Recent UK, EU and globally significant policy and regulatory developments and implications for investors, lenders, issuers, and borrower

• EU has proposed updates to the European Sustainability Reporting Standards (ESRS), aiming to simplify them and make sustainability reporting more manageable for companies while still aligning with the European Green Deal.
• In that regard, the European Financial Reporting Advisory Group (EFRAG) also launched a new State of Play 2025 Portal on ESRS reporting and published an accompanying report. The portal is an interactive platform presenting key insights from EFRAG’s latest market study on the early implementation of the ESRS.

Global

• Basel Committee published its voluntary climate risk disclosure framework for banks
• UN Global Ocean summit 2025 highlighted global progress on ocean protection and finance
• Marine industry guidance published by the Taskforce on Nature-related Financial Disclosures (TNFD)
• The International Financial Reporting Standards Foundation (IFRS) released guidance on disclosures around transition plans
• The Network for Greening the Financial System (NGFS) released suite of notes to aid entities with transition planning
• The International Organization of Securities Commissions (IOSCO) published final Sustainable Bonds Report

UK

• Spending Review reaffirms Government’s commitment to UK Energy
• UK’s 10-Year Industrial Strategy to drive investment into clean tech
• Onshore wind strategy aims to unlock UK wind capacity 
• UK presented unified approach to climate and biodiversity
• UK decided not to pursue domestic green taxonomy

•   Reporting developments:
  • UK Government consults on Transition Plan requirements
  • UK Government takes steps towards domestic sustainability reporting standards
  • Oversight Regime for Assurance of Sustainability Reporting

• Transition Finance Council led integrated approach to the UK’s transition strategy
• British Standards Institutions consulted on world’s first transition planning standard
• FCA plans to simplify climate reporting for UK financial firms
• UK Pensions Regulator (TPR) raised expectations on climate and nature governance
• Climate Change Committee (CCC) releases UK’s emission reduction progress report

EU 

• EU Omnibus update (including European Sustainability Reporting Standards revisions)
• EU Commission recommended limiting SME sustainability data requests
• European Commission and European Securities & Markets Authority (ESMA) advance voluntary disclosure tools to enhance sustainable bond market integrity
• Developments related to European Banking Authority’s (EBA) Pillar 3 reporting disclosures:
  • Consultation on amended disclosure requirements for ESG risk management
  • Temporary relief on ESG Pillar 3 disclosures
• The European Supervisory Authorities published joint guidelines on ESG risk integration in stress testing

• ECB reported progress on climate risk management and announces new guidance for banks:
  • ECB stress-testing to assess resilience of banks’ credit portfolios to nature degradation
  • ECB’s note on short term climate-related risks
  • ECB’s note on banks’ progress in manging climate and nature-related risks

• ECB published its latest Bank Lending Survey findings
• EU sets 2040 climate target
• EU Commission on High Integrity Nature credits
• EBA published draft Greenwashing guidance for retail banking
• European Commission sought to simplify EU environmental legislation
• European Commission sought feedback on Climate Resilience and Risk Management Framework

USA

• US Securities & Exchange Commission (SEC) withdrew proposed rules for ESG fund disclosures and shareholder submission reforms
• Court paused SEC Climate Rule challenge instructing agency to clarify position

EFRAG proposal to update EU ESRS

In July, EFRAG published the revised Exposure Drafts [1] of the European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD) for a public consultation on proposed revisions to streamline disclosures. EFRAG’s simplification drive sits amongst a wider European effort to consolidate regulatory processes through amendments to existing standards. The Omnibus’ aim of reducing the scope of CSRD as well as delaying its application to Wave 2 and Wave 3 companies through the ‘Stop-the-clock’ directive can be considered as the ‘first stage’ of this consolidation regime. EFRAG’s proposed revisions to the ESRS is the ‘second stage’ of this process through prescriptive revisions to the actual reporting requirements. These revisions include:

Simplification of the Double Materiality Assessment (DMA) 

• Feedback on the ESRS implementation revealed that companies found the DMA process overly burdensome, often treating the ESRS General Requirements AR 16 topic list as a checklist to justify non-materiality. To address this, EFRAG proposed including a ‘practical considerations’ section to guide companies toward a more efficient, top-down approach –  starting with an analysis of business models to identify the most relevant material topics.

Improved readability and integration into corporate reporting 

• ESRS sustainability statements have been criticised for being overly granular. To improve clarity while retaining transparency, EFRAG proposed allowing an executive summary at the beginning of the statement and the use of appendices for detailed disclosures.

Streamlining Minimum Disclosure Requirements (MDRs) 

• The combination of General Disclosure Requirements (GDRs) with topical standards in ESRS has been criticised for being overly complex and repetitive. In response, EFRAG proposed streamlining the framework by retaining cross-cutting GDRs at the ESRS 2 level with a reduced number of mandatory datapoints, while significantly limiting the required ‘shall’ disclosures in topical standards to only the most essential items.

Enhanced clarity and accessibility

• The Application Requirements section in the ESRS Delegated Act 2023 has been criticised for combining too many elements, making it difficult for companies to determine compliance obligations. To address this, EFRAG proposed removing the ‘voluntary disclosure’ category – often misinterpreted as mandatory – and clearly distinguishing between mandatory and non-mandatory content to improve usability and clarity.

Further simplification reliefs

• EFRAG is proposing additional reliefs for disclosing quantitative information on financial effects, due to its sensitive nature and immature methodologies and for metrics where data availability and quality is limited. The reliefs include qualitative and estimated information. 

