Policy Digest: June 2026

Key Trends & Highlights

• New international standards driving interoperability across sustainability topics: The emergence of frameworks such as ISO 32212 and the TISFD signals continued efforts to expand sustainability reporting beyond climate while maintaining alignment with established frameworks such as ISSB, TCFD, and TNFD. The focus is increasingly on integrated reporting across climate, nature, social impacts, and transition planning.
• Climate risk integration becomes a supervisory and strategic imperative: The ECB updated its compendium of good practices to help banks increasingly embed climate and nature-related risks into stress testing, physical risk modelling, and prudential risk management. 
• EU & Rest of the World: Having shaped much of the global sustainable finance playbook, the EU is increasingly focused on the extraterritorial impact and practical implementation of its regulations. Recent reforms seek to reduce reporting and operational costs, while reinforcing core policy objectives: ‍
  
  • ESRS: The EU is streamlining its sustainability reporting framework through the proposed Non-EU ESRS (N-ESRS) following broader Omnibus reforms. ‍
  • CBAM: The EU is providing greater clarity on how carbon prices paid in third countries can be recognized against CBAM liabilities, helping reduce administrative complexity while preserving the integrity of the EU's carbon border mechanism.‍
• ‍ISSB early adopters provide implementation lessons for global markets: As jurisdictions move from adoption to implementation, early experiences are beginning to shape market practice. Australia's review of the first wave of IFRS S2-aligned reports highlights the importance of decision-useful and investor-focused climate disclosures, while Brazil's shift from mandatory reporting to a comply-or-explain approach demonstrates a more flexible pathway towards long-term ISSB alignment.

Taken together, these developments reflect a maturing sustainability regulatory landscape, with policymakers increasingly focused on implementation, interoperability, and balancing reporting effectiveness with proportionality.

INTERNATIONAL 

• ISO launches framework for net zero transition planning standard for financial institutions 

The new ISO 32212 standard provides a global framework for net-zero transition planning by financial institutions, supporting the integration of climate-related risks, opportunities, and transition objectives into lending, investment, insurance, and capital market activities. The framework is designed to complement existing standards such as ISO 14060 and the Science Based Targets Initiative (SBTi) Financial Institutions Net-Zero Standard and intended for broad application across both traditional and emerging financial actors, including those operating in developing markets and digital finance ecosystems. The standard emphasizes flexibility and proportionality, recognizing varying regulatory environments and data constraints. Key requirements include assessing climate-related impacts and risks, setting and embedding transition objectives and targets, integrating these into financing and engagement decisions, communicating outcomes, and establishing governance and review processes. ISO emphasized that financial institutions play a critical role in mobilizing capital for decarbonization and climate adaptation, with the framework expected to become a cornerstone of global transition planning by helping direct capital toward credible transition strategies aligned with the Paris Agreement. Read more

• BSI launches TISFD Framework on Social Equality

The Taskforce on Inequality and Social-related Financial Disclosures (TISFD) Framework was established to help businesses and financial institutions report on their impacts on people, as well as their social risks, opportunities, and dependencies. The Beta Version 0.1 Framework introduces key concepts and definitions for understanding social risk, alongside an initial draft of disclosure recommendations across the governance, strategy, and impact and risk management pillars. The framework is intended to complement existing sustainability and financial reporting practices by addressing disclosure gaps rather than creating additional reporting burdens. It adopts a "building block" approach, drawing on concepts and definitions embedded in leading global standards and frameworks, including the International Sustainability Standards Board (ISSB) Standards, Global Reporting Initiative (GRI) Standards, and European Sustainability Reporting Standards (ESRS). It is also designed to align with the TCFD and TNFD frameworks, promoting integrated reporting across interconnected people, climate, and nature topics. Key requirements include conducting materiality assessments to identify and evaluate people-related risks, opportunities, and dependencies. Preparers are expected to define the scope of their assessments and disclosures and specify the short-, medium-, and long-term time horizons considered. BSI will continue to develop the TISFD Framework through an iterative and consultative process involving a broad range of stakeholders, with further refinements expected between 2026 and 2027. Read more

