Sustainability & Stewardship in Financial Services Regulation — July 2026 

International

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SBTi

The Science Based Targets Initiative Launches Second Public Consultation on its Draft Power Sector Net-Zero Standard

The Science Based Targets initiative (SBTi) launched a second public consultation on July 15 on an updated draft of its Power Sector Net-Zero Standard. The draft Standard is intended to provide sector-specific requirements enabling power sector companies to set science-based targets aligned with achieving global net-zero emissions by 2050 and has been revised following feedback received during the first consultation and additional input from the SBTi’s Expert Working Group.

According to the SBTi, the updated draft introduces a number of changes, including greater alignment with the Corporate Net-Zero Standard Version 2.0, clarification of the activities and emissions covered by the Standard, revised performance metrics, and updated target-setting approaches. The draft also incorporates new pathways based on the International Energy Agency’s World Energy Outlook 2024 Net Zero Emissions Scenario, including region-specific pathways to support target setting. The consultation will remain open until August 31.

SBTi Services Launches Readiness Assessment Service for the Corporate Net-Zero Standard Version 2.0

SBTi Services launched its Readiness Assessment Service on July 14, intended to help companies assess their preparedness for compliance with the Science Based Targets initiative’s (SBTi) Corporate Net-Zero Standard Version 2.0. The service is available to companies with targets validated under previous versions of the SBTi’s corporate criteria and is designed to provide a structured assessment of how existing targets align with the requirements of the updated Standard.

According to SBTi Services, the assessment is based primarily on information submitted during a company’s original target validation and evaluates matters such as company categorization, alignment of existing targets with the Version 2.0 framework, validation timelines, and the adequacy of emissions inventory and assurance arrangements across Scope 1, 2, and 3 emissions. The resulting report identifies areas where data, methodologies, or assurance processes may need to be strengthened before a company seeks validation under the new Standard. 

The launch forms part of broader efforts to support companies transitioning to the Corporate Net-Zero Standard Version 2.0, which is expected to become operational in 2027 and mandatory for all companies seeking to set SBTi targets from 2028. 

Asia Pacific

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Japan

The Financial Services Agency Publishes Report on Storm and Flood Risk Management and Client Support Practices

The Financial Services Agency (FSA) published a report on July 17 on recent developments in the management of storm and flood risks and related client support practices among financial institutions. The report forms part of the FSA’s ongoing monitoring of climate-related financial risk management following the publication of its Supervisory Guidance on Climate-related Risk Management and Client Engagement in 2022. 

The report is based on a survey of major banks, regional banks, and insurers and examines how institutions identify, assess, and manage financial risks arising from storm and flood events. According to the FSA, financial institutions increasingly recognize storm and flood risks as material climate-related financial risks and have enhanced their risk management practices through the use of more refined data, improved analytical methodologies, and the integration of climate considerations into lending and investment decisions.

The FSA also highlights a range of measures undertaken to support clients’ resilience and adaptation efforts, including disaster-related financing products, adaptation-linked investments, and risk assessment services. In addition, financial institutions have strengthened their own business continuity planning and adaptation measures in response to lessons learned from past natural disasters.

Malaysia

The Securities Commission Malaysia Consults on Proposals to Strengthen the Corporate Governance Ecosystem

The Securities Commission Malaysia (SC) published a Consultation Paper on July 3 seeking public feedback on a series of proposals aimed at further strengthening Malaysia’s corporate governance framework. The proposals build on feedback received in response to the SC’s Discussion Paper on the Corporate Governance Framework issued in December 2025.

The Consultation Paper sets out four key proposals aimed at enhancing accountability, transparency, and shareholder participation. These include new requirements to strengthen the professionalism and effectiveness of company secretaries, the establishment of a shareholder litigation fund to support meritorious legal claims, enhanced governance expectations for public listed companies (PLCs) with concentrated ownership structures, and greater clarity regarding board oversight of technology and artificial intelligence (AI).

According to the SC, the proposals are intended to reinforce the role of key governance gatekeepers, improve governance practices among listed companies, and promote market discipline through greater shareholder empowerment. The consultation will remain open until July 31.

South Korea

The Financial Services Commission Announces Revised Roadmap for Mandatory ESG Disclosures

The Financial Services Commission (FSC) announced a revised roadmap for sustainability (ESG) disclosures on July 8. The roadmap accelerates the implementation of mandatory ESG disclosure requirements and introduces a range of support measures intended to facilitate compliance by listed companies.