Improved interoperability with IFRS S1 and S2

• Better alignment of language between ESRS and IFRS S1 and IFRS S2
• The materiality of information in ESRS has been strengthened through a new paragraph in ESRS 1 that clarifies that sustainability statements must include material information – serving as a general filter for all disclosures, including those required under ESRS 2. Alongside this, EFRAG launched a new State of Play 2025 Portal on ESRS reporting and published an accompanying report. The portal is an interactive platform presenting key insights from EFRAG’s latest market study on the early implementation of the ESRS. Some of these insights include:

• Materiality coverage is low – only 10% of companies  identified all 10 topical ESRS standards as material
• Stakeholder engagement with a wider gamut of parties is low – 97% of entities analysed in the report included internal stakeholders in materiality assessments.
• 55% of companies disclosed a climate transition plan, with a wide range of approaches – speaks to the lack of standardised convention. 
• Sustainability statements vary widely in length (depending on countries, from 70 to more than 200 on average) with financial institutions producing longer reports on average.
• Biodiversity and internal carbon pricing remain limited in disclosures.
• Social disclosures are narrowly focussed on wages with broader human rights topics rarely reported

Issuers / Borrowers

While the Omnibus regulation impacted the number of companies that must report against CSRD, corporates that are still captured should still expect scrutiny from lenders and investors on ESG disclosures. Furthermore, EFRAG’s changes aim for consistency (e.g. alignment with the International Sustainability Standards Board (ISSB)) may help companies better meet diverse investors and lenders expectations. Additionally, the key findings mentioned above show that there remain multiple areas where corporates enhance the robustness of their profiles through better adherence to fields such as climate targets, biodiversity, and human rights. An enhanced profile will likely give corporates more flexibility in the range of funding sources available to them, broadening their access to finance and increasing liquidity. 

Investors / Lenders

EFRAG’s revisions signal a shift toward more globally interoperable and decision-useful sustainability reporting. By aligning more closely with the ISSB, and by reinforcing connectivity with financial statements (including banks’ Pillar 3), the package should enhance cross-border comparability and make it easier to integrate sustainability risks and factors into mainstream credit analysis, product design, and portfolio oversight. For investors and lenders, the practical effect is a cleaner, more coherent linkage between sustainability drivers and financial exposures, reducing duplication and improving the reliability of core inputs.

At the same time, the reforms acknowledge reporting realities by expanding the permitted use of estimates and “undue cost or effort” reliefs and by contemplating a more qualitative baseline for anticipated financial effects. This pragmatism introduces wider uncertainty around some datapoints and may reduce the volume of quantified forward-looking information. Investors and lenders are likely to place greater emphasis on the credibility of transition plans, the rigour of scenario analysis, and the clarity of capex and opex pathways.

Global

Basel Committee publishes voluntary climate risk disclosure framework for banks

The Basel Committee on Banking Supervision announced the release of a framework [2] for the disclosure of climate-related risks by banks. Following pressure from the US, however, the committee decided to make the framework voluntary. Key requirements include:

• Disclosures on qualitative factors describing banks’ governance processes
• Controls and procedures used to monitor, manage and oversee material climate-related financial risks, including how the risks affect banks’ business models, strategy and decision-making
• Methodologies used to determine which exposures are subject to material physical and transition risk
• Requirements for qualitative disclosure on exposures and financed emissions by sector

Most notably, a requirement to report on facilitated emissions, or those from capital markets and financial advisory activities, has been removed.

UN Global Ocean summit 2025 highlights global progress on ocean protection and finance

France and Costa Rica co-organised the 3rd United Nations Ocean Conference (UNOC3) in Nice from 9-13 June 2025 [3]. 

• Major treaty on ocean protection set to take effect: Over 50 countries have ratified the BBNJ Agreement, a landmark treaty protecting marine biodiversity in international waters – covering half the planet’s surface. It will officially enter into force by January 2026, triggering the first-ever Ocean COP that same year.
• Deep-sea mining under scrutiny: 37 nations called for a precautionary pause on deep seabed mining, emphasising the need to better understand fragile deep-ocean ecosystems before exploiting them.
• Ocean-climate action gains momentum: The Blue NDC Challenge (nationally determined contributions), launched by Brazil and France, encourages countries to integrate ocean health into their national climate plans. Early supporters include Australia, Fiji, Kenya, Mexico, Palau, and Seychelles.
• Protecting ocean workers: Countries like Côte d’Ivoire and Belgium committed to improving labour conditions in the fishing industry by endorsing international labour standards.
• Science-based Ocean policy support: A new platform, the International Platform for Ocean Sustainability (IPOS), will help governments craft effective, science-driven ocean policies tailored to local needs.

Additionally, as part of the Blue Economy and Finance Forum (7-8 June 2025):

• A total of €8.7 billion in investments was committed over the next five years by philanthropists, private investors and public banks, supporting a sustainable and regenerative blue economy.
• At UNOC3 (United Nations Ocean Conference), the EU committed around €1 billion to the Ocean, specifically for restoring health of the ocean and its productivity, accelerating development of sustainable competitiveness, among others.
• The assets under management of institutions that have signed the #BackBlue Ocean Finance Commitment exceed €3 trillion, strengthening the integration of ocean priorities into global financial and insurance decision-making.
• 20 public development banks representing $7.5 billion per year of investment in sustainable blue finance have come together to form the Ocean Coalition of Finance in Common.

Marine industry guidance by the Taskforce on Nature-related Financial Disclosures (TNFD)

The TNFD published additional sector guidance [4] for fishing and marine transportation and cruise lines, supplementing the TNFD’s guidance on the identification and assessment of nature-related issues (the LEAP approach). 

Fishing industry:

• The fishing guidance offers practical steps to identify, assess and manage nature-related issues such as dependencies on healthy fish populations and exposure to illegal, unreported and unregulated (IUU) fishing.
• Based on market feedback, the TNFD has co-developed an interoperability table with the Marine Stewardship Council (MSC), enabling organisations with MSC-certified fisheries to report against TNFD metrics efficiently and ensuring comparability.

Marine industry:

• The marine transportation and cruise lines guidance helps organisations identify, assess and manage their nature-related issues, including interactions with ecologically sensitive areas such as marine protected areas and migratory corridors for marine mammals.
• It highlights and encourages better understanding and disclosure of critical dependencies, such as the cruise line sector’s reliance on vibrant coral reef ecosystems.

