering climate‑related disclosures) but Scope 3 emissions would continue to be reported on a "comply or explain" basis.
• Non‑climate sustainability reporting (UK SRS S1) to be on a "comply or explain" basis, as this will be new for many issuers and may present challenges.

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The European Banking Authority (EBA) has published a consultation paper proposing updates to existing guidelines (EBA/GL/2020/13) on the use of systemic risk buffers (SyRB) to address climate-related and broader environmental risks under Article 133 of the Capital Requirements Directive (CRD), as amended by CRD VI (Directive (EU) 2024/1619). The EBA notes that climate risks, both transition and physical, are expected to have a material impact on individual institutions and the wider financial system. Article 133 permits relevant authorities to apply a SyRB where climate related risks could have serious negative consequences for the financial system and the real economy. The current guidelines, published in 2020, were not designed to target exposures subject to climate risk. The consultation therefore proposes revisions to enable SyRB measures to better capture climate risks of both types. It also incorporates some changes based on lessons learned from national authorities that have previously implemented SyRB measures, with the aim of improving their design and monitoring. The guidelines are expected to be finalised by mid-2026 and are expected to apply six months after publication. The deadline for comments is 30 April.

The European Commission (EC) has published two draft Delegated Regulations (dated 16 October) supplementing Regulation (EU) 2024/3005, the environmental, social and governance (ESG) Rating Regulation, on the transparency and integrity of ESG rating activities. The first draft Delegated Regulation concerns the supervisory fees to be charged by the European Securities and Markets Authority (ESMA) to ESG rating providers, setting out the types of fees, the matters for which they are due, the amounts, justifications and payment modalities, as required under Article 42(2) of the ESG Rating Regulation. The second draft Delegated Regulation establishes the procedural framework for ESMA’s imposition of fines and periodic penalty payments on ESG rating providers, specifying rules on rights of defence, conduct of infringement proceedings, access to files by persons to whom a statement of findings has been sent, limitation periods and the collection of fines, pursuant to Article 39(9) of the ESG Rating Regulation. The deadline for feedback on both draft Delegated Regulations is 13 February. The EC expects to adopt both Delegated Regulations during Q1 2026.

The European Securities and Markets Authority has published its second thematic note on clear, fair and not misleading sustainability-related claims in relation to environmental, social and governance (ESG) strategies. This note forms part of a broader thematic study to address greenwashing risks in support of sustainable investments and follows ESMA's first note on ESG credentials. The purpose of these notes are to provide market participants with information and build on observed market practices. As with the first note, this second note sets out four principles for making sustainability claims. In summary, claims should be: (i) accurate; (ii) based on accessible information; (iii) substantiated; and (iv) up to date. The note follows a similar format to the first, including practical "do's and don'ts" and examples of good and poor practice. It focuses on ESG integration, exclusions and strategies. While these notes do not create new disclosure requirements, they are intended to guide market participants on ensuring that communications, including non-regulatory oral and written communications, and those aimed at retail investors, are clear, fair and not misleading.

The UK Department for Business and Trade (DBT) has published a letter (dated 5 January) sent to the UK Financial Conduct Authority (FCA) providing an update on finalising the UK versions of the International Sustainability Standards Board's (ISSB) sustainability reporting standards (UK SRS), ahead of the FCA's planned January 2026 consultation on adopting the standards for listed companies. The letter confirms that consultation feedback largely supported the draft UK SRS S1 and S2, but stakeholders strongly recommended providing entities with sufficient time to implement the more challenging requirements and sought clarity on the interaction between embedded transitional reliefs and FCA rules.

To address this, the government will remove specific time references from the standards and instead allow timing and availability of reliefs to be set through government regulations (Companies Act 2006), FCA rules or by any other relevant authority. It will also clarify how statements of compliance apply to reporters where reliefs are used. The government will review the ISSB's updates to the international financial reporting standard S2 (climate related disclosures) for incorporation into the final UK SRS S2, which is expected to be published early in 2026.

