Policy Digest: March 2026
This month’s Policy Digest highlights the crystallization of climate and sustainability disclosure standards across major economies. At the same time, financial institutions—including banks, asset managers and insurers—are receiving clearer guidance from regulators on how to leverage sustainability data across investee companies. The goal is to ensure that climate and ESG information remains consistent and comparable across the financial system, enabling the scaling of transition finance. Transition relief measures aim to support first-time reporters by allowing time to build data systems and internal capacity. However, regulators caution that flexible relief could weaken data availability and disrupt the sustainability information chain.
Key trends & highlights
- US federal rollbacks, state climate disclosure advances: The United States Environmental Protection Agency (EPA) has delayed reporting requirements for high-emitting operators under the Greenhouse Gas Reporting Program (GHGRP). Meanwhile, California has established August 2026 as the deadline for emissions reporting under SB 253. In New York, lawmakers have advanced legislation requiring large companies to disclose greenhouse gas emissions starting in 2028.
- The ‘transition relief’ data dilemma: Staff at the European Central Bank (ECB) have warned that proposed simplifications to the European Sustainability Reporting Standards (ESRS) removing roughly 68% of non-mandatory datapoints could weaken the sustainability data chain across the financial system The UK Government, similarly, has provided indefinite relief for Scope 3 reporting, and sustainability disclosures, risking data gaps and complicating global convergence.
- ISSB as the ‘global baseline’: Adoption of the International Sustainability Standards Board (ISSB) standards continues to accelerate:
- UK: UK Sustainability Reporting Standards (UK SRS) finalised for voluntary corporate use.
- Korea: Authorities announced a draft roadmap for ISSB-aligned disclosure standards.
- Ethiopia: An updated roadmap introduces ISSB-based reporting for public interest entities from 2028.
- Banking the transition: The Monetary Authority of Singapore (MAS) has finalized transition planning guidelines for banks, emphasizing climate engagement with high-risk portfolio companies and the integration of climate risk into strategy, governance and board oversight to manage both physical and transition risks across portfolios.
Europe
EU CSRD/CSDDD published in EU Official Journal
On February 26th, 2026, Directive (EU) 2026/470 was published in the Official Journal of the European Union, finalizing the European Commission's Omnibus simplification package designed to streamline EU sustainability reporting requirements—including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy Regulation. The amending directive was introduced with the aim of ‘cutting red tape’ and balancing sustainability ambition with EU competitiveness. The directive drastically reduces CSRD's scope from the original 50,000 companies to approximately 5,000—a 90% reduction—by raising thresholds to companies with more than 1,000 employees and above €450 million net annual turnover. Similarly, the simplification package reduces CSDDD's scope by raising the applicability threshold to companies with more than 5,000 employees and above €1.5 billion net turnover, allowing companies to focus their assessment of adverse impacts on areas of their chains where such impacts are most likely to occur, with penalties for non-compliance set at up to 3% of net worldwide turnover.
The amending directive, which enters into force March 19th, 2026. In addition to simplification, the directive grants wave one CSRD companies (originally required to report from FY 2024) a two-year exemption for 2025-2026. Member states get extended transposition deadlines—March 2027 for CSRD and July 2028 for CSDDD—with companies required to comply with CSDDD measures by July 2029. The package also exempts certain EU and non-EU financial holding companies from consolidated reporting requirements.
ECB issues opinion on simplified ESRS
Staff at the European Central Bank (ECB) have highlighted three key areas for improvement to ensure that revisions to the Corporate Sustainability Reporting Directive (CSRD) maintain its policy objectives while simplifying requirements. First, the introduction of permanent reliefs, phase-ins, exemptions, and the removal of certain datapoints could reduce the availability and comparability of sustainability data across companies. This may also weaken incentives for firms to improve data collection and methodologies, undermining the CSRD’s aim of creating a reliable and comparable sustainability data ecosystem to support risk assessment, capital allocation, and the EU’s Paris Agreement on climate change commitments. Second, although efforts have been made to improve interoperability with international standards such as ISSB, ECB staff note important deviations—particularly the inclusion of additional relief measures not present in the global baseline. Third, further clarification is needed to ensure the revised draft European Sustainability Reporting Standards provide disclosures that remain meaningful and usable for the financial sector.
