Policy Digest: September 2025
This month’s Policy Digest reflects the ever-evolving global sustainability disclosure landscape. Leading standard-setter, the International Financial Reporting Standards (IFRS) Foundation, issued new guidance on the disclosure of financial effects from sustainability risks and opportunities, clarifying when companies may be relieved from reporting quantitative current and anticipated impacts. The International Auditing and Assurance Standards Board (IAASB) published FAQs clarifying that sustainability disclosures subject to assurance must comply with the new ISSA 5000 Standard. The FAQs also note that jurisdiction-specific assurance standards may be applied until ISSA 5000 is formally adopted and implemented locally. Global regulators’ efforts to refine disclosure guidance extended to the Taskforce on Nature-related Financial Disclosures (TNFD), which issued a Discussion Paper on reporting nature-related impacts, risks, and opportunities in financial portfolios.
In Europe, the political stalemate with the US on sustainability reporting came to a close with a new compromise. The EU and US struck a trade deal aimed at balancing compliance burdens with the regulatory impacts of measures such as the Carbon Border Adjustment Mechanism (CBAM) and the Corporate Sustainability Due Diligence Directive (CSDDD) for SMEs. The European Commission has also published comprehensive guidelines to facilitate compliance with the CSDDD. Amid regulatory uncertainty over the Omnibus I Directive, the Spanish Government has launched a ‘Climate Emergency Plan’ to complement the CSRD and mandate emissions reporting for large public and private companies.
Across the Atlantic, ESG remains a partisan issue at the US federal level, with regulators seeking to roll back rules such as the Environmental Protection Agency’s (EPA) emissions reporting requirements for carbon-intensive industries, citing compliance burdens. Anti-ESG sentiment is also evident across other agencies, with the SEC Chair recently warning that the IFRS Foundation’s support for the International Sustainability Standards Board (ISSB) could prompt a reversal of U.S. filing rules. At the state level, however, California continues to pave the way for climate reporting, with recent guidance to support the implementation of the Climate-related Financial Risk Act (CA SB 261).
Asia-Pacific saw a mix of regulatory moves. Singapore delayed ISSB-aligned climate reporting by five years, while Indonesia advanced efforts to integrate ISSB standards into its national framework. Malaysia and Hong Kong made progress on taxonomy development, and Australia’s Treasury issued principles-based guidance for climate transition plan disclosures. Meanwhile, South Korea’s National Assembly amended the Commercial Act to strengthen corporate governance rules.
As seasons change, regulation evolves in fits and starts — with pauses, deregulation, and rapid implementation among the outcomes we continuously monitor and share with our readers.
International
IFRS Foundation outlines implementation guidance for disclosing information about financial effects of applying ISSB standards
The IFRS requires disclosure of how sustainability risks and opportunities affect financial statements both during the reporting period and over short-, medium-, and long-term horizons. These requirements, based on TCFD recommendations, aim to provide investors with information that complements financial statements by including current and anticipated financial effects. The latest education resource from the IFRS Foundation provides permanent relief from the disclosure of quantitative current and anticipated financial effects, if these effects are not material or if there may be use of unreliable estimates, amounting to misleading disclosures. The IFRS Foundation will also exempt disclosures on anticipated financial effects if a company lacks skills, capabilities, and resources to support sufficient reporting or faces undue compliance burden.
The IFRS Foundation additionally acknowledges that proposed ESRS changes (July 2025) have significant implications for interoperability: aligning requirements with ISSB Standards (Option 1) would reduce reporting burden and improve comparability for investors, while making quantitative disclosures optional (Option 2) would weaken interoperability and force companies to undertake additional work to comply with both frameworks. Ensuring that key disclosures on anticipated financial effects remain mandatory is, therefore, essential to maintain efficiency for preparers and provide decision-useful, comparable information for investors. The IFRS Foundation welcomes feedback on the guidance until 29th September 2025.
IAASB publishes FAQs on new ISSA 5000Standard for assurance engagements
The FAQs clarify that the ISSA 5000 Standard, finalized in November 2024, is an authoritative document that is not amended or replaced by this publication. The Standard becomes effective on 15th December 2026. Jurisdictions that have not yet adopted ISSA 5000 in place of ISAE 3000 may continue to apply ISAE 3000. However, practitioners can only claim IAASB compliance for assurance engagements after the effective date if they apply ISSA 5000. Following the withdrawal of ISAE 3400 for assurance engagements on GHG statements, the IAASB has clarified that only jurisdictional equivalents of ISAE 3400 may be used after ISSA 5000 becomes effective. To claim compliance with ISSA 5000 for assurance engagements on sustainability information, practitioners must apply the ISSA 5000 Standard after the effective date. Separately, for reference purposes, the IAASB has published relevant extracts of the ISSA 5000 Standard.