It also published a discussion paper on the measurement of ocean-related issues for consultation. The deadline for feedback was 1 October.

IFRS releases guidance on disclosures around Transition Plans 

The IFRS Foundation published a new guidance document: Disclosing information about an entity’s climate-related transition [5] including information about transition plans, in accordance with IFRS S2 as part of its commitment to supporting the implementation of IFRS Sustainability Disclosure Standards (ISSB Standards).

The document builds on disclosure-specific material developed by the Transition Plan Taskforce (TPT) [6], with some aspects tailored to ensure global considerations and application. It clarifies how preparers should disclose their transition strategies, including governance, targets, actions, and progress metrics. It emphasises the importance of aligning with global climate goals, such as the Paris Agreement, noting that the climate-related transition process must be viewed in the context of an entity’s overall strategy. The guidance supports market confidence by encouraging robust, verifiable plans that demonstrate how organisations intend to navigate the shift to a low-carbon economy. 

NGFS releases suite of notes to aid entities with transition planning

The NGFS published a collection of notes relating to transition plans and climate scenario analysis. These include: 

A brief overview of the NGFS’s general findings related to transition plans [7] that highlighted that transition plans are essential tools for both financial and non-financial institutions to manage climate-related risks and support the shift to a low-carbon economy. The NGFS recommends integrating scenario analysis, establishing governance oversight, and linking climate targets to remuneration policies as best practices.

A Technical Note [8] intended to provide micro-prudential authorities with an overview of how financial institutions can set credible climate-related targets within their transition plans. The report outlines seven categories of climate targets, including emissions metrics, portfolio alignment, and client engagement and notes the importance of adaptation targets, particularly in emerging markets, and recommends using global reference pathways (e.g. International Energy Agency (IEA), Intergovernmental Panel on Climate Change (IPCC) and NGFS scenarios) to ensure alignment with climate goals.

A Conceptual Note [9] intended to help financial institutions understand the interactions between climate scenario analysis and transition plans.

Difficulties in mapping scenarios to real-world financial exposures, and the lack of standardisation in client transition plans damage the effectiveness of this methodology. Accordingly, the report recommends that entities do the following:

1. Develop a data management framework to both support scenario analysis and transition planning
2. Establish a governance structure that integrates both processes across the organisation
3. Use a diverse set of scenarios but promote consistency in assumptions, methodologies, and metrics across both processes, while ensuring transparency when differences arise.

IOSCO publishes final Sustainable Bonds Report 

The report [10] identified the key characteristics and trends associated with the sustainable bonds market and identifies five key considerations designed to address market challenges. The considerations include:

• Enhancing regulatory clarity: IOSCO urges jurisdictions to improve regulatory clarity for sustainable bonds by aligning with global standards (e.g., International Capital Market Association (ICMA) Principles and CBI Standards). This fosters consistency, investor confidence, and market growth. Tailored rules or guidance can address specific risks and support market development.
• Establishing guiding principles: Clear, consistent classification of green, social, sustainability, and transition bonds and mapping these labels to industry standards to reduce confusion – especially around emerging terms like “transition bonds” – and to curb greenwashing.
• Enhancing transparency: Robust, ongoing reporting on sustainability goals and SPTs is critical. Transparent disclosures help investors track progress and reduce greenwashing risks. Regulators may consider penalties or corrective actions for non-compliance.
• Promoting the use of credible external reviewers: IOSCO supports using independent reviewers (e.g., second-party opinion providers) with strong governance and conflict-of-interest safeguards. These reviewers validate sustainability claims and build investor trust.
• Utilising capacity building: Education, training, and collaboration platforms are vital to strengthen market expertise.

Spending Review reaffirms Government’s commitment to UK Energy

In June, Chancellor Rachel Reeves unveiled the first Spending Review [11] under the current Labour government, announcing amongst other plans, a 16% increase in overall spending for the Department for Energy Security and Net Zero that will reach £12.6bn in 2028-29. The Review is poised to channel investment to the following verticals:

• Energy efficiency: The Spending Review pledged £13.2bn in funding for the “warm homes plan”, covering spending between 2025-26 and 2029-30.  The funding will see around one-fifth of the nation’s housing stock upgraded by 2029.
• Social and affordable housing: Reeves announced, what she called, the “biggest boost to investment in social and affordable housing in a generation”, confirming £39bn in funding for a 10-year affordable homes programme.
• Energy infrastructure investment: £8.3bn will be allocated to Great British Energy (GB Energy) and the linked GB Energy – Nuclear, another manifesto commitment. The Spending Review also gives it an extra £300m in support for offshore wind supply chains and £80m for port investment to support floating offshore wind deployment in Port Talbot in Wales, subject to final due diligence.
• New nuclear: Ahead of the Spending Review, the Chancellor announced £14.2bn investment in the planned Sizewell C new nuclear power plant in Suffolk – which is being jointly developed by the UK government and EDF Energy. Additionally, Rolls-Royce has been selected to build three small modular nuclear reactors (SMRs), with the first connecting to the grid “in the mid-2030s”. The Spending Review also included over £2.5bn for nuclear fusion and £13.9bn for the Nuclear Decommissioning Authority, to keep “former nuclear sites and facilities safe and secure as it decommissions sites and manages nuclear waste”.
• Carbon capture and storage (CCS): The UK has already pledged ~£21.7bn of funding over 25 years to support five CCS projects, involving “clusters” of connected facilities. The Spending Review allocates another £9.4bn of capital spending by 2029 towards “maximising deployment to fill the [CO2] storage capacity” of the first two funded clusters.
• Transport: £2.6bn of capital investment has been set aside to decarbonise transport as part of the government’s clean energy mission. This is made up of £1.4bn to support continued uptake of electric vehicles, in particular vans and heavy goods vehicles (HGVs), as well as £400m for charging infrastructure and £616m for walking and cycling infrastructure.