Under the revised roadmap, mandatory ESG disclosures will apply from 2028 to KOSPI-listed companies with total consolidated assets of KRW 10 trillion or more, with the threshold reduced to KRW 5 trillion from 2029. Authorities will consider extending the regime to companies with assets of KRW 2 trillion or more from 2030 following a review of implementation of the measures currently envisaged. ESG disclosures will be incorporated into statutory corporate business reports under the Financial Investment Services and Capital Markets Act (FSCMA). The FSC also intends to introduce safe harbor provisions and phase in mandatory third-party verification from 2030.

The roadmap further postpones mandatory disclosure of Scope 3 greenhouse gas emissions by three years for each category of reporting entity, acknowledging the need to develop emissions measurement capabilities. In parallel, the Government announced a range of capacity-building measures, including development of climate-risk data platforms, industry-specific Scope 3 emissions guidance, ESG consulting programmes, and initiatives to promote the use of sustainability disclosure data by investors and financial institutions.

Europe

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EU

The European Securities and Markets Authority Issues Public Statement on the Distribution of ESG Ratings Following Application of the EU ESG Ratings Regulation

The European Securities and Markets Authority (ESMA) issued a public statement on July 1 clarifying the application of the EU ESG Ratings Regulation. According to ESMA, the statement responds to uncertainty regarding whether third parties can continue to distribute ESG ratings issued by ESG ratings providers that have not yet been granted authorization or recognition by ESMA.

Under the ESG Ratings Regulation, ESG rating providers operating in the EU must apply to ESMA for authorization or recognition. While the Regulation entered into application on July 2, ESG ratings providers have until August 2 to notify ESMA of their intention to apply and until November 2 to submit their application.

ESMA Consults on Simplifying the EU Taxonomy Disclosure Framework

ESMA launched a consultation on July 1 regarding technical advice to the European Commission on selected key performance indicators (KPIs) under the Taxonomy Disclosures Delegated Act. The consultation forms part of the broader review of the EU Taxonomy reporting framework and supports the European Commission’s efforts to simplify EU sustainability reporting requirements. 

ESMA’s proposals focus on simplifying Taxonomy-related disclosures for non-financial undertakings and asset managers. Among other matters, ESMA proposes amendments relating to the operational expenditure (OpEx) KPI and group-level reporting in response to concerns over the complexity and reporting burden of existing requirements.

The consultation follows a request from the European Commission for the European Supervisory Authorities (ESAs) to provide technical advice on targeted aspects of the Taxonomy disclosure framework. The consultation will remain open until August 12.

The European Banking Authority Consults on Simplifying Taxonomy Disclosure Key Performance Indicators

The European Banking Authority (EBA) published a Discussion Paper on July 1 concerning certain KPIs and other aspects of the Taxonomy Disclosures Delegated Act. According to the EBA, the Discussion Paper aims to facilitate the European Commission’s efforts to simplify and enhance the usability of Taxonomy-related disclosures by credit institutions and investment firms.

The Discussion Paper sets out preliminary proposals covering a range of areas, including the simplification of the Fees and Commissions KPI, Trading Book KPI, and Off-Balance Sheet Exposures KPI for credit institutions, as well as the “other services” KPI applicable to investment firms. The EBA also seeks feedback on the alignment of grandfathering provisions with the EU Green Bond Regulation, improvements to group-level disclosure requirements, and the treatment of operational expenditure (OpEx) information disclosed by non-financial undertakings when calculating KPIs for financial institutions.

The consultation follows a targeted Call for Technical Advice issued by the European Commission to the European Supervisory Authorities. The EBA is coordinating its work with ESMA and the European Insurance and Occupational Pensions Authority. The consultation will remain open until August 12.

The European Insurance and Occupational Pensions Authority Consults on Changes to Insurance Taxonomy Disclosures

The European Insurance and Occupational Pensions Authority (EIOPA) launched a consultation on July 1 concerning proposed amendments to insurance disclosures under the EU Taxonomy framework for environmentally sustainable activities. The proposals are intended to enhance transparency, simplify reporting requirements, and further align insurers’ Taxonomy-related disclosures with other sustainable finance frameworks and disclosure requirements applicable to financial institutions. 

Among the proposed changes, EIOPA suggests revising the existing underwriting KPI for (re)insurers by limiting the denominator of Taxonomy and eligibility ratios to Taxonomy-eligible lines of business. EIOPA also proposes introducing a new “Green Insured Activities KPI” to measure the proportion of Taxonomy-aligned insured activities, covering both corporate policies linked to Taxonomy-reporting entities and certain retail insurance products. In addition, the consultation explores simplifications to reporting templates, including the removal of disclosures on gas and nuclear activities.

The consultation forms part of a broader review of the Taxonomy Disclosures Delegated Act following a request for technical advice issued by the European Commission to the European Supervisory Authorities (ESAs) in March 2026. EIOPA is coordinating its work with EBA and ESMA. The consultation will remain open until August 12.