Commission Delegated Regulation 2026/73 has been published in the Official Journal of the European Union (OJ). The Delegated Regulation, adopted on 4 July, amends 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. These include materiality-based exemptions, reduced and simplified key performance indicators and streamlined reporting templates. The Regulation enters into force on the twentieth day following publication in the OJ, applying from 1 January. Undertakings may, however, apply Delegated Regulations (EU) 2021/2178, (EU) 2021/2139 and (EU) 2023/2486 as applicable on 31 December 2025 for the financial year that starts between 1 January and 31 December 2025.

The Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 has been published, accompanied by an explanatory memorandum. This follows the draft version of the Order which was laid before the UK Parliament in October. The Order amends the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO) to bring the provision of an environmental, social or governance (ESG) rating into the remit of the UK Financial Conduct Authority (FCA) when that rating is likely to influence a decision to make a specified investment. This means that providers of an ESG rating will need to be authorised by the FCA. The FCA published a consultation on 1 December setting out its proposed rules for the ESG ratings regime. The Order inserts a new article 63U into the RAO setting out the new regulated activity. It also specifies exclusions, including exclusions for regulated products and services, intra-group ratings, private use, and ancillary non-commercial provision. In addition, the Order tailors the overseas persons exclusion in article 72 of the RAO to reflect the new regulated activity.

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On 17 December, the European Commission published draft guidance to assist with preparing for the simplified EU Taxonomy disclosure rules, under the EU Taxonomy for sustainable economic activities, which apply from January 2026. These rules, introduced through the Omnibus Taxonomy Delegated Act adopted in July, aim to significantly reduce reporting burdens for EU businesses. Key changes include: the removal of requirements for companies to assess non-material activities; streamlined reporting templates with up to 89% fewer data points for financial undertakings and 66% fewer for non-financial undertakings; and simplified key performance indicators for financial institutions. The guidance, presented as FAQs, provides early interpretation and practical advice ahead of firms preparing their first annual Taxonomy reports under the new framework, due in 2026 for the 2025 financial year. Formal adoption of the FAQs in all EU languages is expected in Q1 2026, following the publication of the Omnibus Taxonomy Delegated Act in the Official Journal of the European Union.

The European Securities and Markets Authority (ESMA) has published a risk analysis report assessing the impact of its guidelines on the use of ESG or sustainability-related terms in fund names. The study found that the guidelines have improved consistency in the use of ESG terms by increasing alignment of fund names and their actual investment strategies and enhanced investor protection by reducing greenwashing risks. Analysis of nearly 1,000 shareholder notifications from the 25 largest EU asset managers revealed that 64% of funds mentioned in shareholder notifications changed their name, often to remove ESG terminology, while 56% updated investment policies to strengthen their sustainability focus. Additionally, funds with higher fossil fuel exposures were more likely to drop ESG terms from their names, whereas those retaining ESG terms have reduced fossil fuel holdings more than all other funds. ESMA concludes that its guidelines have driven convergence in the use of ESG terms and have reduced greenwashing risks.

The European Parliament has announced it has approved the provisional agreement with EU governments to simplify sustainability reporting and due diligence obligations under the European Commission's Omnibus I simplification package. This proposes targeted amendments to, amongst other things, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D), aimed at reducing administrative burdens for businesses. The EU has already published Directive (EU) 2025/794 which implemented the "stop-the-clock" proposal, postponing the application date of certain requirements of the CSRD and CS3D.

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The Council of the EU and European Parliament (EP) have reached a provisional agreement on the Omnibus I package on simplified rules for sustainability reporting and due diligence, as set out in the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D). The co-legislators confirmed the agreement through separate press releases. This provisional agreement follows the EP's earlier rejection of its negotiating mandate.

In relation to the CSRD, it was agreed that the scope of the sustainability reporting requirements should be reduced with listed SMEs and financial holding undertakings being removed from scope, and the employee threshold increased to 1000 with a net turnover threshold of over EUR450 million being added. A transitional exemption for "wave one" companies (being companies that had to start reporting from the 2024 financial year) was also agreed for 2025 and 2026.

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The UK Financial Conduct Authority (FCA) has published consultation paper CP25/34, setting out its proposed regulatory regime for environmental, social and governance (ESG) rating providers. This follows the government's draft legislation to bring this activity within the FCA's perimeter.