UK’s 10-Year Industrial Strategy to drive investment into clean tech

In June, the UK government published its 10-year Industrial Strategy (IS) [12]. The 10-year plan aims to increase business investment in eight growth-driving sectors (the IS-8) through the following:

• Access to finance: Prioritise growth of the market through the British Business Bank, the expansion of public financing capital – broadening the National Wealth Fund and raising UK Export Finance’s capacity to its maximum size.
• Regulatory reform: Reduce regulatory costs by 25%, reduce the number of regulators using Regulatory Innovation Office and streamline market access for innovative products.
• Planning and infrastructure: Remove planning barriers and fast-track decisions on critical infrastructure projects.
• Energy: Commit to lower electricity costs for IS-8 manufacturing industries; that this will reduce costs for energy intensive business by c.£35-40/MWh up to 2030. Eligibility for this will be determined via consultation which will be launched shortly and reviewed in 2030. The government also committed to expanding the existing energy package as well as previous commitments to introduce a Carbon Border Adjustment Mechanism by 2027. 
• Economic resilience and security: Boost defence spending, secure critical supply chains and technologies, and help businesses manage risks. As part of this, the government will supporting foundational industries, such as steel and ports, critical to growth sectors.
• International partnerships: Attract private capital and build partnerships through active co-investment with industry on shared priorities.
• Data: Enabling UK data use across private and public sectors, extending Smart Data initiatives, and creating a framework for public data valuation and licensing.

Onshore wind strategy aims to unlock UK wind capacity

Following the removal of the de facto planning ban in England in July 2024, the UK Government unveiled its plan [13] to nearly double the current level of onshore wind, aiming to deliver 27–29GW of capacity by 2030 through six levers:

• Planning & consenting: The Government is streamlining environmental assessments and planning processes, introducing new tools and guidance to help authorities identify suitable sites and accelerate approvals. Onshore wind is re-entering the NSIP regime for projects over 100MW, with added flexibility for smaller developments. Updated planning policies, training, and technical guidance will support faster deployment and repowering of existing sites.
• Networks & system planning: Grid connection reforms are underway with Ofgem and National Energy System Operator (NESO) to reduce delays and costs. Strategic plans for transmission infrastructure through 2050 will guide future network development across the UK.
• Community engagement: New guidance will ensure high-quality public consultation and community benefits for energy projects. Locally owned renewables will be supported through the Local Power Plan, alongside regional campaigns and a Net Zero participation strategy to build public support.
• Aviation & defence: The Government is addressing radar and airspace challenges through annual impact surveys, developer-funded trials, and new roles in the Ministry of Defence and Civil Aviation Authority. Updated guidance and potential funding will help airports mitigate turbine interference.
• Finance & market access: A joint delivery group will identify deployment barriers, while reforms to CFD and electricity pricing aim to improve market access. The National Wealth Fund may support projects with limited credit-rated buyers, helping unlock investment.
• Supply chains & workforce: Supply chain capability is being assessed, with potential incentives to boost UK manufacturing. Onshore wind is now part of the Industrial Strategy, and a plan is in place to support skills development and sustainable construction practices.

UK presents unified approach to climate and biodiversity

In July, the UK government published a report [14] highlighting proposed actions to jointly address climate change and biodiversity. The report focuses on priorities, including climate and nature integration, delivering of clean energy, supporting a rural economy, restoring the UK’s seas, and mobilising green finance through the following levers:

• Strategic integration of climate and nature policy: Aligning climate and biodiversity strategies with domestic legislation such as the Environment Act 2021 and Climate Change Act 2008 to ensure compliance with global standards including the Paris Agreement and the Global Biodiversity Framework.
• Planning for co-benefits across land and sea: New planning tools, including the Land Use Framework and Strategic Spatial Energy Plan, will guide infrastructure and land development to maximise climate and nature benefits. Biodiversity Net Gain and the Nature Restoration Fund are being embedded into planning policy.
• Accelerating clean energy deployment:: The UK aims to become a clean energy superpower by 2030, with major expansions in solar, onshore, and offshore wind.
• Investing in a nature-rich rural economy: Over £7 billion is committed to nature recovery, with £2.7 billion annually allocated to sustainable farming. Environmental Land Management schemes incentivise nature-friendly practices, while additional funding supports flood resilience, tree planting, and peatland restoration.
• Restoring marine ecosystems: New protections and restoration efforts aim to enhance biodiversity, support fisheries, and buffer coastal communities against climate impacts.
• Mobilising green finance for scale: The Government has committed £63 billion in public capital for climate and nature but deems private investment to be essential. Initiatives like the Big Nature Impact Fund and the Natural Environment Investment Readiness Fund are building a pipeline of investable projects.

UK decides not to pursue domestic green taxonomy

As part of the Chancellor’s Mansion House speech on 15 July, the UK Government confirmed it will not move forward with developing a UK Green Taxonomy [15]. This decision follows a public consultation that received 150 responses from a wide range of sectors. While 45% of respondents expressed support for the taxonomy, the majority felt it would not effectively achieve its intended goals of directing investment and addressing greenwashing.

Feedback highlighted that existing international taxonomies and market frameworks already serve similar functions, and introducing a UK-specific version could complicate reporting and fragment the regulatory landscape. Practically, however, this could have varied consequences, including:

• Without a UK Taxonomy, UK corporates issuing sustainable bonds in the EU will retain the EU Taxonomy as the baseline for evidencing the sustainable credentials of their issuances – potentially resulting in a lack of alignment with what UK-based investors deem important
• Domestic practitioners will likely use a range of voluntary disclosures which may detract from this standardisation

Respondents also pointed to existing sector-specific policy roadmaps as more effective tools for guiding investment into net-zero initiatives. Many noted that the consultation would have been more impactful had it included a draft framework rather than conceptual proposals. Additionally, stakeholders felt that current policies – such as sustainability reporting under the UK Sustainability Reporting Standards (UK SRS), transition planning requirements, SDR labelling and disclosure rules for asset managers, and regulation of ESG rating providers – already address the core objectives of the proposed taxonomy.