TNFD releases Discussion Paper on assessment and disclosure of dependencies and impacts on nature in financial portfolios
The Discussion Paper seeks feedback from financial institutions, data providers, disclosure users, and other stakeholders on identifying, assessing, and disclosing nature-related dependencies and impacts in financial portfolios. Consultation questions focus on methodological and data challenges, the usefulness and prioritization of financed impact driver metrics, and best practices for asset location data collection. Stakeholders are also invited to comment on proposed new definitions. Supporting annexes summarize TNFD’s current approach, data availability, relevant definitions, and lessons from financed GHG emissions disclosures. Feedback is due by 3rd November 2025. This will inform further development of TNFD’s guidance, metrics, and LEAP framework in collaboration with its knowledge partners. Read more
Europe
EU-US announce Joint Agreement on Fair and Balanced Transatlantic Trade
On 21st August 2025, the European Union and United States inked a Framework Agreement, reinforcing joint commitment to fair, balanced and mutually beneficial trade relationship. The Framework Agreement addresses US concerns over the downstream implications of the Carbon Border Adjustment Mechanism (CBAM) on small and medium-sized businesses (SMEs). In addition to the recent increase of the de minimis exception for low-value imports, the European Commission will take stock of additional flexibilities that may be provided in the CBAM implementation. The European Union’s key legislation for corporate sustainability reporting – the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD), will also be examined to minimize disruptions to transatlantic trade. This would include efforts to reduce the administrative burden for SMEs, reconsidering penalties for non-compliance, and overall requirements related to climate disclosure. The European Union may consider equivalence where non-EU countries have relevant due diligence rules already in place. Read more
EU Commission releases guidance to support compliance with the EU Deforestation Regulation
The new guidance provides clarifications on scope, definitions of risk and protections, penalties for non-compliance, and the implementation timeline. Medium operators are required to comply with the EU DR from 30th December 2025, while SMEs must comply from 30th June 2026. The guidance introduces clearer definitions for key actors, including operators and traders, and directly links the level of risk to the number of intermediaries in the supply chain. It also explicitly distinguishes obligations for SMEs versus non-SMEs and complements due diligence requirements with concrete indicators for determining when companies may conclude there is “no cause for concern”. In addition, the regulation’s coverage has been expanded to include legal defenses and protections relating to land, indigenous communities, labor, and the environment. To address packaging-related questions, the guidance clarifies that packaging is only in scope if sold as a product on its own, while 100% recycled products are exempt. Read more
Spanish government approves a new "Climate Emergency Plan"
The Spanish government has enacted Royal Decree 214/2025, introducing mandatory emissions reporting for public and private entities. Beginning in 2026, companies must disclose Scope 1 and 2 greenhouse gas (GHG) emissions based on FY 2025 data, with Scope 3 reporting becoming compulsory from 2028. More than 4,000 companies will fall under the scope of the Decree, which complements the EU-wide Corporate Sustainability Reporting Directive (CSRD). In addition, companies must prepare and disclose five-year quantified GHG reduction plans and publish their carbon footprint either via the national online registry or through their own website. This marks a shift from voluntary to mandatory climate reporting in Spain, reinforcing corporate accountability, resilience to climate risks, and alignment with national climate objectives. Read more
Switzerland announces plans to implement EU-aligned due diligence rules
On 3rd September 2025, the Swiss Federal Council announced plans to adapt existing Swiss due diligence rules to further alignment with the EU’s CSDDD. The Swiss rules will align with the CSDDD thresholds, applying to large companies with more than 1,000 employees and annual revenues exceeding CHF 450 million in two consecutive years. High-risk audited companies may also be included. A national authority will oversee compliance with the new regime by reviewing reports, conducting investigations, and imposing sanctions linked to annual turnover. In addition, the Swiss government will establish a legal mechanism to facilitate claims against companies. The draft counterproposal to the Responsible Business Initiative is expected by March 2026, pending clarity on the EU’s forthcoming Omnibus Directives. Read more
United States
California releases guidance for first preparers of climate-related financial disclosures
The California Air Resources Board (CARB) has released a Draft Checklist as a ‘starting point’ to support the implementation of CA SB 261. The checklist provides clarification and guidance to help companies comply with disclosure requirements on climate-related risks and opportunities, including clearer definitions of subsidiary and parent-level reporting boundaries. To minimize reporting burdens, the checklist notes that Scope 1, 2, and 3 emissions reporting is already required under CA SB 253 (effective from 2026) and is therefore not duplicated under SB 261. It also confirms interoperability with TCFD- and ISSB-aligned frameworks for companies already reporting under these standards and clarifies that insurance companies are out of scope. Based on stakeholder feedback, CARB allows for qualitative scenario analyses to ease reporting burden. The checklist further outlines minimum narrative disclosure requirements covering governance, strategy, risk management, and key metrics and targets for material climate-related risks. Read more
Asia-Pacific