EUROPE

• EFRAG publishes N-ESRS for non-EU groups

European Financial Reporting Advisory Group (EFRAG) has published the first detailed proposals for the Non-EU European Sustainability Reporting Standards (N-ESRS), which will apply to non-EU groups with significant EU activities that fall within the scope of Article 40a of the Accounting Directive. EFRAG estimates nearly 1200 companies will be in scope, including ~400 US companies. Unlike the ESRS for EU companies, the N-ESRS focuses exclusively on sustainability impacts and removes the double materiality approach. As a result, disclosures relating to sustainability-related risks, opportunities, financial effects, resilience, and dependencies are excluded. However, value chain reporting remains in scope, requiring companies to assess impacts across suppliers, business relationships, products, and services. To future-proof the framework and reduce reporting duplication, EFRAG is prioritizing interoperability with the ISSB Standards, particularly for companies operating across multiple jurisdictions. A public consultation is scheduled for the second half of July 2026, with final technical advice expected in January 2027. The N-ESRS will then be adopted through a Delegated Act, expected by mid-2027, ahead of FY2028 reporting requirements. Read more

• ECB publishes report on good practices and thematic review for climate and nature-related risk stress testing

The European Central Bank (ECB) has updated its compendium of good practices following the 2022 climate stress test, highlighting innovative approaches banks are using to incorporate climate and nature-related risks into stress testing frameworks. While all significant banks were conducting climate risk stress tests by 2024 (up from 42% in 2022), the ECB notes that modelling capabilities remain relatively immature, particularly in terms of risk coverage and transmission channels. The report showcases emerging practices for addressing climate and nature-related risks, including improved modelling techniques where reference scenarios and established quantification methodologies are lacking. Given the increasing materiality of climate and nature risks, driven by both regulatory expectations and observable physical impacts, the ECB encourages banks to strengthen their stress-testing capabilities through the adoption of practical modelling approaches and industry good practices. The ECB emphasized that climate and environmental risks should be fully integrated into prudential risk management, including credit, market, operational, business model, and strategic risks, as well as capital and recovery planning. Supervisory climate stress testing will remain a key tool for assessing banks' resilience, with both transition and physical risks expected to be incorporated into future EU-wide regulatory stress tests under the EBA Joint Guidelines, applicable from 1 January 2027.  Read more

• EU launches consultation on implementing regulation setting carbon price paid in third countries

The Implementing Regulation aims to reduce administrative burden by establishing a mechanism for recognizing carbon prices paid in third countries and crediting them against a company’s Carbon Border Adjustment Mechanism (CBAM) liability. Under the proposed framework, EU importers may reduce the number of CBAM certificates they are required to surrender by demonstrating that a carbon price has already been effectively paid abroad. The draft regulation sets out requirements for evidencing carbon price payments, as well as the qualifications and independence criteria for third-party verifiers. It also addresses several operational aspects, including the calculation of carbon prices effectively paid for the embedded emissions of imported goods, acceptable forms of evidence, the conversion of foreign currencies into euros, and the accreditation and qualification of certifiers. Read more

• ESMA adopts Regulatory Technical Standards finalizing ESG Ratings authorization application information

On 26 May 2026, the European Commission adopted a delegated regulation (RTS) supplementing the EU ESG Ratings Regulation, specifying the information required in applications for the authorization or recognition of ESG ratings providers. Large ESG ratings providers (ERPs) must notify the European Securities and Markets Authority (ESMA) of their intention to operate by 2 August 2026 and submit an authorization application by 2 November 2026. The application requires detailed information on organizational structure, governance, management, staffing resources, market coverage, conflict-of-interest policies, and the issuance, distribution, and turnover of ESG ratings. The RTS provides further guidance on the format, content, and presentation of these applications. Under the proportionality principle, smaller providers benefit from a temporary exemption from certain requirements of the ratings regime until 2028–2029. These providers must notify ESMA of their registration in the EU or their intention to operate by 2 November 2026. Read more

• EU issues warning to 20 Member States for incomplete legal transposition of the Green Claims Directive

The ‘Directive on Empowering Consumers for the Green Transition’, adopted in 2024, is a key component of the EU’s consumer protection agenda and aims to combat greenwashing by targeting unverified and unsubstantiated environmental claims. The Directive strengthens consumer protection by improving the reliability and transparency of green claims and sustainability labels. Member States were required to transpose the Directive into national law by 27 March 2026, with the new rules set to apply from 27 September 2026. However, the European Commission has opened infringement procedures against Belgium, Bulgaria, Czechia, Estonia, Greece, Spain, France, Croatia, Cyprus, Latvia, Luxembourg, Hungary, Malta, the Netherlands, Austria, Poland, Portugal, Slovenia, Finland, and Sweden for failing to transpose the Directive into national law. The Commission has issued letters of formal notice to the Member States concerned, which now have two months to respond and notify their complete transposition measures failing which, the Commission may proceed to the next stage of the infringement procedure by issuing a reasoned opinion formally requesting compliance. Ultimately, the Commission may refer the matter to the Court of Justice of the European Union and request the imposition of financial penalties. Read more