The proposed regime combines: (i) existing baseline standards set out in specific sections of the FCA's Handbook, including Threshold Conditions (COND), Principles for Businesses (PRIN), Systems and Controls (SYSC), the Senior Managers and Certification Regime (SM&CR) and General Provisions (GEN); and (ii) tailored requirements, informed by the International Organization of Securities Commissions, to address risks specific to ESG ratings. These tailored rules, set out in Chapters 3 to 6 of the consultation paper, focus on transparency, systems and controls, governance, conflicts of interest and stakeholder engagement.

While rating providers will be regulated, the FCA expects users to continue conducting due diligence to assess ratings' relevance and suitability, noting that the scope of regulation may require distinguishing between regulated and unregulated products. The FCA will monitor whether further guidance for firms on using ESG ratings will be useful.

The deadline for responses is 31 March 2026, with final rules expected in Q4 2026. The authorisation gateway is expected to open in June 2027, and the regime is scheduled to go live on 29 June 2028. In parallel, the FCA published a research note titled "Understanding the UK ESG Ratings Market: Findings from Our Surveys".

The European Commission (EC) has adopted a proposal for a regulation to amend the Sustainable Finance Disclosure Regulation (SFDR). The SFDR, which has been in application since March 2021, sets detailed sustainability disclosure requirements for financial intermediaries and financial products regarding consideration of environmental, social, and governance (ESG) factors. The proposed amendments are aimed at simplifying the framework and making disclosures more retail friendly. An EC review found that the current regime produces lengthy, complex disclosures that hinder investor understanding and comparability.

Key elements of the proposal include: (i) removing entity-level disclosure requirements on principal adverse impacts and reducing product-level requirements; (ii) introducing a new clear categorisation system comprising of three product categories for ESG claims, based on existing market practice and the latest regulatory guidance; and (iii) repealing Commission Delegated Regulation (EU) 2022/1288 supplementing the SFDR, to remove the complex templates and entity-level requirements under it. The EC proposal will now be submitted to the European Parliament and Council of the EU for their deliberation.

The European Commission's International Platform on Sustainable Finance (IPSF) has published its 2025 annual report, assessing progress in sustainable finance framework design to implementation across jurisdictions. The report highlights significant progress in consolidating the core elements of sustainable finance frameworks including: refinement of taxonomies; increased regulatory focus on transition plans; and convergence of disclosure frameworks around international standards, notably the International Sustainability Standards Board (ISSB) and the EU's European sustainability reporting standards (ESRS). The report underscores efforts by IPSF members in preventing greenwashing and enabling credible capital allocation aligned with real economy needs. There is also a dedicated chapter in the report that addresses transition finance for strategic sectors and critical raw materials. The IPSF notes these sectors (such as metals, mining, and heavy industry) are indispensable for clean technologies but are also among the hardest to decarbonise. The chapter explores how sustainable finance frameworks can help steer investment into these complex areas. Looking ahead, the IPSF will continue this work in 2026, with further attention to transition frameworks, taxonomies, strategic sectors and comparability.

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The European Parliament (EP) has announced it has adopted its negotiating mandate on the Omnibus I sustainability package which proposes targeted amendments to, amongst other things, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D), aimed at reducing administrative burdens for businesses. 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.

It follows the EP's rejection of the mandate proposed by its Legal Affairs Committee just last month. Although the text of the mandate has not been published, the announcement states that the mandate proposes sustainability reporting will only apply to companies with over 1,750 employees and annual turnover exceeding EUR450 million, with simplified standards and voluntary sector-specific disclosures. Only businesses within this scope would also be required to provide sustainability reporting under taxonomy rules (i.e. a classification of sustainable investments).

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The Network for Greening the Financial System (NGFS) has released an updated guide on climate scenario analysis for central banks and supervisors, building on the 2020 edition. The revised guide reflects significant methodological progress and best practices in scenario design, data and modelling, with a new emphasis on short-term scenarios to assess near-term financial risks from climate change and evolving policy developments. While retaining the original four-step framework, which includes: (i) identifying objectives and scope; (ii) choosing climate scenarios; (iii) assessing economic and financial impacts; and (iv) communicating and using results; the guide expands on each step with new insights, methodologies and examples. It serves as a practical reference for authorities and financial institutions integrating climate scenario analysis into their risk management frameworks and will continue evolving alongside ongoing sector developments.

