UK

1. UK Sustainability Reporting Standards published, introducing a ‘comply or explain’ approach
2. UK FCA publishes simplifying TCFD-aligned product-level reporting requirements
3. UK Government announces major overhaul of corporate reporting rules, amending the Companies Act 2006

EU

1. EU SFDR 2.0 – EU Parliament adopts final position, trilogue negotiations to follow – where do the amendments stand?
2. ESMA publishes thematic notes on ‘impact’ and ‘transition’ claims
3. The European Financial Reporting Advisory Group (EFRAG) published the draft ESRS and VESRS datapoints
4. EU sets out Delegated Regulation for common rating scheme for Data Centres alongside consultation on minimum performance standards
5. EU Commission adopts legislative proposal to modernise the EU’s public procurement framework

Global

1. UNEP publishes report stating ‘the global temperature rise is set to cross 1.5°C’
2. UNEP FI publishes guide on nature-related risks and opportunities across portfolios
3. California confirms series of reliefs to ease first year of reporting for SB253
4. Hong Kong Monetary Authority issues Supervisory Policy Manual on transition planning

EU | Sustainable Finance Disclosures Regulation (SFDR 2.0) – EU Parliament adopts final position, trilogue negotiations to follow – where do the amendments stand?

The European Parliament’s Economic and Monetary Affairs Committee (ECON) adopted its negotiating position [1] on the revision of the SFDR 2.0 in September 2026. The position broadly supports the EU Commission’s proposed replacement of the existing Article 8 and Article 9 disclosure regime with three formal product categories: Transition, ESG Basics and Sustainable, each subject to a minimum 70% qualifying investment threshold and category-specific exclusions. 

The Parliament’s position now completes the principal negotiating positions following the Commission’s proposal in November 2025 and the EU Council’s mandate in June 2026, clearing the way for trilogue negotiations. We have broadly summarised the key requirements for each product category in each of the positions (subject to trilogue negotiations).

Click here to read the full summary

Issuer/investor implications 

Issuer implications: As fund managers begin preparing for SFDR 2.0 product classification and reclassification, issuers may face increasing expectations for taxonomy alignment metrics, transition plan disclosures, PAI-related data and evidence of sustainability governance. More importantly, they may also need to reassess their eligibility for, and participation in, current funds and portfolios, although this will ultimately depend on the degree of adoption of new labels, given the increased restrictiveness. Companies able to demonstrate credible transition pathways and measurable sustainability outcomes may be better positioned to attract capital allocated to Transition and Sustainable-labelled products. Additionally, under the proposed SFDR 2.0 framework, European Green Bonds (EuGBs) issued under the EU Green Bond Regulation are expected to qualify as eligible investments for both the Sustainable and Transition categories. As a result, allocations to EuGBs may count towards the minimum qualifying investment thresholds for these product labels, potentially supporting investor demand for green issuances aligned with EU sustainable finance frameworks.

Investor implications: SFDR 2.0 is likely to require a reclassification of existing Article 8 and 9 products against the new Sustainability, Transition and ESG Basics categories. This may driveh canges to investment policies, portfolio construction, stewardship expectations and exclusion frameworks, while increasing scrutiny of investments contributing towards the proposed 70% qualifying investment threshold. Investors may also need to reassess whether current holdings continue to qualify for Sustainable or Transition-labelled products under the proposed eligibility criteria.

The UK Financial Conduct Authority (FCA) published the Policy Statement (PS 26/19) [2], containing the final rules under the UK SRS. The new standards aim to replace the existing climate-reporting rules to create a consistent framework aimed at enabling companies to disclose sustainability and climate-related financial risks and opportunities. Key considerations include:

