Sustainability & Stewardship in Financial Services Regulation — May 2026

International

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SBTi

The Science Based Targets Initiative (SBTi) Updates the Absolute Contraction Approach (ACA) for Calculating Absolute Emissions Reduction Targets

The Science Based Targets initiative (SBTi) announced updates to the Absolute Contraction Approach (ACA) on April 29. The ACA is the methodology used by companies to set absolute emissions reduction targets under the current Corporate Net-Zero Standard Version 1.3. According to the SBTi, the updates are intended to ensure greater consistency between the ACA and the methodologies contained in the Corporate Net-Zero Standard Version 2.0, thereby facilitating a smoother transition for companies as they move from the use of Version 1.3 to Version 2.0. The update concerns the calculation of near-term emissions reductions while maintaining the minimum annual reduction rate floor of 4.2%, thus preserving the ambition of science-based targets. The update takes effect immediately for all companies using the ACA.

TISFD

The Taskforce on Inequality and Social-related Financial Disclosures (TISFD) Consults on Beta Version 0.1 Recommendations for Disclosure of People-Related Information by Businesses and Financial Institutions

The Taskforce on Inequality and Social-related Financial Disclosures (TISFD) opened a public consultation on the initial TISFD Framework (Beta Version 0.1) on May 26. The TISFD Framework is designed to help businesses and financial institutions identify and disclose people-related impacts, dependencies, risks, and opportunities. As the name suggests, the Beta Version 0.1 is the first iteration of the TISFD Framework and includes conceptual foundations, proposed general requirements, draft disclosure recommendations, and areas for future development. According to the timeframe established by TISFD, the framework should be finalized by late 2027 following several development stages. The consultation on the Beta Version 0.1 will remain open until July 31.

Asia Pacific

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Japan

The Ministry of Economy, Trade and Industry (METI) Publishes Frequently Asked Questions (FAQ) on Integrated and Coordinated Disclosure of Business Reports and Updated Annual Securities Reports

The Ministry of Economy, Trade and Industry (METI) published Frequently Asked Questions (FAQ) on Integrated and Coordinated Disclosure of Business Reports and Annual Securities Reports on May 12. According to METI, the FAQ is intended to assist companies in preparing integrated and coordinated disclosure and to facilitate constructive dialogue between companies and investors. Under Japan’s current regulatory framework, companies are permitted to prepare, for the purposes of disclosures prior to shareholder meetings, one document that satisfies the requirements for business reports and financial statements under the Companies Act and for annual securities reports under the Financial Instruments and Exchange Act. METI first compiled an FAQ in 2021 on coordinated disclosure of Business Reports and Annual Securities Reports. In view of revisions to the Companies Act, the Financial Instruments and Exchange Act, and evolving market practices, METI has revised the 2021 FAQ in cooperation with the Ministry of Justice (MoJ) and the Financial Services Agency (FSA).

The Financial Services Agency (FSA) Publishes Comment Letter on the European Commission’s Draft Delegated Act (DA) on Revised European Sustainability Reporting Standards (ESRS)

The Financial Services Agency (FSA), on behalf of the Government of Japan, issued a comment letter on May 15 regarding the European Commission’s draft Delegated Act (DA) on revised European Sustainability Reporting Standards (ESRS). In the comment letter, the FSA suggests allowing non-EU companies to use their International Sustainability Standards Board-compliant sustainability reporting for the purposes of compliance with the EU’s Corporate Sustainability Reporting Directive (CSRD) and the associated N-ESRS (ESRS for non-EU groups). With respect to their climate-related disclosures specifically, the FSA also suggests that the EU allow non-EU companies to choose between the global consolidated approach and the mixed approach (which allows the scope of disclosure to be limited to impacts related to the EU), in the interest of improving interoperability of sustainability reporting standards.