Reporting developments: in June 2025, the UK government launched 3 consultations: UK Government consults on Transition Plan requirements

The consultation [16] explored mandatory disclosure of climate transition plans for UK-regulated financial institutions—including banks, asset managers, pension funds, insurers and other FTSE 100 companies. The consultation built on existing regulatory momentum, including the UK Sustainability Reporting Standards (UK SRS), and a proposed voluntary sustainability assurance regime (also, see below).

The consultation outlines six implementation options:

1. Explain non-disclosure: Entities must justify the absence of a transition plan
2. Mandate development and disclosure: Require entities to publish transition plans, either within annual reports or as standalone documents
3. Mandate implementation: Introduce legal obligations to deliver on plan elements under operational control
4. Net Zero alignment: Require alignment with the UK’s 2050 net-zero target and interim goals consistent with 1.5°C pathways
5. Climate adaptation and resilience: Encourage planning for 2°C and 4°C warming scenarios to safeguard long-term operations
6. Nature alignment: Integrate nature-related risks into transition planning

The government acknowledged potential litigation risks associated with forward-looking statements in transition plans but aims to strike a balance between legal accountability and flexibility, ensuring firms are not penalised for genuine efforts to meet their targets.

UK Government takes steps towards domestic sustainability reporting standards

The UK Government launched a consultation [17] on the implementation of the UK Sustainability Reporting Standards (UK SRS), marking a significant step in aligning domestic disclosure requirements with global best practices. The UK SRS is based on the International Sustainability Standards Board (ISSB) framework, specifically IFRS S1 (general sustainability-related disclosures) and IFRS S2 (climate-related disclosures) and will apply to UK-listed companies.

Key features of the consultation include:

• The UK intends to adopt IFRS S1 and S2 with minimal modifications, ensuring consistency with international norms while tailoring implementation to the UK context
• The government proposes a staged rollout, beginning with climate-related disclosures (IFRS S2), followed by broader sustainability disclosures (IFRS S1)
• The Financial Conduct Authority (FCA) will integrate UK SRS into its disclosure expectations for listed companies, replacing the current TCFD-aligned requirements
• The consultation also explores the development of a voluntary sustainability assurance registration regime to support high-quality reporting and build market trust.

The consultation closed on 17 September 2025, after which draft standards will be published with the option to adopt them on a voluntary basis as the first step. Final versions are expected to be published in the Autumn 2025.

Transition Finance Council leads integrated approach to the UK’s transition strategy

Following the release of “Establishing credibility and integrity in transition finance” [19] and “Scaling Transition Finance through Sectoral Transition Roadmaps” [20] the TFC has published a consultation on Transition Finance Credibility Assessments and a Transition Finance Playbook.

The consultation seeks to develop a framework to determine the credibility of a transition plan by categorising its contents according to the level of alignment with the following categories:

• Credible ambition: Entities must have a plan for reducing emissions, including having clear interim targets and plans that are aligned with the Credible Pathway (1.5°C (<2°C) scenario)
• Action into progress: Entities must be able to demonstrate that they have the capability to implement their transition plans, taking steps to avoid or reduce environmental and social risks
• Transparent accountability: Implementation actions must be aligned with business planning, organisational processes, and governance. This includes implementation actions, interim targets and metrics in an entity’s business and financial systems and processes
• Addressing dependencies: An entity must be able to signal to investors that it has taken account of both positive and negative material dependencies, where a dependency is defined as any uncertainties or sensitivities that could affect an entity’s interim targets and metrics

The latter aims to support the creation of an integrated approach to supporting the transition of high emission sectors to net-zero through the scaling-up of transition finance.

A key theme within the Playbook is the role of different types of capital in the lifecycle of transition projects. The TFC identify the mismatch between investors, investees, and the number of investable projects as an inhibitor to the expansion of transition finance.

British Standards Institutions consults on world’s first transition planning standard

The British Standards Institution (BSI), in collaboration with the ISO Sustainable Finance Committee, consulted [21] on ISO 32212 – the world’s first internationally recognised standard for net zero transition planning in the financial sector (consultation closed on 12 September 2025).

ISO 32212 is designed to be jurisdictionally flexible and applicable across financial sub-sectors. It focuses on governance and process through three channels: integrating leading guidance into management systems, complementing tools like Science Based Targets initiative (SBTi) and Partnership for Carbon Accounting Financials (PCAF), and helping institutions demonstrate structured planning.

The standard outlines seven steps for credible transition plans, including assessing climate risks, setting targets, embedding outcomes in decisions, communicating progress, reviewing performance, and ensuring strong governance. It aligns with frameworks like the TPT Disclosure Framework and IFRS standards without duplicating disclosure requirements.

FCA plans to simplify climate reporting for UK financial firms

The Financial Conduct Authority (FCA) announced plans [22] to streamline climate reporting rules for asset managers, insurers, and pension providers following concerns that current requirements are too granular.

Currently, asset managers are subject to overlapping requirements under the Task Force on Climate-related Financial Disclosures (TCFD) and the Sustainability Disclosure Requirements (SDR). The FCA’s analysis of TCFD-aligned reports revealed improved climate risk consideration but highlighted challenges with data availability and comparability, with firms noting that product-level disclosures were too complex for retail investors. The FCA is exploring how to consolidate these into a single, coherent framework that aligns with international standards, including those from the ISSB and the Transition Plan Taskforce (TPT).

The FCA plans to consult on these changes later in 2025.

UK Pensions Regulator (TPR) raises expectations on climate and nature governance

The UK Pensions Regulator (TPR) announced [23] it will raise expectations for pension scheme trustees on managing climate change and nature-related risks. It highlights that systemic risks are interconnected and unpredictable, requiring trustees to build resilience through robust governance, scenario planning, and collaboration. Climate change, in particular, is flagged as a material financial risk, with trustees urged to integrate climate considerations into investment and risk management processes and also have a renewed focus on internal scrutiny with respect to data coverage, resilience, and systemic risks.