• In-scope companies: Although initial expectations pointed to a mandatory disclosure regime for large, listed UK companies, the Government has applied a comply or explain approach, consistent with the current TCFD framework. The rules have also been extended to non-UK companies (with a secondary listing and depository receipt issuers), which was earlier restricted to signposting requirements under their home jurisdiction.
• Reporting reliefs: The FCA has offered certain transitional reliefs to issuers, allowing issuers to omit reporting against certain types of disclosure, including   
  • 1-year transitional relief for Scope 3 GHG emissions disclosures.
  • 1-year transitional relief permitting the use of an alternative recognised methodology for measuring GHG emissions, rather than the GHG Protocol.
  • 2-year transitional relief for non-climate (UK SRS S1) disclosures.
• Interoperability: The standards are closely aligned with the ISSB’s IFRS S1 and S2. UK SRS S1 sets out overarching requirements for reporting sustainability-related financial information, while UK SRS S2 provides detailed disclosure expectations for climate-related risks and opportunities. (Key point: In April 2026, the ISSB agreed to explore the development of nature-related disclosure requirements alongside its existing climate and broader sustainability standards. While still at an early stage, these developments could influence future iterations of UK SRS and other sustainability reporting frameworks.)
• Integrating sustainability disclosures in financial reports: The UK SRS will require companies to report disclosures in their financial annual reports, including any cross-referencing where permitted under SRS S1.
• Transition plans: Companies are not required to publish a climate transition plan. However, where a transition plan exists, specific information regarding the plan must be disclosed. Where no transition plan is published, companies are expected to explain why. Issuers may choose to publish a standalone transition plan or incorporate their transition plan within other reporting.
• Assurance: The standards require in-scope companies to specify, in their annual financial report, whether or not they have obtained third-party sustainability assurance over their disclosures relating to UK SRS. There are no explanations required in the absence of assurance. 

The rules will apply from January 2027, with first reporting expected in FY 2028.

Timeline

Issuer/Investor implications

Issuer implications: Issuers will need to assess their readiness to meet the disclosure requirements, including assessing the materiality of information in order to adopt a comply or explain approach for each of the datapoints ahead of the first reporting cycle. Where information is omitted, issuers will be expected to give clear, evidence-based explanations as well as estimated timelines for future reporting. Further, those with European exposure to corporate reporting (specifically to EU Corporate Sustainability Reporting Directive (CSRD)) should assess the interoperability and overlap between the frameworks to avoid duplication or missed requirements (the 2024 IFRS-ESRS mapping guidance can be a useful resource in this regard).

Investor implications: As financial materiality remains central, investors may be able to better assess the financial linkage of sustainability matters, including those which could reasonably affect the issuers’ capital allocation and cash flows over time. Additionally, ahead of the application, investors should realign their climate and wider sustainability-related questionnaires to the new requirements – and determine how each relevant disclosure feeds into existing financial models. They should also review how issuers apply and justify missing data or phased timelines. As part of this, they will need to prepare for uneven data availability during such transitional periods and assess the underlying reasons for data gaps.

UK FCA simplifies TCFD-aligned product-level disclosure requirements

The UK FCA published the final rules simplifying its product-level Task Force on Climate-related Financial Disclosures (TCFD) disclosure regime [3] in September 2026, replacing several prescriptive requirements with a more targeted, materiality-based approach. For context, the original regime was introduced to enhance climate-related disclosures by asset managers, life insurers and pension providers, requiring them to report annually at two levels – entity-level (how the firm incorporates climate risks and opportunities when managing investments) and product/portfolio-level (climate data and core metrics at individual level). Key changes include:

• Simplified retail disclosures: Firms must periodically assess whether climate-related risks are materially relevant to the financial performance or returns of in-scope products and disclose any material risks through existing retail risk and return communications.
• Removal of climate opportunities disclosures: The FCA has dropped the requirement for firms to disclose climate-related opportunities, focusing instead on material climate-related risks and reducing overlap with the UK Sustainability Disclosure Requirements (SDR) regime.
• More flexible assessment approach: Firms may assess material climate risks at a frequency and in a manner appropriate to the product and can integrate this process into existing risk assessment frameworks.
• Institutional client disclosures retained: Institutional investors retain the ability to request a minimum baseline of climate data, including Scope 1, 2 and 3 GHG emissions information once per calendar year per product.
• Transitional relief: Recognising existing reporting cycles, the FCA introduced a transition period, with the new institutional disclosure requirements applying from 30 June 2027.

UK Government proposes major overhaul of corporate sustainability reporting, amending the Companies Act 2006

The UK Government has launched a consultation [4] on proposals to modernise the corporate reporting framework, with a focus on simplifying disclosure requirements and ensuring annual reports provide financially material information to investors. The consultation closes on 30 November 2026, with key proposals including:

• Replacing existing strategic report requirements with a streamlined set of core narrative disclosures.  
• Considering how recently published UK Sustainability Reporting Standards (UK SRS) should be incorporated into the UK reporting framework.
• Removing prescriptive standalone reporting requirements covering environmental, employee, diversity, social, human rights and anti-corruption topics.  
• Retaining disclosure of sustainability-related matters where financially material to the business.
• A new ’very large‘ threshold to simplify the scope of non-financial reporting requirements.