Delegated Regulation 2025/1416 amending Delegated Regulation (EU) 2023/2772 has been published in the Official Journal of the European Union. Adopted on 11 July, it introduces targeted amendments, referred to as "quick fix" amendments, to defer the application of specific European sustainability reporting standards (ESRS) under the Omnibus I sustainability package, to ease reporting burdens and provide legal certainty for companies already reporting for financial year 2024 ("wave one" companies). The amendments allow these companies to continue omitting certain disclosures 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. The amendments address gaps left by the "stop-the-clock" Directive, which deferred reporting obligations for wave two and three companies but excluded wave one. The Regulation applies retrospectively from financial years starting on or after 1 January 2025 and entered into force on 13 November.

The Network for Greening the Financial System (NGFS) has published a series of explanatory notes to enhance clarity and usability of its long-term climate scenarios. These notes respond to user feedback seeking greater transparency on underlying assumptions and narratives and aim to support broader application of NGFS scenarios. They cover energy investments, scenario narratives and key findings, key assumptions, physical risks and tipping points in the earth system in the context of NGFS physical risk assessment. The documents form part of Phase V of the NGFS scenario development and go beyond the high-level results presented in the Phase V presentation deck released in November 2024, offering users a closer look at individual scenario outcomes.

The European Commission (EC) has published calls for evidence on proposals to amend two Delegated Regulations: the Taxonomy Climate Delegated Act and the Taxonomy Environmental Delegated Act. The Taxonomy Climate and Environmental Delegated Acts, adopted respectively in 2021 and 2023, specify the technical screening criteria for activities contributing to the six EU climate and environmental objectives including climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, circular economy, pollution prevention and control and biodiversity. The proposed amendments aim to simplify, clarify and enhance usability of these criteria. This initiative forms part of the EC's broader effort to reduce reporting burdens for companies and support sustainable finance through clearer and more proportionate rules. The deadline for comments on both proposals is 5 December.

The European Banking Authority (EBA) has published a final report on guidelines for environmental scenario analysis under the Capital Requirements Directive (CRD), as amended by CRD VI (Directive (EU) 2024/1619). These guidelines complement the EBA's January 2025 environmental, social and governance (ESG) risk management framework by clarifying supervisory expectations for how institutions should conduct environmental scenario analysis, including for institutions using the internal ratings-based approach for calculating the own funds requirements for credit risk. The EBA consulted on the guidelines in January. In response to feedback, the EBA has amended the guidelines with a focus on enhancing clarity and simplifying expectations in line with operational realities. The scope has been streamlined to focus on environmental risks, with climate as the priority. 

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The Joint Committee of the European Supervisory Authorities (ESAs) has published an updated version of its consolidated Q&A document on the Sustainable Finance Disclosure Regulation (SFDR) and the SFDR Delegated Regulation (Commission Delegated Regulation (EU) 2022/1288). A new Q&A has been added clarifying the requirements under Article 6(2) of the SFDR Delegated Regulation concerning principal adverse impact (PAI) disclosures.

The International Organization of Securities Commissions (IOSCO) has published a final report on environmental, social and governance (ESG) indices used as benchmarks (FR/15/25), referred to as "ESG benchmarks". ESG benchmarks are defined in the report as indices specifically constructed to reflect ESG factors according to its publicly disclosed methodology, and which are used as a reference for assessing ESG risk exposure or ESG impact. The report provides a comparative analysis of ESG benchmarks against IOSCO's Principles for Financial Benchmarks (PFBs). The report compares key characteristics and vulnerabilities of ESG benchmarks against traditional financial benchmarks. It also focuses on greenwashing vulnerabilities and existing market and regulatory initiatives aimed at addressing these vulnerabilities.

The report's assessment is structured around the four core pillars of benchmarks, examining how the relevant PFBs apply and whether ESG benchmark administrators should consider any additional factors when embedding these pillars into benchmark design and administration to maintain transparency, consistency, and reliability.