Indonesia

Bank Indonesia Releases Version 2 of the Green Calculator to Strengthen Carbon Emissions Calculation Standards for the Sustainable Finance Sector

Bank Indonesia launched Version 2 of its Green Calculator on May 11. According to Bank Indonesia, the Green Calculator is a tool to ensure companies and financial institutions disclose credible, standardized, reliable and comparable carbon emissions data. Version 2 of the Green Calculator was developed as an improvement of Version 1, featuring broader coverage, more comprehensive methodologies, and improved user accessibility. Bank Indonesia anticipates that Version 2 will improve consistency in emissions data among the 105 banks in Indonesia that have thus far calculated their emissions independently. As the methodologies used by Version 2 of the Green Calculator are aligned with those of the Greenhouse Gas (GHG) Protocol standard, Bank Indonesia also notes that Version 2 may facilitate companies and financial institutions in fulfilling their broader sustainability disclosure obligations in Indonesia.

Australia

The Australian Securities and Investments Commission (ASIC) Publishes Early Observations on Sustainability Reporting and Sets Financial Reporting, Audit, and Sustainability as Focus Areas for the Financial Year 2026 – 2027

The Australian Securities and Investments Commission (ASIC) published early observations on sustainability reporting on May 18. ASIC has assessed the first sustainability reports prepared under Chapter 2M of the Corporations Act 2001 (Corporations Act), which introduced mandatory sustainability reporting in Australia. Entering into force in 2025, new disclosure obligations are being phased in across three groups of entities, with an entity’s group determined in part by its size. Entities in Group 1 are required to prepare sustainability reports for the financial year ending on December 31, 2025. As of May 6, 2026, a total of 259 such Group 1 reports had been lodged with ASIC.

Generally, ASIC observes an increase in the quantity and quality of climate-related financial information and finds greater consistency and comparability across disclosures. However, ASIC has identified areas where the quality of reporting could be improved. For example, the Corporations Act expressly forbids the use of disclaimers in relation to sustainability-related information and ASIC reminds entities of this fact, among other matters.

Relatedly, ASIC outlined on May 18 the key focus areas of its market surveillance programs for the 2026-to-2027 financial year. Specifically, ASIC’s focus areas will be financial reporting, audit, and sustainability reporting and assurance. In the case of the latter, ASIC will support entities’ compliance with their sustainability reporting obligations, including through guidance, targeted relief, and new educational materials. In addition, ASIC will participate in Government initiatives to reduce reporting burdens while maintaining core sustainability reporting requirements, as announced in the Federal Budget.

New Zealand

The Financial Markets Authority (FMA) Releases Updated Guidance on Sustainability-Related Disclosures for Financial Products

The Financial Markets Authority (FMA) published updated sustainability-related disclosure guidance for financial products on May 12. The guidance is meant to provide financial institutions with greater clarity and examples of good disclosure practice for financial products with sustainability-related characteristics. The guidance reflects the expectation that sustainability-related claims remain clear and substantiated, terminology is consistent, and third-party involvement is effectively managed. For example, the FMA highlights that disclosures should be updated to ensure that any changes in circumstances that affect the sustainability performance of a financial product are clearly communicated and explained. 

The FMA Publishes Its 2026 Climate-related Disclosures Insights Report

The FMA published its 2026 Climate-related Disclosures Insights Report on May 26. The report reviews 62 climate statements from the second year of disclosures under New Zealand’s climate-related disclosure regime. The report reflects a greater degree of maturity in climate reporting practices among Climate Reporting Entities (CREs). According to the FMA, report structures have become clearer, greenhouse gas emission disclosures have improved, and governance and risk management processes are better articulated than previously. The report also identifies areas where further improvements could be made, such as through disclosure of more specific physical risks and stronger data and analysis to underpin physical risk assessments, among others.

Europe

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EU

The European Securities and Markets Authority (ESMA) Publishes Report on 2025 Corporate Reporting Enforcement and Regulatory Activities

The European Securities and Markets Authority published its Report on 2025 Corporate Reporting Enforcement and Regulatory Activities on May 7. The report provides an overview of how national authorities and ESMA enforced corporate reporting requirements across the European Economic Area in 2025. As noted by ESMA, 2025 marked the first year of enforcement of the European Sustainability Reporting Standards (ESRS) across the EU and the application of the ESMA Guidelines on Enforcement of Sustainability Information (GLESI). With regard to sustainability reporting, the report found that the materiality assessment disclosures provided by issuers under the ESRS were generally satisfactory but with several areas for potential improvement. Relatedly, issuers’ sustainability statements were compliant, but issuers relied heavily on cross-referencing in a manner that did not always respect the prescribed conditions. That said, ESMA acknowledged the challenging context for companies, including the uneven transposition of CSRD and uncertainties linked to the ongoing reform of the EU’s sustainable finance framework.