Climate Change Committee (CCC) releases UK’s emission reduction progress report

In July, the UK’s Climate Change Committee (CCC) published its 2025 report to Parliament on the UK’s progress in reducing emissions [24] The report offers a detailed assessment of the UK’s trajectory toward its 2030 emissions reduction target, but warns of the mounting risks – emissions have more than halved since 1990, but 39% of the emissions reductions required to meet the 2030 target are either at risk or lack credible delivery plans. The most significant gaps are in building heat decarbonisation and industrial electrification – areas that will require targeted policy intervention and investment mobilisation. The CCC’s analysis underscores the need to assess exposure to sectors with high transition risk and to identify opportunities in clean energy infrastructure, electrified transport, and nature-based solutions.

Omnibus update

In June 2025, the Council [25] of the EU endorsed a negotiating mandate on the Commission’s “Omnibus I” package that materially narrows and refocuses sustainability obligations. For CSRD, ministers built on the Commission’s proposal to raise the employee threshold to ≥1,000 and remove listed SMEs from scope by adding a net-turnover threshold of >€450 million and a review clause.

For CS3D, the Council raised scope thresholds to >5,000 employees and €1.5 billion net turnover, shifted to a risk-based approach largely centred on direct (“tier-1”) partners with targeted extensions where objective, verifiable indications of harm exist, postponed the obligation to adopt climate-mitigation transition plans by two years, maintained deletion of an EU-level harmonised civil-liability regime, and moved the transposition deadline to 26 July 2028. Negotiations between the Council, the Parliament and the Commission are expected to begin in October. 

On 4 July 2025, the Commission adopted a Delegated Regulation [26] that streamlines EU Taxonomy disclosures by introducing a formal materiality mechanism (generally a 10% per-KPI de minimis, with non-assessed portions reported in aggregate) and redesigned templates, while clarifying certain generic Do No Significant Harm (DNSH) requirements. The act applies after the EP/Council scrutiny period as of 1 January 2026 and covers FY 2025 (with an option to start from FY 2026). For financial institutions, the package also provides temporary relief on GAR-related (Green Asset Ratio) reporting: two GAR-linked KPIs for credit institutions – fees & commissions and trading-book – are deferred until 1 January 2028, effectively a two-year delay relative to the main application date, while core GAR stock/flow disclosures continue under the simplified templates.

On 11 July 2025, the Commission adopted an ESRS “quick-fix” Delegated Act [27] for wave-one CSRD reporters to ensure FY 2025–2026 reporting is not more onerous than FY 2024. The amendments extend most phase-in reliefs (previously limited to undertakings with ≤750 employees) to all wave-one entities and allow continued omission of certain datapoints (e.g., anticipated financial effects and selected E/S topics) during FY 2025–2026, while leaving later CSRD “waves” unchanged and signalling a broader ESRS simplification by FY 2027.

EU Commission recommends limiting SME sustainability data requests

The European Commission endorsed the use of a voluntary sustainability reporting (VSME) standard [28] for unlisted small-and medium-sized enterprises (SMEs), urging financial institutions to limit data requests to information covered by the standard.

• Aim: The standard aims to reduce administrative burden and includes disclosures on climate targets, biodiversity, and workforce issues but excludes materiality assessments and assurance requirements.
• Broader policy alignment: The VSME is aligned with broader EU sustainability frameworks, including SFDR and ESG Pillar 3 rules.

European Commission advances voluntary disclosures to enhance sustainable bond market integrity

On 25 July 2025, the European Commission published pre- and post-issuance voluntary disclosure templates [29] in the EU’s Official Journal. These developments supplement the EU Green Bond Standard and are part of a broader effort to harmonise disclosures across the EU sustainable bond market while maintaining a voluntary and flexible approach for issuers that do not use the EU Green Bond label.

• Pre-issuance disclosure templates – provide non-binding guidelines and templates for pre-issuance disclosures (i.e., factsheets) by issuers of bonds marketed as environmentally sustainable and by issuers of sustainability-linked bonds.
• Post-issuance disclosure template – establishes voluntary templates for periodic post-issuance disclosures for the same categories of bonds.

Entering into force in August 2025, these guidelines established a voluntary yet structured approach for issuers, supporting them to enhance the clarity and rigour of their green, sustainability and sustainability-linked bond disclosures.

Developments related to EBA’s Pillar 3 reporting disclosures

• Consultation on amended disclosure requirements for ESG risk management:

The European Banking Authority launched a consultation paper [30] which finalises the implementation of the Pillar 3 disclosure requirements introduced by the banking package (CRR3), including the extension of the scope of application of ESG risks-related disclosures to all institutions and the disclosure of information on shadow banking and equity exposures.

• In line with the Omnibus proposal, it has introduced a proportionate approach for ESG disclosures based on the institution’s type, size and complexity, with simplified disclosures for banks other than large, particularly for small or non-listed.
• Transitional provisions have been introduced to support institutions and facilitate the initial implementation of the new requirements.

• Temporary relief on ESG Pillar 3 disclosures:

The European Banking Authority (EBA) published a no-action letter [31] on the application of the ESG Pillar 3 disclosure requirements, advising EU supervisors not to enforce certain ESG Pillar 3 disclosure requirements for banks owing to the legal and operational uncertainties linked to the recent changes proposed as part of the Omnibus legislative package.

The EBA notes that timing challenges associated with the publishing of its own banking package would have potentially subject institutions to conflicting disclosure requirements, particularly with respect to the Green Asset Ratio.

The European Supervisory Authorities publish joint guidelines on ESG risk integration in stress testing

The three European Supervisory Authorities (ESAs) – European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), announced the publication of new draft Joint Guidelines on ESG stress testing [32], enabling the banking and insurance sector authorities in the EU to integrate ESG risks into their supervisory stress tests.

The draft guidelines establish a common framework for developing ESG-related stress testing methodologies and standards across the EU’s financial system. Some of the factors covered by the guidance include time horizons to be considered in the stress tests with integrated ESG risks, scenario design, levels of data granularity to be considered, and materiality assessments, with authorities guided to take a risk-based approach.