European Commission issues call for technical advice on Article 8 Taxonomy Regulation
The European Commission is requesting technical advice from the ESAs (ESMA, EBA, EIOPA) to simplify and improve specific Taxonomy KPIs in the Disclosures Delegated Act, with final advice due by October 2026 and Commission amendments planned for Q1 2027. The main focus is revising the OpEx KPI for non-financial companies to cover all 'green' expenditures (like purchasing low-carbon materials and renewable energy) rather than just maintenance costs, while allowing companies to report only material categories relevant to their sector. For financial institutions, the advice should narrow the scope of the Commissions and Fees KPI and Trading Book KPI for banks to capital markets activities, and revise the insurance underwriting KPI to focus on insured assets/companies rather than climate risk coverage. The ESAs must consult stakeholders, assess costs and benefits, and coordinate their work to ensure consistent recommendations across the three separate reports they will deliver. This targeted review follows the Omnibus Delegated Act's initial simplifications and aims to make Taxonomy reporting more meaningful and less burdensome while maintaining transparency about sustainable activities.
United Kingdom
UK finalizes sustainability reporting standards
The UK government finalized the UK SRS 1 and UK SRS 2, aligned with the ISSB standards. The standards may be used voluntarily. In parallel, the UK FCA has launched a consultation on introducing mandatory UK-SRS reporting for listed companies and will opine further on “whether to require private companies to report information in accordance with UK SRS” as part of corporate reporting requirements. The finalized standards removed the one-year Scope 3 transition relief originally proposed in the June 2025 drafts. Instead, Scope 3 relief is now indefinite—companies can apply it as long as they disclose their use of the relief, potentially creating data gaps that undermine data availability and consistency in sustainability disclosures globally. While the IFRS Foundation offers a one-year "climate-first" approach for jurisdictional adoption, giving first-time preparers additional time to disclose broader sustainability risks and opportunities, the UK has extended climate-first reporting indefinitely. This differs from the UK's June 2025 draft standards, which had proposed a two-year extension.
UK FCA issues illustrative examples of ‘good’ and ‘bad’ SDR product labelling
The UK’s key financial regulator has set out examples of good and poor practices for the use of the four labels under the Sustainability Disclosure Requirements (SDR) regime launched in 2024. The SDR regime is the UK’s sustainable fund-labelling framework designed to combat greenwashing and improve the transparency and accuracy of sustainability information for financial products. It is described as a principles-based regime that requires firms to substantiate their sustainability claims.
The FCA notes that good disclosures should provide clear, concise, and accurate communication of a product’s sustainability objective and claims. For the Sustainability Focus label, firms should clearly define the sustainability objective, explain how potential significant harm to that objective is assessed, and disclose stewardship activities, KPIs, and robust evidence-based standards. For the Sustainability Improvers label, disclosures should also include KPIs and substantiation of the sustainability objective, supported by an escalation plan if the intended improvement trajectory is at risk. The Sustainability Impact label should communicate the sustainability objective, the theory of change, relevant investment activities, and associated KPIs. For the Sustainability Mixed Goals label, firms may combine relevant elements depending on the strategy and mix of sustainability objectives.
United States
CARB approves California Corporate Climate Accountability Package
The California Air Resources Board (CARB) approved regulation to establish the administration and implementation fees for the Climate Corporate Data Accountability Act and the Climate-Related Financial Risk Act, and set August 2026 deadline for the first climate reports. On December 9th, 2025, CARD released initial proposed regulations to implement SB 253 and SB 261, which set out California's new corporate climate disclosure regime. Under SB 253, companies with over $1 billion in annual revenue doing business in California must publicly report Scope 1 and 2 greenhouse gas (GHG) emissions beginning in 2026, with Scope 3 emissions phased in later; the proposed rules include definitions of covered entities, revenue, and "doing business" in the state, and establish August 10th, 2026 as the first reporting deadline. SB 261 requires climate-related financial risk reporting for companies with over $500 million in revenue, though enforcement was stayed by a court. Reporting under SB 261 remains voluntary, with CARB confirming that more than 120 climate-related financial risk reports have been submitted through a voluntary public docket and are publicly available.
US EPA Extends Reporting Deadline Under GHG Reporting Rule (2/25)
The Environmental Protection Agency (EPA) finalized a rule on February 27th, 2026, extending the submission deadline for the 2025 annual greenhouse gas report from March 31st to October 30th, 2026. The GHG Reporting Program (GHGRP) requires operators of heavy-emitting facilities—including refineries, landfills, power plants, large emission sources, fuel/industrial gas suppliers, and CO2 injection sites that cover approximately 85-90% of total U.S. GHG emissions—to report using prescribed, standardized methodologies. The extension applies only to the 2025 reporting year and gives the EPA time to finalize proposed revisions to the GHGRP that were published in September 2025.
