UK

1. UK targets 87% carbon emissions reduction by 2040; CCC publishes progress report 
2. Joint statement on United Kingdom-Netherlands circular economy finance collaboration 

EU

1. EU Listing Act outlines key changes for ESG-labelled instruments
2. ESMA publishes register of firms authorised to act as external reviewers of EuGBs; opens applications for ESG ratings providers 
3. EU SFDR 2.0 moves closer, as Council agrees negotiating position
4. ECB releases updated compendium of good practices for climate and nature-related risk management and stress testing

Global

1. The International Organization for Standardization (ISO) launches ISO 32212, standard for net zero transition planning for financial institutions
2. SBTi launches the release of the Corporate Net-Zero Standard Version 2.0 

EU Listing Act outlines key changes for ESG-labelled instruments 

The EU Listing Act, amending the EU Prospectus Regulation (PR), entered into force in December 2024, with some amendments planned to be phased in over the following 18 months, applicable from 5 June 2026 [1]. Publication in the EU Official Journal is expected in August 2026. Key developments include:

• New ESG disclosure requirements:
  • All ESG labelled bonds must explicitly state the ESG factors or objectives they target. When aligned with the EU Taxonomy or equivalent classification systems, the percentage allocation of bond proceeds should be disclosed, preferably in the final terms rather than the base prospectus. 
  • Issuers of ESG bonds are required to provide electronic links to assigned ESG ratings, external reviews, or second-party opinions. Additionally, any post-issuance disclosures, such as allocation reports, must be made available.           
  • Use-of-proceeds (UoP) bonds: Prospectuses for ESG UoP bonds must describe the projects and activities to which proceeds will be allocated, the goal and characteristics of those and any deviations from such allocation.        
  • Sustainability-linked bonds (SLBs): For SLBs, description of any impact to financial features (such as interest/premium payments) as well as KPIs and sustainability performance targets (SPTs), including consistency with sector-specific science-based targets and the issuer’s sustainability strategy be disclosed.
• EU Green Bond Standard (EU GBS) exclusion: To avoid duplicating information, ESG requirements do not apply to bonds issued under the EU GBS, provided conditions under the PR to incorporate relevant information from the factsheet or voluntary templates in the prospectus, is met.
• Grandfathering approach: Base prospectuses approved before 5 June 2026 will be grandfathered for the remainder of their 12-month validity period and will only be subject to the new regime at their next scheduled update.

For issuers, the EU Listing Act could, in the longer term, reduce administrative burdens through streamlined prospectus requirements and more standardised disclosure processes to improve transparency and comparability for listings on an official EU exchange. While issuers will need to provide clearer explanations of ESG objectives, KPIs, sustainability targets, and where relevant, alignment with the EU Taxonomy, for many issuers this information is likely already contained in their frameworks. 

Although in the short-term, this is likely to increase upfront documentation and verification requirements but, standardisation may ultimately improve execution efficiency and reduce approval timelines once market practices mature. The alignment of prospectus disclosure expectations with broader EU sustainable finance regulations should further support consistency across reporting frameworks. These new requirements also further enhance the attractiveness of utilising the EU GBS label as the required disclosures would be captured in the pre-issuance factsheet. 

For investors, the EU Listing Act should improve the quality, comparability and reliability of information available in prospectuses when evaluating ESG-labelled debt securities. More standardised disclosures on ESG objectives may support portfolio construction, regulatory reporting and stewardship activities, particularly for institutions subject to SFDR and other sustainable investment requirements. However, investors may also need to adapt review processes to process potentially larger volume of information.