ESMA publishes thematic notes on ‘impact’ and ‘transition’ claims

ESMA published two thematic notes (5) covering impact claims and climate transition claims. The guides essentially note that sustainability-related claims concerning impact and transition should be communicated in a manner that is clear, substantiated and balanced, with sufficient transparency regarding objectives, implementation approaches and measurement of outcomes. While they don’t introduce regulatory requirements, they provide practical expectations to reduce greenwashing risks.

Impact: Statements that explicitly or implicitly mention “impact”, “positive change” or equivalent terms. Such claims may arise in relation to funds, use-of-proceeds (UoP) bonds and sustainability-linked bonds (SLBs). Impact claims generally rely on three key concepts:

• Intentionality: having the explicit aim to generate positive impact, reflected in clear impact objective(s), a theory of change, ex-ante targets or financial incentives (e.g. variable remuneration).
• Additionality is a defining characteristic of impact investing. It can relate both to the impact generated by the investee and to the impact generated through the investor’s actions (these concepts should not be conflated).
  • Investee impact refers to the positive environmental or social outcomes generated by a company, project or asset.
  • Investor impact is the result of an investor’s actions to influence or enhance those outcomes.
• Measurability: tracking progress towards objectives and publishing accurate and up-to-date results. Key performance indicators (KPIs) focus on outputs (e.g. emissions), outcomes (e.g. emissions avoided) or impact (e.g. improvement in quality of soil).

Transition: Often relate to the gradual improvement of the climate performance of companies, assets or activities towards a climate-neutral economy. ESMA acknowledges that transition claims are inherently forward-looking and subject to assumptions and uncertainty. Nevertheless, key expectations include:

• The transition ambition and objectives pursued, including the targets and metrics underpinning that ambition, along with the base value and base year for measuring progress. Claims should also explain how and to what extent the ambition contributes to climate objectives at EU or global levels, including through science-based and Paris-aligned scenarios or pathways.
• The strategy and actions intended to deliver those objectives, including the strategy and action plan to support and monitor the ambition through key actions and policies e.g. the main elements of a fund’s investment strategy or portfolio construction methodology, or, for bonds, the activities to be financed and their selection criteria

The European Financial Reporting Advisory Group (EFRAG) published the draft ESRS and VESRS datapoints

Following the adoption of the revised European Sustainability Reporting Standards (ESRS) framework in July 2026, the EFRAG released the “2026 Draft List of Datapoints for Revised ESRS” [6]. The list reflects the revised ESRS and incorporates usability enhancements such as data type categorisation, embedded hyperlinks to EFRAG’s interactive ESRS and additional paragraph references.

EFRAG has invited stakeholders to review the methodology and report any fatal flaws through an online survey by end of October, with the final resource expected by the end of 2026. In parallel, it has also published the draft XBRL Taxonomy [7], providing digital structures for ESRS reporting.

EU sets out Delegated Regulation for common rating scheme for data centres alongside consultation on minimum performance standards

In September 2026, the EU Commission (EC) proposed a common rating scheme for data centres (DCs), through a Delegated Regulation [8], to ensure transparency around how these facilities use resources (energy and water), as well as their contribution to the grid through their reuse of waste heat, the addition of clean energy generation capacities, and flexibility. 

The Delegated Regulation follows steps taken by EC in June 2025, where it released the ‘Energy Efficiency Roadmap’ which identified a DC energy package as one of ten priority areas to guide EU action on energy efficiency. The rating scheme is expected to allow comparison between data centres in the same region and promote new designs or appropriate efficiency interventions in new or existing data centres.

The rating scheme will apply to DCs that have a capacity over 500kW and the associated Delegated Regulation is subject to a two-month scrutiny period by European Parliament and Council, with the first labels for individual data centres to be displayed in 2027.

Delegated Regulation Proposed thresholds - Energy and Water Efficiency Classification Convention

The European Commission is also consulting [9] on EU-wide minimum performance standards for DCs as it looks to manage the sector’s growing energy and environmental footprint while supporting continued expansion of digital and AI infrastructure. The proposed standards would apply to new and retrofitted data centres and could set minimum requirements across energy efficiency, water use, waste-heat reuse and grid services. A legislative proposal is indicatively expected in Q2 2027 after the consultation closes on 14 December 2026.