They have launched a joint consultation into the new proposed guidelines, which closed on 19 September 2025.

ECB reported progress on climate risk management and announced new guidance for banks

• The ECB published a blog post on short-term climate-related risks [33]. The post provided an overview of the results of the recently published NGFS short-term scenarios for the euro area, with the best-case scenario corresponding to no decline in the euro area’s GDP and the worst-case scenario leading to a contraction of almost 5%.

• Climate risks require urgent attention, with droughts – especially lack of surface water – posing the most significant nature-related threat to euro area economic activity.
• New NGFS scenarios show substantial near-term impacts from extreme weather events.

With ambitious climate policies already in place, the euro area stands to benefit from an early, globally coordinated net-zero transition, which is expected to have limited inflationary effects.

• The ECB published another blog post highlighting the progress banks have made so far in managing climate and nature-related risks [34].

Some of the observations included:

• Only 5% of banks had no practices in place at the end of 2024, down from a 25% in 2022.
• Meanwhile, more than half of banks have adopted leading practices for some climate exposures, up from only 3% in 2022.
• More than 90% of banks currently consider themselves to be materially exposed to climate-related and environmental risks, up from 50% in 2021, with risk assessments becoming increasingly sophisticated.
• Three-quarters of banks do not yet cover all material climate and nature-related risk drivers in their Internal Capital Adequacy Assessment Processes (ICAAPs), and only one-third of banks explicitly integrate climate-related risks into their capital plans.
• All banks have now included climate risk in their stress testing framework, up from only 41% in 2022.

ECB also announced its plans to publish a set of good practice guidance to help banks improve further in risk management.

ECB published its latest Bank Lending Survey findings

The ECB published the findings of its latest Bank Lending Survey [35]. The survey monitored the supply of and the demand for bank lending.

• The Survey reported that climate considerations are already shaping bank lending to firms.
  • Over the past 12 months (Q3 2024–Q2 2025), banks say lending policies eased for “green firms” (net impact on credit standards: -20%; terms and conditions: -31%) and tightened for “brown/high emitting firms” (+35% and +22% respectively).
  • Climate change lifted loan demand for green and “transition” firms (+22% and +24%), while demand fell for brown firms (-3%). The main demand drivers were fixed investment/corporate restructuring and bank lending rates for green projects/technologies (+17% and +21% respectively), whereas uncertainty about future climate regulation weighed on demand (-11%). Looking ahead, banks expect these patterns to persist.

• For households, banks report a clear green differentiation by building energy performance.
  • Lending conditions eased for mortgages on high energy performance buildings (credit standards -14%; terms -30%) and tightened for low performance buildings (+25%; +22%).
  • Demand rose for loans tied to high/medium performance properties (+24%/+7%) but fell for low performance ones (-12%). Demand was driven chiefly by investment in energy performance (+36%) and preferential lending rates for sustainability upgrades (+24%), while physical risk was the main tightening factor on lending policy (+11%). Banks expect continued easing for energy efficient properties and tightening for energy inefficient ones over the next year.

EU sets 2040 Climate Target

In line with the EU’s legally binding 2050 climate neutrality goal, the European Commission has proposed an amendment to the EU Climate Law, setting a new 2040 target [36] to reduce net greenhouse gas (GHG) emissions by 90% compared to 1990 levels.

Flexibility Measures and Sectoral Integration:

To accommodate varying national and sectoral capabilities, the proposal introduces new flexibilities:

• Use of high-quality international carbon credits from 2036 onward (up to 3% of 1990-level emissions)
• Integration of permanent domestic carbon removals into the EU Emissions Trading System (EU ETS) marking an important development for voluntary carbon markets expected to drive demand for removal credits
• Sectoral balancing – e.g., surplus reductions in waste or transport may offset land-use sector shortfalls

Clean Industrial Deal: The Economic Backbone

The 2040 target is closely tied to the Clean Industrial Deal, launched in early 2025 as well as other key deliverables to date including:

• Clean Industrial Deal State Aid Framework (June 2025): Eases financing for clean-tech and energy-intensive sectors
• Simplification of the Carbon Border Adjustment Mechanism (CBAM): Exempts 90% of importers – mostly SMEs – from complex reporting requirements. A comprehensive CBAM review is scheduled for year-end
• Tax Incentive Recommendations: Introduces accelerated depreciation and tax credits for clean technology and industrial decarbonisation
• Support for Power Purchase Agreements (PPAs), grid component manufacturing, and the Industrial Decarbonisation Bank.

EU Commission on High Integrity Nature Credits

The European Commission adopted a Communication, Roadmap towards Nature Credits [37] which sets out an approach for the development of high integrity nature credits to incentivise private investment in nature.

The approach sets out the following steps:

• Ensuring cooperation with EU and international stakeholders
• Developing high-integrity and transparent methodologies
• Identifying market supply and demand and
• Considering options for public and private financing solutions to kick-start the market.

The Commission also plans to run a pilot project from 2025-2027, supported by EU funds. It invited all interested parties to engage in shaping this initiative through an open call for feedback that ran until 30 September 2025.

EBA publishes draft Greenwashing guidance for retail banking

EBA launched a consultation [38] on the revision of product oversight and governance guidelines for retail banking products to consider products with ESG features and greenwashing risks.

Prompted by EBA’s recent report on greenwashing – highlighting an increase in potential cases across all sectors, including among EU banks – and the recent legislative changes such as amendments to the Capital Requirement Directive (CRD) and the Capital Requirements Regulation (CRR) regarding ESG risks, the revisions focus on clarifying existing requirements, such as internal controls, target market identification and distributor information, without imposing additional regulatory burdens.

The deadline for feedback was October 09. The EBA will hold a virtual public hearing on the consult with Feedback expected by 9 October 2025, and the final guidelines expected in Q1 2026 for application from 1 December 2026.