EBA Publishes Peer Review on Supervision of Pillar 3 Disclosures

EBA published on July 2 the results of a targeted peer review on compliance with Pillar 3 disclosure requirements under the Capital Requirements Regulation (CRR) and the Bank Recovery and Resolution Directive (BRRD). The review assessed how competent authorities across the EU supervise institutions’ compliance with a variety of disclosure requirements. 

The EBA found that most competent authorities have fully or largely integrated Pillar 3 requirements into their supervisory frameworks, including supervisory methodologies, internal guidance, and review processes. According to the review, supervisory practices were generally effective and demonstrated a high degree of convergence across the EU. The assessment also identified several authorities that had implemented supervisory arrangements to a particularly high standard, reflecting advanced practices and strong application of the relevant regulatory requirements.

However, the EBA noted that differences in supervisory approaches remain across jurisdictions. In particular, the review identified instances where authorities lacked sufficiently formalized methodologies or systematic processes for assessing compliance with Pillar 3 requirements. The EBA highlights the importance of continued supervisory convergence and notes that the findings may lead to follow-up measures aimed at strengthening consistency and effectiveness in the supervision of bank disclosures across the EU.

EBA Clarifies Product Oversight and Governance Requirements for ESG Products

EBA published on June 30 revised Guidelines on product oversight and governance (POG) arrangements for retail banking products. The amendments clarify the application of the Guidelines to products with environmental, social, and governance (ESG) features and introduce measures intended to address greenwashing risks in the design and distribution of retail banking products. 

The revised Guidelines make ESG and greenwashing considerations more explicit throughout the product lifecycle, including in relation to manufacturers’ internal control functions, target market identification, distribution arrangements, and the information provided to distributors and consumers. According to the EBA, the amendments are intended to ensure that financial institutions apply robust governance standards when developing and marketing ESG-related products, thereby reducing the risk of consumers being misled regarding a product’s sustainability characteristics.

The revised Guidelines will apply from January 11, 2027.

The European Commission Adopts Revised European Sustainability Reporting Standards and Voluntary Reporting Standard for Smaller Companies

The European Commission adopted on July 3 revised European Sustainability Reporting Standards (ESRS) and a voluntary sustainability reporting standard for smaller companies. The measures form part of the Commission’s Omnibus I simplification package and are intended to reduce administrative burdens associated with sustainability reporting while maintaining the quality and usefulness of sustainability-related disclosures. 

According to the Commission, the revised ESRS simplify reporting requirements through clearer drafting, additional flexibilities, and streamlined reporting processes. The amendments reduce the number of mandatory datapoints by more than 60% and the overall number of datapoints by more than 70%, with the Commission estimating that the changes will reduce reporting costs by more than 30% per company. The revisions build on technical advice from EFRAG and stakeholder feedback received through consultations conducted during 2025 and 2026.

In parallel, the Commission adopted a voluntary reporting standard intended to provide companies outside the scope of the Corporate Sustainability Reporting Directive (CSRD) with a proportionate framework for responding to sustainability information requests from investors, financial institutions, and larger companies. The standard also introduces a value-chain cap limiting the sustainability information that CSRD-reporting companies may request from smaller entities within their value chains.

Americas

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United States

The U.S. Department of Labor Submits Proposed Rule Revising ESG Investment Guidance for Employee Retirement Income Security Act Plans

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) submitted a proposed rule titled “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” to the Office of Information and Regulatory Affairs (OIRA) on June 30. The proposed rule would revise prior EBSA regulation regarding the treatment of ESG considerations in investment decisions and shareholder activities undertaken by fiduciaries of retirement plans governed by the Employee Retirement Income Security Act (ERISA). While not clear, it is possible the proposal may also address proxy voting under ERISA. The proposal is expected to be published in the coming months, opening up a public consultation process.

The U.S. Securities and Exchange Commission Publishes Spring 2026 Regulatory Flexibility Agenda

The U.S. Securities and Exchange Commission (SEC) has published its Spring 2026 Regulatory Flexibility Agenda, outlining planned rulemaking initiatives. According to the Agenda, the SEC is considering 36 proposals at the proposed rule stage, many of which are intended to simplify, modernize, or reconsider existing regulatory requirements. 

The Agenda includes a number of initiatives relevant to public companies, shareholders, and capital markets participants, including proposals relating to shareholder proposal requirements, executive compensation disclosures, proxy rules, electronic delivery of information, foreign private issuer eligibility, exempt offering frameworks, and emerging growth company accommodations. The Agenda also identifies a proposal to rescind the SEC’s climate-related disclosure rules, with the prior rules having been subject to litigation. Several of the identified rulemaking projects are targeted for proposal during 2026, although the timing set out in the Regulatory Flexibility Agenda is indicative rather than binding.