Singapore delays ISSB-aligned climate reporting by five years
Singapore’s ACRA and SGX RegCo have updated company reporting timelines, delaying most mandatory climate-related disclosures. Companies are divided into three categories: Straits Times Index (STI) constituents, non-STI firms above $1 bn, and non-STI firms below $1 bn market capitalization. All listed firms must disclose direct emissions for FY2025, but other climate-related reporting starts in FY2028 for large firms and FY2030 for smaller ones. Scope 3 emissions are voluntary for non-STI firms over $1 bn, but mandatory for STI constituents. Limited assurance on Scopes 1 and 2 emissions becomes compulsory for all listed firms from FY2029. Read more
Malaysian government reinforces commitment to national taxonomy development
Malaysia’s Joint Committee on Climate Change (JC3) is advancing development of a unified Malaysian Taxonomy on Sustainable Finance, aligned with the ASEAN Taxonomy, moving from a principles-based approach toward science-based screening criteria and quantitative thresholds. The Taxonomy will cover key subject areas such as energy transition, circular economy, sustainable agriculture, biodiversity, and nature-based solutions, supporting risk assessment, transition planning, and sector-wide sustainability reporting under the forthcoming National Sustainability Reporting Framework (NSRF). Read more
Australian Treasury publishes climate-related transition planning guidance for companies
The purpose of the guidance is to improve the availability of consistent and comparable climate-related financial disclosures to investors, lenders and other stakeholders. Australia will start requiring information on climate-related risks and opportunities under the ISSB-aligned standards ‘AASB Climate-related Disclosures 2’ (Australian Accounting Standards Board). The AASB 2 requires climate-related disclosures across four pillars: governance, strategy, risk management, and metrics and targets to understand how the effects of climate risks on overall strategy and decision-making. While transition plan disclosure is voluntary, reporting entities must disclose if they have disclosed any information pertaining to transition plans, any underlying assumptions in the preparation of transition plans, as well as the plan’s dependencies. Overall, the guidance follows a principles-based approach (not a compliance tool or resource, rather).
Principle 1: Align with the leading international standard, the TPT framework developed by the IFRS Foundation.
• Principle 2: Support the use of domestic policies and context to achieve net zero by 2050.
• Principle 3: Take a pragmatic approach, recognizing differences in decarbonization pathways, with transitions that are ambitious but flexible.
• Principle 4: Treat climate as a material factor (including transition planning), while encouraging organizations to pursue other environmental and sustainability objectives.
The Treasury invites feedback on the guidance until 24 September 2025. Read more
Indonesia finalizes ISSB-aligned sustainability reporting standards
In December 2024, the Institute of Indonesia Chartered Accountants (Ikatan Akuntan Indonesia/IAI) published the Roadmap on the Indonesian Sustainability Disclosure Standards as an initial step in supporting the implementation of sustainability disclosure standards based on the global baseline of the ISSB Standards. In parallel, the IAI issued a consultation on the Exposure Draft of Indonesian Sustainability Disclosure Standards (SPK). The final SPK standards were slated to be finalized by Q2 2025. On 11th August 2025, the Institute of Indonesia Chartered Accountants (IICA) launched two final ISSB-aligned Indonesia Sustainability Disclosure Standards (SPK 1 and 2), which will come into effect on 1st January 2027. Read more
Hong Kong Monetary Authority launches consultation on Phase 2 of Green Taxonomy
The latest phase of Taxonomy development builds on its foundation of facilitating capital allocation toward a low-carbon and transition economy. In Phase 2A of the prototype, sector coverage has been expanded from four to six with the addition of manufacturing and information and communication technology (ICT). The scope has also broadened to include 13 new economic activities, bringing the total to 25 since Phase 1. Transition elements, such as interim decarbonization targets and supporting measures, have been introduced, alongside a new climate change adaptation objective aimed at addressing funding needs for managing physical risks from extreme weather events. HKMA has opened the consultation until 8th October 2025. Read more
National Assembly of South Korea adopts second amendments to the Korean Commercial Act
South Korea’s National Assembly has passed an amendment to the Commercial Act aimed at strengthening minority shareholder rights and enhancing board independence, both core pillars of corporate governance. The reform requires listed companies with assets over 2 trillion won ($1.4 billion) to adopt cumulative voting, allowing minority investors to concentrate votes on specific board candidates, thereby diversifying board composition and accountability. It also mandates that at least two audit committee members be elected separately from the board, reinforcing the independence of audit oversight. Read more
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Other News & Resources
• ESG Book and Asset Impact release A Practical Guide to EBA Pillar 3. Read more
• Austrian financial firms pilot new decarbonization metric in government partnership. Read more
• The International Accounting Standards Board issues amendments to IFRS 19 Standard. Read more
• IFC releases Guidance on Collecting and Disclosing Human Capital Data. Read more
• GHG Protocol and ISO announce strategic partnership. Read more
• UNEP FI releases Nature Impact Target Setting for Banks. Read more
• SEBI opens Consultation on Revised Norms for appointment of an independent third-party reviewer/certifier for green debt security. Read more
• China issues guidelines to advance low-carbon transition, strengthen national carbon trading market. Read more