European Commission seeks to simplify EU Environmental Legislation

The European Commission launched a call for evidence [39] for the simplification of environmental legislation. In line with the Commission President’s Political Guidelines for the 2024-2029 mandate and consistent with the Competitiveness Compass for the EU, the initiative will aim to simplify and streamline the administrative requirements related to the environment in the areas of waste, products, and industrial emissions.

The consultation closed on 10 September. A legislative proposal is planned for Q4 2025.

European Commission is seeking feedback on Climate Resilience and Risk Management Framework

The European Commission launched a call for evidence [40] for a European climate resilience and risk management framework. The initiative will set out a framework and plan for action to support EU countries to prepare for climate-related risks and to ensure regular science-based risk assessments. Among the main barriers to be addressed include financial barriers and regulatory barriers.

The consultation closed on 4 September 2025. A proposal is planned for Q4 2026.

US SEC withdraws proposed rules for ESG fund disclosures and shareholder submission reforms 

The US Securities and Exchange Commission (SEC) has withdrawn two proposed rules [41] that would have expanded ESG-related disclosures and made it easier for shareholders to submit proposals. 

One rule aimed to require investment funds to disclose more details about their environmental, social, and governance (ESG) strategies, while the other sought to lower the ownership threshold for shareholders to submit proposals and increase their ability to resubmit proposals that previously failed. The SEC’s decision to pull back these proposals reflects growing political and industry resistance to ESG regulation, particularly from Republican lawmakers and business groups who argue that such rules impose unnecessary burdens and politicise investing.

Court pauses SEC Climate Rule challenge instructing agency to clarify position

Following the US SEC’s request to the Eighth Circuit Court of Appeals to rule on the legal challenge against its climate disclosure rules, the Court has decided to pause challenges to the rules [42], effectively telling the SEC to either recommit to defending them or initiate a formal reconsideration process. The move follows the SEC’s refusal to defend the rules in court or say whether it planned to modify or scrap the rule entirely.

The litigation was originally centred around mandating companies to disclose climate-related risks and greenhouse gas emissions, which has faced pushback from industry groups and Republican-led states. By urging the court to rule, the SEC initially aimed to resolve the legal uncertainty surrounding the rule’s future.

For those looking to discuss any of the above further, please reach out to our authors:

• Tonia Plakhotniuk, Director, Sustainable Finance Advisory
• Daniel Bressler, Director, Sustainable Finance Advisory
• Anika Wadhwa, Analyst, Sustainable Finance Advisory
• Usman Zaheer, Analyst, Sustainable Finance Advisory

1. Press release – EFRAG Shares Revised ESRS Exposure Drafts and Launches 60-Day Public Consultation | EFRAG
2. Basel Committee: A framework for the voluntary disclosure of climate-related financial risks
3. United Nations Ocean Conference Nice 2025
4. TNFD releases final guidance for the fishing and marine transportation and cruise lines sectors and consultation on ocean measurement
5. IFRS Foundation publishes guidance on disclosures about transition plans;
6. Transition Plan Taskforce knowledge resources
7. Network for Greening the Financial Systems – main takeaways of the NGFS work on transition plans
8. Technical note: NGFS target setting and transition plans
9. Conceptual note: NGFS interactions between climate scenario analysis and transition plans
10. IOSCO Sustainable Bonds Report (May 2025)
11. UK government unveils the 2025 Spending Review | Rachel Reeves
12. UK government publishes its 10-year Industrial Strategy to drive growth
13. UK government unveiled its Onshore Wind Strategy aiming to unlock UK wind capacity
14.  HM Government: Unlocking benefits for people, nature and climate: Actions to jointly address climate change and biodiversity loss in England
15. UK government announces its decision to not proceed with a UK Taxonomy, in its consultation response
16. UK government consults on mandating transition plan requirements for UK-regulated financial institutions and FTSE companies
17. UK government publishes exposure drafts for the UK Sustainability Reporting Standards
18. Consultation launched on the assurance of sustainability reporting | developing an oversight regime for assurance of sustainability-related financial disclosures
19. Call for Evidence: Transition Finance Council releases guidance “Establishing credibility and Integrity in Transition Finance”.
20. Call for Evidence Transition Finance Council releases guidance “Scaling Transition Finance through Sectoral Transition Roadmaps”.
21. The British Standards Institute publishes consultation on the world’s first transition planning standard in collaboration with ISO Sustainable Finance Committee
22. UK FCA announces plans for simplifying and streamlining climate reporting requirements for asset managers
23. The UK Pensions Regulator (TPR) to raise expectations for pension scheme trustees on managing climate change and nature-related risks.
24. UK’s Climate Change Committee releases progress report on emission reduction.
25. Simplification council agrees position on sustainability reporting and due diligence requirements to boost EU competitiveness
26. EU Commission adopts Delegated Regulation to streamline EU Taxonomy disclosures
27. EU commission adopts quick fix for companies already conducting corporate sustainability reporting
28. EU Commission publishes VSME Standard
29. EU Green Bond: Green bonds and sustainability-linked bonds templates for voluntary post-issuance disclosures
30. EBA launches consultation on amended disclosure requirements on ESG risk equity exposures
31. EBA issues no action letter application for ESG disclosure requirements and updates to ESG risk management
32. The three European Supervisory Authorities launch consultations on integrating ESG risks into financial stress tests for banks and insurers
33. ECB 2025 blog post on climate risk implications on financial stability and economic growth
34. ECB blog post on banks’ progress made in managing climate- and nature-related risks
35. ECB publishes its latest Bank Lending Survey findings
36. EU Commission proposes amendment to the EU Climate Law setting a new 2040 target to reduce net greenhouse gas (GHG) emissions by 90%
37. EU Commission adopts communication and a roadmap for high integrity nature credits
38. EBA consults on launching revised product oversight and governance guidelines for retail banking products
39. EU Commission launches call for evidence for the simplification of EU environmental legislation.
40. Call for Evidence launched for a European climate resilience and risk management framework
41. U.S. SEC withdraws proposed rules for ESG fund disclosures and shareholder submission reforms
42. Court pauses SEC Climate Rule challenge instructing agency to clarify position