Sustainability & Stewardship in Financial Services Regulation — August 2026

International

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TNFD

The Taskforce on Nature-related Financial Disclosures Publishes Final Sector Guidance for the Alternative Fuels Value Chain

The Taskforce on Nature-related Financial Disclosures (TNFD) published final sector guidance for the alternative fuels value chain in August 2026. The guidance supplements TNFD’s LEAP (Locate, Evaluate, Assess and Prepare) approach and is intended to support organizations in identifying, assessing, and disclosing nature-related dependencies, impacts, risks, and opportunities across alternative fuel-related activities. The final guidance incorporates feedback received during a public consultation conducted earlier in 2026.

The guidance covers a broad range of industries involved in the alternative fuels value chain, including biofuels, chemicals, forestry management, waste management, transportation, oil and gas, and electric utilities and power generation. It provides sector-specific guidance on applying the LEAP approach, recommended disclosure metrics and indicators, dependency and impact assessment tools, and illustrative examples of nature-related risks, opportunities, and response actions. According to TNFD, the guidance is intended to help organizations better understand nature-related considerations within the alternative fuels sector and support more decision-useful disclosures aligned with the TNFD framework.

The Taskforce on Nature-related Financial Disclosures Publishes Discussion Paper on Environmental Crime

TNFD published a discussion paper on environmental crime in August 2026. The paper sets out draft guidance on incorporating environmental crime considerations into assessments of nature-related dependencies, impacts, risks, and opportunities using TNFD’s LEAP (Locate, Evaluate, Assess and Prepare) approach. The guidance is intended to support organizations preparing to align their assessment and disclosure processes with the TNFD recommendations and supplements TNFD’s existing LEAP guidance.

The discussion paper highlights environmental crime as an increasingly important source of financial, operational, and strategic risk for businesses and financial institutions, noting that illegal activities may be embedded within global value chains and financial systems. It examines how organizations can integrate considerations such as illegal land conversion, illegal mining, illegal fishing, wildlife trafficking, and pollution-related offenses into their nature-related risk assessments and disclosures. According to TNFD, incorporating environmental crime into LEAP assessments can strengthen risk identification, improve visibility of hidden exposures, and support more robust and credible nature-related disclosures.

SBTi

The Science Based Targets Initiative Launches Call for Evidence to Support Revision of its Forest, Land and Agriculture Standard

The Science Based Targets initiative (SBTi) launched a call for evidence on July 30 to inform the development of Version 2 of its Forest, Land and Agriculture (FLAG) Standard. The initiative seeks feedback from companies operating in the FLAG sector, with particular emphasis on organizations located in regions that play a significant role in global agricultural and forestry supply chains. In addition to the call for evidence, the SBTi will conduct a series of virtual stakeholder meetings as part of its broader engagement program. The call for evidence will remain open until October 8.

According to the SBTi, the revision will consider how concepts introduced through the Corporate Net-Zero Standard Version 2.0, including updated company categorization, enhanced target-setting options, and revised target review requirements, could be incorporated into the FLAG framework. The updated Standard is also expected to clarify alignment with the Greenhouse Gas Protocol Land Sector and Removals Standard. The SBTi notes that the revision will follow a structured development process incorporating stakeholder feedback, public consultations, pilot testing, and input from expert working groups.

Asia Pacific

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Malaysia

The Joint Committee on Climate Change Releases Sustainability Reporting Guidance for Banks and Insurance and Takaful Operators

The Joint Committee on Climate Change (JC3) announced on August 13 the release of two guidance documents to support sustainability-related disclosures by banks and insurance and takaful operators (ITOs) under Malaysia’s National Sustainability Reporting Framework (NSRF). Developed through the NSRF Financial Institutions Guidance Document Taskforce, the documents were prepared with input from financial institutions and informed by industry surveys, stakeholder consultations, and benchmarking against market practices.

The guidance aims to support financial institutions in applying the IFRS Sustainability Disclosure Standards (IFRS S1 and IFRS S2) within the Malaysian regulatory context. In developing the guidance, the Taskforce considered the ISSB Standards alongside relevant domestic requirements, including Bank Negara Malaysia’s Climate Risk Management and Scenario Analysis Policy Document and, where relevant, Bursa Malaysia’s listing requirements. According to JC3, the documents provide practical, implementation-focused examples covering selected sustainability-related risks and opportunities relevant to banks and ITOs, with the objective of promoting more consistent, comparable, and decision-useful sustainability disclosures across Malaysia’s financial sector.