UK targets an 87% carbon emissions reduction by 2040; CCC publishes progress report

The UK Parliament has enacted the Seventh Carbon Budget (2038–2042) [2],  mandating an 87% emissions reduction by 2040 against 1990 levels to support the Net Zero 2050 goal. The budget caps emissions at approximately 535 MtCO₂e for the period, aligning with UK Climate Change Committee (UK CCC) recommendations. Key drivers and actions include:

• Energy price shocks: Recent and ongoing geopolitical pressures have resulted in energy supply disruptions leading to a surge in prices. This has reinforced the need for greater energy independence.
• Decarbonising and electric technologies:  As part of the government’s aim to make Britain a clean energy superpower, a series of new policies [3] designed to accelerate the rollout of clean power in the energy system and electrification were launched - lifting the onshore wind ban, investing in nuclear building programmes and encouraging clean power projects. There is also continued progress on the accelerated roll-out of electric vehicles and heat pumps.
• Need for sector delivery plans: The government emphasises the need for policy tools to advance sector plans, prioritising funding mechanisms (balancing private investment and public support), infrastructure for grid expansion, allocation of limited resources across sectors, and accounting for rising electricity demand from data centres and other emerging energy-intensive industries.

Alongside this, the UK CCC also published its emission reduction progress report to Parliament [4] assessing progress towards statutory carbon budgets and the Net Zero 2050 target. Key developments and findings include:

Joint statement on United Kingdom-Netherlands circular economy finance collaboration

On 23 June 2026, the UK and Dutch governments signed a joint statement [5] to strengthen cooperation on circular economy finance, following the recent creation of the Circular Economy Finance Group. The collaboration aims to support sustainable economic growth in line with UN Sustainability Development Goals (SDGs) , improve resilience and reduce financial risks. Key outcomes include: 

• Common circular economy finance framework: Develop a shared voluntary framework with common definitions, metrics and indicators for financing and investment activities, while improving understanding of financing flows and funding needs.
• International alignment and industry collaboration: Promote global best practices through alignment with international initiatives and strengthen cooperation with financial institutions and stakeholders to support the circular transition.

What are the implications?

The joint statement recalibrates industry status quo by highlighting the role that diplomatic partnerships play in furthering the sustainability agenda. Governments are an important conduit for unlocking the cross-border monetary and knowledge flows that are required for the development of circular finance.

ESMA publishes register of firms authorised to act as external reviewers of EuGBs; opens applications for ESG Ratings Providers 

The European Securities and Markets Authority (ESMA) has published the official register of firms [6] authorised to act as external reviewers under the European Green Bonds Regulation. Starting 22 June 2026, all authorised external reviewers will fall under direct ESMA supervision and must comply fully with the Regulation’s requirements. The move marks a real consolidation within the market – external reviewers that were listed on ESMA’s transitional register (in accordance with Articles 69 and 70 of the European Green Bonds Regulation are now required to cease external review activities – various reviewers that were initially approved for the transitional regime are no longer on the current list.

Key takeaways include:

• Firms previously operating under Articles 69–70 must now cease activities unless fully registered, marking the shift to a fully regulated market structure
• Full supervisory regime now in force: Registered reviewers must meet requirements including: senior management accountability; robust, transparent methodologies; strong analytical and technical expertise; effective internal controls and conflict-of-interest framework

Transparency on legacy activity: ESMA has created a separate register detailing firms that operated during the transitional period, including the timeframe of their activities. ESMA notes that previously reviewed factsheets by reviewers on the transitional register, that are not currently on the authorised register, are still valid (such as those reviewed by KPMG). Firms seeking to act as EuGB external reviewers must register with ESMA and pay a €40,000 registration fee.

ESMA opens authorisation process for ESG rating providers: From 2 July 2026, ESG rating providers wishing to operate in the EU must notify ESMA of their intention to seek authorisation, marking the start of the new supervisory regime under the EU ESG Ratings Regulation.

EU SFDR 2.0 moves closer as EU Council agrees negotiating position

Ahead of the trilogue negotiations (expected in Sept. 26) between the EU Commission, Parliament and the Council on  Sustainable Finance Disclosure Regulation (SFDR) 2.0, below covers the Council’s position [7] (For an overview of the Commission's and Parliament's positions, please refer to our previous newsletters [8][9])

European Central Bank (ECB) releases updated compendium of good practices for climate and nature-related risk management and stress testing.