UNITED KINGDOM 

• FCA consults on TCFD-aligned disclosure requirements for asset managers

The UK’s top financial regulator is mirroring the EU’s broader regulatory simplification agenda by proposing to replace TCFD-aligned product-level climate reports with more targeted disclosures focused on material information for retail investors under the Consumer Duty framework. The aim is to provide investors with more meaningful information on climate-related risks, including the impact of acute physical risks such as extreme weather events on investment performance, while reducing burdensome and potentially duplicative reporting requirements. The proposals complement the FCA’s Sustainability Disclosure Requirements (SDR) and are intended to support a consistent chain of climate-related information for investment purposes. The proposed rules would apply to all products currently subject to public and on-demand TCFD product reporting requirements, which were introduced in 2021. The FCA estimates the changes could reduce industry compliance costs by approximately £20 million annually. The consultation is open until 13 July 2026, after which the FCA will review the current climate reporting framework and consider further enhancements before finalizing the new rules. Read more

NORTH AMERICA

• SEC proceeds with formal recission of climate disclosure rule 

On 29 May 2026, the U.S. Securities and Exchange Commission (SEC) announced that it intends to proceed with rescinding its climate-related disclosure rule, citing concerns over the materiality of climate disclosures to investors and the compliance burden imposed on registrants. The decision follows growing speculation about the rule’s future after the SEC filed a notice with the U.S. Office of Management and Budget (OMB) in early May 2026. Read more 

SOUTH AMERICA

• Brazil drops mandatory ISSB implementation 

Brazil’s securities regulator, the Comissão de Valores Mobiliários (CVM), has amended its sustainability reporting regulation, shifting from mandatory ISSB-aligned reporting to a "comply or explain" approach ahead of the first reporting cycle. When filing annual financial statements in 2027, companies that do not disclose sustainability information will be required to explain their decision. Companies that choose not to report under the regime must instead commit to reporting in accordance with the standards issued by the Brazilian Sustainability Pronouncements Committee (CBPS), which are broadly aligned with IFRS S1 and IFRS S2. They must also commit to applying the CBPS standards for at least three consecutive years. The amendment is intended to ease implementation challenges while maintaining Brazil’s long-term alignment with global sustainability reporting standards. Read more

ASIA-PACIFIC 

ASIC publishes observations on first ISSB-aligned climate disclosures 

The report provides a snapshot of the decision-usefulness of the first batch of sustainability reports prepared in accordance with the Corporations Act 2001 and the Australian Sustainability Reporting Standard AASB S2 Climate-related Disclosures. Australia’s sustainability reporting regime follows a phased implementation timeline, with Group 1 entities being the first required to prepare sustainability reports for financial years commencing on or after 1 January 2025. By 31 December 2025, 259 entities had lodged sustainability reports, including 225 non-listed entities and 34 listed entities. The top five disclosing sectors were concentrated in high climate-impact industries: mining, construction, financial services, oil and gas, and electricity and energy supply and distribution. Based on its review of these initial disclosures, Australian Securities & Investment Commission (ASIC) identified several areas for improvement to enhance the quality, authoritativeness, and usability of sustainability reporting. Recommendations include avoiding contradictory statements that may mislead investors, providing climate-related information where ‘reasonable and supportable’, disclosing any approximations, assumptions, and estimates used, improving transparency without obscuring material climate-related risk information, and using effective cross-referencing throughout sustainability reports. ASIC also clarified that climate-related targets should be disclosed in line with the AASB S2 definition of targets to support consistent application of globally aligned standards and help prevent fragmentation. Read more 

OTHER NEWS & RESOURCES 

• French investor group launches VOICE framework to assess engagement process. Read more
• FASB publishes guidance on environmental credits and obligations for banks. Read more
• TNFD opens consultation on environmental crime discussion paper. Read more‍
• TNFD and A4S publish new guidance about nature-related issues for CFOs. Read more