The Joint Committee on Climate Change Provides Update on Sustainability Reporting, Climate Finance, and Taxonomy Initiatives at Its 17th Meeting

The Joint Committee on Climate Change (JC3) announced key sustainability and climate finance initiatives on August 6, following its 17th meeting. According to JC3, priorities include supporting Malaysia’s energy transition, strengthening climate resilience, particularly in relation to flood risks, and enhancing the measurement and reporting of sustainability outcomes. As part of these efforts, JC3 highlighted the release of the National Sustainability Reporting Framework (NSRF) Guidance Documents for banks and insurers and takaful operators, which are intended to support more robust, consistent and comparable sustainability-related disclosures. Capacity-building programs to support implementation are expected to commence in October 2026.

The meeting also reviewed progress under the Climate Finance Innovation Lab (CFIL), through which 22 projects seeking RM1.73 billion in funding will participate in an accelerator program designed to support project development and access to financing. In addition, JC3 agreed to adopt the ASEAN Taxonomy for Sustainable Finance as the foundation of the Malaysia Taxonomy, with a pilot program scheduled ahead of full implementation for reporting purposes in 2028. JC3 also announced plans to explore the development of a centralized climate- and nature-related data platform to support sustainable finance activities and sustainability reporting across the Malaysian market.

Europe

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EU

European Financial Reporting Advisory Group Publishes 2026 State of Play Report on Sustainability Reporting Practices under the ESRS

The European Financial Reporting Advisory Group (EFRAG) published its 2026 State of Play Report on July 1. The report provides an assessment of sustainability reporting practices based on 905 assured sustainability statements prepared for financial year 2025 under the European Sustainability Reporting Standards (ESRS). Building on its inaugural review of 2024 reporting, the report analyzes reporting practices across the ESRS framework, including new insights into double materiality assessments, climate transition planning, executive remuneration, and sustainability target-setting.

According to EFRAG, reporting practices remained broadly stable in the second year of ESRS application, with climate change, own workforce, and business conduct continuing to be the most frequently identified material topics. The report found that 82% of companies updated their double materiality assessment compared with the previous reporting cycle, while 67% adopted a hybrid approach combining top-down and bottom-up methodologies. EFRAG also observed increased adoption of climate transition plans, with 69% of companies disclosing such plans compared with 55% in the prior year, and 57% reporting near- and long-term decarbonization targets aligned with a 1.5°C pathway. The report further highlights a growing integration of sustainability considerations into corporate strategy, although it notes that companies continue to set measurable targets for only a subset of the sustainability topics identified as material.

European Financial Reporting Advisory Group Launches Consultation on Draft Sustainability Reporting Standard for Certain Non-EU Undertakings (ESRS-40a)

The European Financial Reporting Advisory Group (EFRAG) opened on July 23 a public consultation on its Exposure Draft of the European Sustainability Reporting Standards for certain non-EU undertakings (ESRS-40a). The draft standard has been developed as technical advice to the European Commission under Article 40a of the Accounting Directive and is intended to support the implementation of the Corporate Sustainability Reporting Directive (CSRD). The consultation is open to stakeholders both within and outside the European Union until October 31.

The proposed standard applies to certain third-country undertakings with significant activities in the EU and is intended to promote transparency regarding their impacts on people and the environment while supporting a level playing field between EU and non-EU companies operating in the EU market. EFRAG is seeking feedback on the proposed disclosure requirements, including practical implementation challenges and the relevance of the disclosures. According to EFRAG, stakeholder input will inform the finalization of its technical advice to the European Commission, which is expected to be submitted in January 2027. The first sustainability reports prepared under the future ESRS-40a are expected to cover financial year 2028, with publication in 2029.

The European Commission’s Joint Research Centre Launches Survey on the Assessment of Credible Climate Transition Plans

The European Commission’s Joint Research Centre (JRC) launched a survey in July 2026 seeking evidence on market practices used to assess the credibility of corporate climate transition plans. The initiative is intended to inform the JRC’s ongoing research on credible transition plans and is primarily aimed at financial institutions, although responses from other stakeholders are also welcomed. According to the JRC, the exercise is being conducted without prejudice to ongoing legislative or regulatory developments relating to transition plans and sustainable finance.