The ECB has updated its compendium of good practices for climate and nature-related risk management through two reports, one on stress testing [10] and another on broader risk management [11]. Key takeaways include:

• Progress continues: Banks have strengthened governance, scenario analysis and disclosures, but further enhancements are needed as climate and nature risks increase.
• Nature risk remains an emerging area: Most banks are still developing methodologies, data and analytical capabilities.
• Stress-testing practices continue to mature, including:
  • More sophisticated scenario design and balance sheet assumptions
  • Improved data strategies (geolocation, emissions proxies, inclusion of EPC data)
  • Broader modelling of transition, physical, and nature risks and renewed focus on risk integration
• Broader risk management is evolving: Transition planning increasingly incorporates reputational and litigation risks.

While banks have largely met supervisory expectations, the ECB expects greater focus on quantifying and integrating climate, and nature-related risks into risk management frameworks as their financial materiality increases.

ISO Launches Net Zero Transition Planning Standard for Financial Institutions

The ISO has launched ISO 32212:2026 [12] - an international framework intended to help banks, insurers, asset managers, asset owners and other financial institutions embed credible climate transition planning into their governance, strategy and financing activities. Key features include:

• Interoperability: The framework integrates leading guidance, including the Transition Plan Taskforce (TPT), the Glasgow Financial Alliance for Net Zero (GFANZ), Institutional Investors Group on Climate Change (IIGCC), OECD guidance and IFRS sustainability frameworks into a single certifiable structure. 
• Embedding considerations in business structure and planning: The standard places strong emphasis on governance and execution, including board oversight, defined accountability, adequate resourcing, and robust documentation.
• Foundation of the framework: Built on five interconnected steps:
  • Assess transition status using scenario analysis
  • Set targets aligned with recognised global, national, and sector benchmarks
  • Embed objectives into decision-making, engagement, funding, and client strategies
  • Disclose outcomes through consistent reporting aligned with established frameworks
  • Monitor progress and regularly update plans through robust governance and controls

SBTi Releases New Corporate Net Zero Standard

The Science Based Targets initiative (SBTi) released Corporate Net-Zero Standard Version 2.0 [13], designed to make science-based climate action more flexible and practical. The standard reflects:

• Introduces a best-efforts compliance model, allowing companies to maintain alignment if targets are missed, provided they demonstrate robust action and disclose barriers and remediation measures.
• Establishes a new Ongoing Emissions Responsibility (OER) framework for carbon credits, providing greater clarity and helping stimulate carbon markets.
• Strengthens focus on execution by embedding targets into governance, transition planning, and capital allocation processes.
• Establishes an implementation hierarchy that prioritises direct emissions reductions across operations and value chains before market instruments and offsets.
• Applies differentiated requirements based on company size and geography, including more stringent Scope 3 expectations for large developed-market companies.
• Mandates near-term Scope 1 and 2 targets; & Scope 3 targets primarily required for larger corporates.

Rui Zu, Director, Sustainable Finance Advisory (Rui.Zu@natwest.com)

Daniel Bressler, Director, Sustainable Finance Advisory (Daniel.Bressler@natwestmarkets.com)

Usman Zaheer, Associate, Sustainable Finance Advisory (Usman.Zaheer@natwest.com)

Anika Wadhwa, Analyst, Sustainable Finance Advisory (Anika.Wadhwa@natwest.com)

References

[1]   Updated Prospectus Regulation incorporates ESG disclosure requirements

[2]   The Seventh Carbon Budget - Committees - UK Parliament

[3]   Clean Power 2030 Action Plan: A new era of clean electricity – main report - GOV.UK

[4]   Progress in reducing emissions 2026 report to Parliament - Climate Change Committee

[5]   Joint statement on United Kingdom-Netherlands circular economy finance collaboration - GOV.UK

[6]   ESMA publishes the register of external reviewers under the EuGB Regulation

[7]   Council agrees position on simpler transparency rules for sustainable financial products - Consilium

[8]   Sustainable Finance Policy and Regulations – Year-End Wrap and Outlook for 2026 | NatWest Corporates and Institutions

[9]   Sustainable Finance Policy and Regulation Round-up

[10] ECB report on good practices for climate and nature-related risk stress testing

[11]  Good practices for climate and nature risk management

[12] ISO 32212:2026, Sustainable finance — Net zero transition planning for financial institutions

[13] The SBTi releases Corporate Net-Zero Standard V2.0 to accelerate corporate climate action - Science Based Targets Initiative