EU Commission adopts legislative proposal to modernise the EU’s public procurement framework

The European Commission adopted a legislative proposal [10] for a regulation to modernise and simplify the EU's public procurement framework. The proposal will require public buyers to systematically consider not only price, but also quality, including environmental, social, innovation, security and resilience, and 'European preference' considerations. The proposal will enable public buyers to factor environmental factors including climate resilience and adaptation into procurement decisions.

UNEP publishes report stating ‘the global temperature rise is set to cross 1.5°C’

The United Nations Environment Programme (UNEP) published a report [11] namely “Limiting Overshoot” which notes that global temperature rise is set to cross 1.5°C, likely within the next few years. However, the report identifies an “overshoot, peak and decline” pathway as a potential remaining option to return to 1.5°C temperature. The report emphasises that this pathway would require immediate and sustained greenhouse gas (GHG) emissions reductions, adaptation measures that reduce vulnerability to impacts of climate change and carefully governed Carbon Dioxide Removal (CDR), while emphasising that the scale and duration of any overshoot will affect climate risks and impacts.

UNEP FI publishes guide on nature-related risks and opportunities across portfolios

UNEP FI, in partnership with Taskforce on Nature-related Financial Disclosures (TNFD), has published Asking Better Questions on Nature [12]: For Bank Chief Risk Officers and Risk Committees. The guide is intended to help banks gather information to monitor and manage nature-related risks and opportunities across their portfolios

California confirms series of reliefs to ease first year of reporting for SB253

The California Air Resources Board (CARB), the regulator charged with developing and enforcing the state’s new corporate climate reporting regulations (SB253), announced the release of new guidance [13] for companies set to begin reporting GHG emissions this year under the state’s new climate reporting regulations, with initial reports due on 10 November 2026.

The new guidance confirms a series of measures by the regulator to “exercise enforcement discretion” to ease the transition into the new reporting requirements for companies, including allowing the use of emissions data already collected for the prior fiscal year, not requiring Scope 1 and 2 data from companies that had not yet collected the data in the past, and accepting emissions data even without limited assurance, for the 2026 reporting cycle.

Hong Kong Monetary Authority issues Supervisory Policy Manual module on transition planning

On 22 September 2026, the Hong Kong Monetary Authority (HKMA) issued a new Supervisory Policy Manual (SPM) module, GS-2 on Transition Planning [14]. The guidance builds on the HKMA’s existing GS-1 Climate Risk Management module. GS-2 applies to all authorised institutions and expects them to establish transition planning processes that consider transition and physical climate risks. It embeds transition planning across several areas of banks’ activities, including board and senior management governance, strategy, risk management, metrics and targets, stakeholder engagement, scenario analysis and communication. 

Implementation is expected to be iterative rather than immediate. Banks should be prepared to demonstrate progress in implementing GS-2 within 24 months of its issuance and are expected to have transition planning documentation in place by 1 July 2030. 

Authors

Rui Zu, Director, Sustainable Finance Advisory 

Daniel Bressler, Director, Sustainable Finance Advisory 

Usman Zaheer, Associate, Sustainable Finance Advisory 

Anika Wadhwa, Senior Analyst, Sustainable Finance Advisory 

1.     EU Parliament’s ECON Committee adopts final position on the revision of SFDR 2.0

2.     UK SRS adopted by the UK FCA

3.     FCA Handbook - ESG 2.3 TCFD-Product-level reporting

4.     UK Modernising Corporate Reporting (MCR) programme

5.     ESMA publishes notes on impact and transition claims

6.     EFRAG Secretariat Releases 2026 Draft List of Datapoints for Revised ESRS | EFRAG

7.     EFRAG Releases Draft ESRS XBRL Taxonomy for the Revised ESRS and Launches Public Consultation | EFRAG

8.     Commission enhances energy efficiency and sustainability of data centres in the EU

9.     Data centres in Europe – minimum performance standards

10.   Commission proposes simpler and more strategic Public Procurement rules

11.   UNEP: World set to cross 1.5°C global warming, but can still limit, adapt to and return from higher temperatures | UNEP - UN Environment Programme

12.   UNEP guide on nature risks and opportunities in portfolios

13.   Guidance for California climate rules (SB 253) 2026 Reporting

14.   Hong Kong Monetary Authority - Supervisory Policy Manual: GS-2 Transition Planning