The survey seeks feedback on how financial institutions evaluate the credibility of transition plans and the practicality and relevance of different assessment approaches. The assessment areas covered include emissions reduction targets, decarbonization levers and implementation actions, external dependencies and assumptions, investment and financial indicators, progress reporting, and governance arrangements.

The European Banking Authority Publishes ESG Risk Dashboard on Climate Risk Exposures in the EU/EEA Banking Sector

The European Banking Authority (EBA) published its latest ESG Risk Dashboard on August 6, providing an overview of transition and physical climate risks across the EU/EEA banking sector. The dashboard is based on ESG disclosure data and is intended to support the monitoring of banks’ exposure to climate-related risks and emerging vulnerabilities associated with climate change. According to the EBA, the results illustrate that climate risk indicators remained broadly stable during the second half of 2025, while the availability and quality of climate-related data continued to improve.

The dashboard shows that exposures to sectors with a high contribution to climate change remained broadly unchanged at 62% of total exposures across the EU/EEA between June and December 2025. The EBA also reports broadly stable levels of exposure to physical climate risks, although significant differences persist across jurisdictions due to varying geographic, economic, and sectoral characteristics. In addition, the EBA identified gradual improvements in the quality of climate-related information, including increased availability of energy performance data for mortgage portfolios and a reduction in the share of missing or estimated energy efficiency information.

United Kingdom

The Financial Conduct Authority Simplifies IPO Rules to Support UK Listings

The Financial Conduct Authority (FCA) announced reforms to the UK equity IPO regime on August 5. According to the FCA, the reforms aim to improve the competitiveness of UK capital markets and facilitate access to public markets for companies seeking to raise capital. The changes were finalized through Policy Statement PS26/16 and took effect immediately.

The reforms include the removal of the seven-day waiting period associated with connected research during an IPO and the simplification of information-sharing requirements for issuers and participating firms. The FCA states that these measures are designed to make the UK listing framework more efficient and better positioned to compete with other global listing venues.

The Financial Conduct Authority Publishes Guidance on Climate Adaptation and Resilience for Regulated Firms

FCA published guidance on climate adaptation and resilience on August 4, outlining the potential impacts of physical climate risks on financial services firms, consumers, and markets. The guidance focuses on the property insurance and mortgage sectors, highlighting how increasing exposure to floods and other climate-related hazards could affect the availability, affordability, and accessibility of financial products and services. According to the FCA, the initiative is intended to support firms in understanding and managing the growing impacts of physical climate risks while promoting consumer protection, market integrity, and effective competition.

The FCA identifies five key risks arising from physical climate change, including reduced access to insurance, challenges in obtaining mortgages, increased costs for homeowners, and difficulties in the accurate pricing of climate-related risks. The guidance distinguishes between acute physical risks, such as floods and storms, and chronic risks, including rising sea levels and changing weather patterns, and highlights their potential implications for firms’ operations, assets, and risk management frameworks. The FCA also outlines its ongoing supervisory and policy work in the insurance and mortgage sectors and encourages firms to make use of emerging tools, data, and industry guidance, including resources developed through the Climate Financial Risk Forum (CFRF), to strengthen climate resilience and adaptation planning.

Americas

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Canada

Business Future Pathways Launches Consultation on Draft Methodology for Canada’s Sustainable Finance Taxonomy

Business Future Pathways launched a public consultation on July 9 about the draft Methodology Report for Canada’s Sustainable Finance Taxonomy. The taxonomy is intended to serve as a voluntary tool for identifying climate-aligned investment opportunities across Canadian projects, sectors and economic activities. The Taxonomy will support investment that aligns with Canada’s decarbonization and clean growth priorities. According to Business Future Pathways, the draft Methodology Report will provide the foundation for the future development and implementation of Canada’s Sustainable Finance Taxonomy.

The consultation seeks stakeholder feedback on three key elements of the draft report. These include an activity classification framework covering green, transition, and abatement activities; proposed approaches to “Do No Significant Harm” (DNSH) criteria and Minimum Social Safeguards (MSS); and a methodology for developing sector-specific technical screening criteria. According to Business Future Pathways, the DNSH and MSS frameworks are intended to help ensure that climate mitigation activities do not adversely affect Indigenous rights, human rights, or broader environmental and social objectives. Feedback received through the consultation will inform the next phase of taxonomy development, including the formulation of technical screening criteria expected to commence in Fall 2026.