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The draft Financial Services and Markets Act 2000 (Regulated Activities) (ESG Ratings) Order 2025 has been laid before UK Parliament and published alongside a draft explanatory memorandum. The draft Order seeks to bring the provision of environmental, social or governance (ESG) ratings within scope of regulation under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (RAO), making it a specified activity where such ratings are likely to influence decisions to invest in instruments listed in Part 3 of the RAO. This will require providers of an ESG rating to be authorised and supervised by the UK Financial Conduct Authority (FCA). Savings and transitional arrangements will apply, allowing firms to continue providing ESG ratings without authorisation, provided they submit an application for authorisation within a relevant application period to be specified by the FCA.

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The European Banking Authority (EBA) has launched a consultation on its revised guidelines for the supervisory review and evaluation process (SREP) and supervisory stress testing, mandated under the Capital Requirements Directive (CRD). The proposed guidelines consolidate all relevant SREP provisions into a single, comprehensive framework as part of the EBA's efforts to simplify and enhance the EU supervisory framework. The update integrates new elements, including environmental, social and governance factors, operational resilience and mandates under the revised Capital Requirements Directive (CRD VI) relating to third-country branches and the output floor.

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The Financial Conduct Authority (FCA) has updated its Climate Financial Risk Forum (CFRF) webpage, announcing the release of a comprehensive suite of publications aimed at enhancing the financial sector's capacity to manage climate and nature-related risks. These are set out below.

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The European Parliament has rejected the negotiating mandate, adopted by its Legal Affairs Committee on 13 October, on the Omnibus I package on simplified rules for sustainability reporting and due diligence. The Legal Affairs Committee's report (A10-0197/2025) was published on 17 October. Members of the European Parliament will vote on amendments to the file at the upcoming plenary session in Brussels on 13 November, after which trilogue negotiations with the Council of the EU and the European Commission may begin. The Council of EU adopted its mandate in June. The aim is to finalise the legislation by the end of the year.

The European Commission (EC) has published a communication alongside a fact sheet outlining its 2026 work programme, which sets out a comprehensive legislative and policy agenda to strengthen the EU. The programme includes 38 new policy objectives across key areas including energy, defence and digital innovation, among others.

Key initiatives include the European Innovation Act, Cloud and AI Development Act and Quantum Act, which seek to accelerate technological progress and support the EU's digital transition. In the area of sustainable finance, the EC includes a package of measures for "the decade ahead" on climate and the Energy Union, aiming to strengthen the EU's climate and energy frameworks. These measures include revising national targets, updating the emissions trading system, and establishing new infrastructure and regulatory frameworks for CO₂ transport, energy efficiency and renewables. A notable focus of the programme is regulatory simplification, with over half of the legislative initiatives designed to reduce administrative burdens and deliver net cost savings, particularly for small and medium-sized enterprises. The annexes accompanying the work programme list the new initiatives, pending proposals and those the EC proposes to withdraw, among other elements.

The International Transition Plan Network (ITPN) has launched a new interactive global map to help track the regulatory status of climate-related transition plans across jurisdictions. The map allocates jurisdictions into one of three categories: (i) mandatory, where rules or guidance are in force; (ii) upcoming, where mandatory rules are under development; and (iii) voluntary, where guidance encourages disclosure. The map will be regularly updated, with stakeholders invited to contribute to its accuracy.

The Joint Committee of the European Supervisory Authorities (comprising the European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority) (ESAs) have published their 2026 work programme, setting out key priorities for cross-sectoral collaboration for 2026.

The programme focuses on joint efforts in relation to:

• Digital Operational Resilience Act (DORA) – the ESAs will concentrate on the effective operation of the new oversight framework and work related to supervisory convergence of DORA. The ESAs will designate third-party providers critical (CTPPs) to the EU financial sector by the end of 2025 and will conduct risk assessments to outline individual annual oversight plans for each CTPP, complemented by a strategic multi-annual oversight plan.
• Consumer protection and financial innovation – in 2026, the ESAs expect to work on drafting regulatory technical standards based on the empowerments in the proposed amendments to the PRIIPs Regulation in the European Commission's (EC's) Retail Investment Strategy. Work on consumer confidence and protection will consider the EC's strategy to develop a Savings and Investment Union.