New York passes corporate climate reporting legislation
The New York State Senate passed the Climate Corporate Data Accountability Act (Senate Bill 9072A) on February 10, 2026, establishing mandatory emissions reporting for companies with revenues over $1 billion operating in the state. The bill requires Scope 1 and 2 emissions disclosure beginning in 2028, followed by Scope 3 emissions in 2029.
This mirrors California's SB 253, enacted in October 2023, which similarly requires companies with revenues exceeding $1 billion to report their Scope 1, 2, and 3 emissions. Both states are advancing climate disclosure requirements despite federal rollbacks—including the SEC's indefinite withdrawal of its climate disclosure rule and the reversal of DOL guidance allowing ERISA fiduciaries to consider ESG factors. These state-level initiatives reflect growing recognition that climate risks constitute material financial risks. While California's laws face legal challenges from the U.S. Chamber of Commerce, with a federal appeals court temporarily blocking enforcement of SB 261's financial risk reporting requirements, states continue to fill the regulatory gap left by federal inaction, establishing reporting mandates and guidelines that enable standardized climate data collection.
Asia-Pacific
Korea introduces mandatory sustainability reporting for companies from 2028
The Korean Financial Services Commission has released a draft roadmap for sustainability disclosure standards—KSSB 1 General Requirements and KSSB 2 Climate-related Disclosures—based on IFRS S1 and S2 standards respectively. Implementation will be phased with KOSPI-listed companies with consolidated total assets of KRW 30 trillion or more required to comply with both KSSB 1 and KSSB 2 by 2027. Requirements expand to KOSPI-listed companies with consolidated total assets of KRW 10 trillion or more from 2028 onwards. The draft roadmap proposes mandatory Scope 3 GHG emissions reporting from 2030. During the implementation phase, assurance will be voluntary, and subsidiaries constituting less than 10% of a group's consolidated total assets are exempt in the first reporting year. The FSC notes that mandatory reporting may be further phased to support global regulatory convergence. The commission is accepting feedback on the proposed roadmap until March 31st, 2026.
Singapore releases transition finance guidelines for financial institutions
The Monetary Authority of Singapore (MAS) has released finalized 'Guidelines on Environmental Risk Management – Transition Planning' outlining supervisory expectations for banks, asset managers, and insurance companies to manage physical and transition risks across their portfolios. The guidelines emphasize risk-proportionate engagement with investee companies and customers rather than indiscriminate divestment, recommending a multi-year view since current emissions levels may not reflect actual risk if companies are implementing mitigation measures. The guidelines recommend all financial institutions to embed climate risk into governance structures with board oversight, integrate it into risk appetite and business strategy, and build climate data capabilities through customer and portfolio company data collection. While establishing common expectations, the guidelines provide tailored requirements for each sector—banks focus on credit risk and lending relationships, insurers on underwriting exposures and claims impact, and asset managers on portfolio construction and stewardship.
Middle East and Africa
Ethiopia drafts roadmap for adopting ISSB Standards
The Accounting and Auditing Board of Ethiopia (AABE) has launched a consultation on its draft roadmap for adopting ISSB standards, following the IFRS Foundation's "climate first" approach. The implementation follows four phases:
- Phase 1: Narrative disclosures aligned with IFRS S2
- Phase 2: More detailed climate disclosures with limited quantitative reporting
- Phase 3: IFRS S1 aligned and S2 with transition reliefs
- Phase 4: Full IFRS compliance
Reporting will be phased in across four entity groups:
- Group 1: Select large entities
- Group 2: Other large entities, Tier 2 financial institutions, and federal state-owned entities
- Group 3: Other listed entities, other financial institutions, medium-sized entities, and regional state-owned entities
- Group 4: Other IFRS issuers
No assurance is required during Phases 1-3. Limited assurance under ISSA 5000 becomes mandatory in Phase 4, covering all sustainability disclosures. After Phase 4, entities have a maximum two-year window with limited assurance before transitioning to mandatory reasonable assurance.
Other News and Resources
- OECD issued Due Diligence Guidance for Responsible AI. Read More
- EU legislation may include definition of transition finance soon. Read More
- Net-Zero Asset Owner Alliance introduces ‘transition targets’ for signatories. Read More