ESMA Issues Statement Presenting the Results of Its 2023 Common Supervisory Action (CSA) on How Supervised Entities Integrate Sustainability into Their Suitability Assessment under MiFID II

ESMA published a Statement on May 6 outlining the results of the 2023 Common Supervisory Action (CSA) on sustainability-related requirements in MiFID II. The CSA aimed to assess the progress made by financial intermediaries in collecting information on their clients’ “sustainability preferences” and product categorization and in adhering to ESMA Guidelines on Suitability and Product Governance. ESMA found that the majority of financial intermediaries made progress in applying various sustainability-related requirements under MiFID II, despite the sustainable finance framework undergoing significant reform. Most notably, ESMA acknowledges that multiple intermediaries reported challenges in explaining the concepts in which clients have to express their “sustainability preferences” (such as “Taxonomy-alignment” or “sustainable investment” under the Sustainable Finance Disclosure Regulation [SFDR]). Accordingly, ESMA encourages national competent authorities (NCAs) to mitigate these challenges and accommodate ongoing reform of the EU’s sustainable finance framework by adopting a proportionate supervisory approach with respect to MiFID II requirements on collecting clients’ “sustainability preferences.”

The European Commission Adopts Draft Delegated Acts (DAs) Containing the Revised European Sustainability Reporting Standards and Voluntary Sustainability Reporting Standards for Companies Not Subject to CSRD

The European Commission adopted two draft Delegated Acts (DAs) on May 6. The first of these draft DAs contains the final form of the revised European Sustainability Reporting Standards (ESRS), based largely on amendments proposed by the European Financial Reporting Advisory Group (EFRAG). The second contains voluntary sustainability reporting standards for companies not subject to mandatory sustainability reporting requirements under the CSRD.

While the European Commission largely adopted the amendments proposed by EFRAG when adopting the revised ESRS, a number of modifications were made. These include clarifications to the materiality assessment requirements specifying that companies are not expected to satisfy the information needs of each individual user and are expressly discouraged from disclosing non-material information. The Commission grants companies greater discretion with respect to the omission of information from their disclosures in specific circumstances and the use of estimates when disclosing anticipated financial effects. The disclosure of greenhouse gas emissions has also been aligned with global standards, among other adjustments.

The European Commission Adopts Draft DA on the Information to Be Provided in Applications for Authorization by ESG Ratings Providers

The European Commission adopted a draft DA on May 26 specifying the information to be included in applications to ESMA for authorization or recognition as an ESG ratings provider under the EU ESG ratings regulation. The provisions of the draft DA are based on the Regulatory Technical Standards finalized by ESMA in October 2025. The draft DA sets out the information that ESG ratings providers must submit to ESMA when applying for authorization, if established in the EU or when applying for recognition, if established outside the EU.

Americas

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United States

The Securities and Exchange Commission (SEC) Submits Proposed Rulemaking to Rescind Climate-Related Disclosure Rules to the Office of Information and Regulatory Affairs

The Securities and Exchange Commission (SEC) proposed a rule titled “Recission of Climate-Related Disclosure Rules” on May 29. The proposed release seeks to rescind SEC rules approved in March 2024 requiring disclosure of climate-related risks and greenhouse gas emissions by public companies. By way of background, the SEC stayed the implementation of the climate-related disclosure rules in April 2024 pending the outcome of consolidated litigation in the U.S. Court of Appeals for the Eighth Circuit. In March 2025, the Commission voted to end its defense of the final rules. In September 2025, the Eighth Circuit of the U.S. Court of Appeals issued an order suspending further legal proceedings until the SEC reconsidered the challenged rules through the notice-and-comment rulemaking process. The proposed release is open for public comment for 60 days after the publication of the proposed release in the Federal Register.