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The European Securities and Markets Authority (ESMA) has published its final report proposing the replacement of Commission Delegated Regulation (EU) 2016/1437, which sets out the regulatory technical standards (RTS) for the European Electronic Access Point (EEAP). The publication of the European Single Access Point (ESAP) Regulation and of the two Joint Committee implementing technical standards (ITS) on the ESAP make certain aspects of Commission Delegated Regulation (EU) 2016/1437 (the RTS on the EEAP) obsolete. It is therefore necessary to replace the RTS on the EEAP with an RTS whose content is aligned with the ESAP legislation to bring more legal certainty. The proposed RTS align the requirements which are currently in the RTS on the EEAP with the ITS on tasks of ESAP collection bodies and the ITS on ESAP functionalities, and therefore with the establishment of the ESAP project. It does this by cross-referring the relevant sections of the ESAP Regulation or of one of the two ITS. The report also includes a feedback statement following the consultation earlier this year. The draft RTS will now be submitted to the European Commission and are expected to apply from 10 July 2026.

The European Securities and Markets Authority (ESMA) has published its final report on the regulatory and implementing technical standards (RTS and ITS) under the European Green Bonds Regulation (Regulation (EU) 2023/2631). The report follows its April consultation and outlines ESMA's finalised draft technical standards on various aspects of the external reviewer regime, covering criteria for assessing: (i) the appropriateness, adequacy and effectiveness of the systems, resources and procedures; (ii) whether the compliance function has the authority to discharge its responsibilities properly and independently and for assessing the necessary resources, expertise and access to relevant information; (iii) the soundness of administrative and accounting procedures and internal control mechanisms and the effectiveness of control and safeguard arrangements for information processing systems; (iv) whether the information used when providing reviews is of sufficient quality and from reliable sources; (v) information, form and content of applications for recognition; and (vi) standard forms, templates and procedures to notify ESMA of material changes in the information provided at registration.

Following feedback, ESMA has revised the final technical standards to address concerns around proportionality and costs for compliance, as well as providing clarity on compliance and implementation. ESMA has submitted the final draft RTS and ITS to the European Commission for adoption. They will apply exclusively to ESMA-registered external reviewers from 21 June 2026.

The European Securities and Markets Authority (ESMA) has published its final report on three draft regulatory technical standards (RTS) under Regulation (EU) 2024/3005 on the transparency and integrity of environmental, social and governance (ESG) rating activities. ESMA revised the three RTS to take into account comments received from its May consultation. ESMA has also been mindful of the wider initiative for simplification and burden reduction. As a result, the revisions to the finalised RTS are aimed at removing or clarifying elements which could be considered unduly onerous or ambiguous.

Key changes include on the following: 

• RTS on authorisation and recognition – ESMA has removed or simplified several information requirements.
• RTS on separation of business – The requirement for a physical separation of staff remains. However other requirements, such as those relating to network segmentation, have been clarified or removed where they were deemed as imposing excessive burden.
• RTS on disclosures – Several elements have been revised to ensure they are practically achievable by ESG rating providers – Others have been removed when it was judged they did not provide sufficient added value for the burden that was imposed.

ESMA has submitted the finalised draft RTS to the European Commission for adoption. They will also be subject to non-objection by the European Parliament and Council of the EU. They are expected to apply from 2 July 2026.

The European Commission has adopted a Delegated Regulation supplementing the EU Green Bonds Regulation (Regulation (EU) 2023/2631) (EUGB) regarding regulatory technical standards (RTS) on the external review regime. From 21 June 2026, any entity wishing to provide external review services under the EUGB must be registered with and supervised by the European Securities Markets Authority (ESMA), which is also tasked with developing the relevant RTS/ITS specifying certain provisions for external reviewers. This Delegated Regulation sets out RTS relating to: (i) the conditions for the registration of external reviewers; (ii) the criteria for assessing the sound and prudent management of external reviewers; (iii) the knowledge, experience and training of the external reviewers' employees; and (iv) the conditions under which external reviewers can outsource their assessment activities. The Delegated Regulation will enter into force once it is published in the Official Journal of the European Union.

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.