October Policy Digest

The cost of a hot, dry summer is becoming increasingly evident in private markets, where businesses are reassessing priorities to strengthen overall resilience. This underscores the growing importance of defining material information in the context of nature- and climate-related risk management. This month, global regulators doubled down on sustainability disclosure and transition frameworks, advancing an international baseline to improve comparability and deliver decision-useful information for investors, while addressing the challenges and contextual nuances of national-level implementation. Key highlights include:

• Global standards and transition planning: ISO and UNDP launched ISO 53001 to embed the SDGs into organisational governance and operations, while Verra introduced its Scope 3 Standard Program to strengthen the measurement, verification and traceability of value-chain emissions reductions, complemented by Australia’s voluntary transition-planning guidance.
• Simplification, proportionality and investor-useful disclosure: ESMA’s 2027 priorities reflect the EU’s push to streamline sustainable finance rules, alongside the adoption of revised ESRS and VSME standards, while the FCA finalised UK SRS reporting on a comply-or-explain basis, balancing implementation burdens against investors’ need for material, comparable information.
• Credible transition finance and greenwashing safeguards: The EU’s evolving SFDR 2.0 framework seeks to define credible transition investments, including fossil-fuel-related criteria and Taxonomy-aligned CapEx thresholds, while EmpCo guidance clarifies environmental marketing claims and Türkiye’s new Green Taxonomy establishes criteria for classifying sustainable economic activities.
• Expanding carbon markets: Canada explored an Article 6 framework to expand international carbon trading, subject to environmental integrity and safeguards against double counting.

The past few years in global sustainable finance regulation have been marked by market concerns over compliance burdens and political pushbacks, both of which have periodically slowed progress. Despite this, disclosure regimes continue to mature, reflecting a broader shift towards more targeted, decision-useful reporting rather than a retreat from transparency, as investors continue to signal demand for reliable sustainability data.

INTERNATIONAL

• ISO/UNDP launch 53001Standard to advance SDGs

Since the inception of the SDGs, it has provided a common framework for organizations committed to address global sustainability challenges ranging from gender equality, ending hunger, quality education, and climate action. The new framework creates requirements for management systems within organizations to embed SDGs into their governance, strategy and operations. With the 2030 deadline for achieving the SDGs fast approaching, organizations are encouraged to adopt a practical approach to advancing sustainability outcomes. This includes engaging relevant stakeholders to assess actual and potential impacts, strengthening risk management, setting SDG-aligned targets, tracking measurable outcomes and progress, mitigating adverse impacts, and understanding the links between positive sustainability impacts and business outcomes. Read more

• Verra launches Scope 3 Standard Program

The S3S program is designed to provide companies with Scope 3 targets and value chain emissions abatement projects with a credible, standardized methodology for measuring, verifying, attributing and reporting emissions outcomes. It builds on the foundations of Verra’s Verified Carbon Standard (VCS), a greenhouse gas crediting program with established emissions accounting methodologies, auditing requirements and project monitoring information available through the Verra Registry. The key distinction is that VCS supports carbon offsetting, where credits can be purchased or acquired without being directly linked to investments in value chain decarbonization. Under S3S, Scope 3 Units (S3Us) are intended to link emissions abatement to a specific impacted product within the value chain, ensuring that outcomes can be traced to the relevant good or service and reported against Scope 3 targets. In its first phase, the program focuses on listing eligible emissions abatement projects on the Verra Registry, provided they apply the available methodologies: VM0042 (Agriculture Land Management) and VM0043 (Utilization in Concrete Production). Projects will be subject to independent validation and verification, with S3U issuance for eligible project components planned for a later stage. The verified right-to-report these outcomes under the S3S program will also be introduced in a subsequent phase. Organizations already using Verra’s VCS program can review the program materials and provide feedback on usability until 30 November 2026. Read more

EUROPE

• ESMA publishes 2027 Annual Work Programme

On 28 September 2026, the European Securities and Markets Authority (ESMA) published its 2027 Annual Work Programme, outlining regulatory priorities aligned with the EU’s Simplification and Burden Reduction (SBR) agenda. The programme emphasizes streamlining administrative requirements while maintaining flexibility and competitiveness, with the Omnibus Simplification package serving as a key example of this shift. In the sustainable finance arena, ESMA will consider revisions to the Sustainable Finance Disclosure Regulation (SFDR) alongside changes to the Corporate Sustainability Reporting Directive (CSRD), European Sustainability Reporting Standards (ESRS) and EU Taxonomy under the Omnibus package. Depending on the outcome of the SFDR review, ESMA may work with other European Supervisory Authorities (ESAs) to develop technical advice for new Level 2 measures, potentially including consumer testing, and update existing Level 3 Q&As. It will also review its Guidelines on funds’ names using ESG- or sustainability-related terms in light of the SFDR negotiations. Separately, ESMA will monitor developments and supervisory practices in the EU green bond market to inform its contribution to the European Commission’s report on the application of the EU Green Bonds Regulation. Read more

• ESRS/VSME published in EU Official Journal

The European Commission has adopted the Delegated Acts for the revised European Sustainability Reporting Standards (ESRS) and the Voluntary Sustainability Reporting Standard (VSME), both of which have been published in the EU Official Journal. The revised ESRS will enter into force on 10 November 2026 and apply to financial years beginning on or after 1 January 2027, while the VSME Delegated Act entered into force on 24 September 2026. Companies in scope of the ESRS for FY 2026 may report under the existing ESRS, apply the existing standards with reliefs introduced by the Delegated Act (including the top-down materiality approach and value chain limitations), or adopt the full revised ESRS. Companies must disclose which reporting option they have chosen. Under the VSME Delegated Act, a value chain cap will apply from FY 2027, limiting requests for sustainability information from value chain companies with 1,000 or fewer employees to the streamlined ESG datapoints covered by the voluntary standard.

• SFDR 2.0: ECON backs fossil fuel transition criteria amid greenwashing concerns

The European Parliament’s ECON Committee has dropped the outright exclusion of fossil fuels from SFDR 2.0 ‘Transition’ category, instead proposing that companies continuing fossil fuel production allocate at least 20% of their capital expenditure (CapEx) to EU Taxonomy-aligned activities, in line with the Council’s position. The treatment of fossil fuel activities under the EU Taxonomy has been contentious, particularly given the tension between recognising certain activities as part of the green transition and avoiding the risk of locking in fossil fuel dependence. ECON goes further by requiring these companies to allocate a greater share of CapEx to green, Taxonomy-aligned activities than to new fossil fuel expansion over a rolling three-year period. It also proposes phasing out coal-fired power generation activities. Critics, including Eurosif, have highlighted the complexity of this approach and the challenges of demonstrating eligibility and a credible transition pathway. The Committee has also revised the treatment of public debt under the Transition category, allowing it to contribute towards the category threshold subject to specific conditions and a 15-percentage-point cap, while excluding it from the Sustainable category, which remains reserved for use-of-proceeds instruments such as green bonds.

The Committee also proposed removing certain entity-level disclosure requirements under the SFDR, including principal adverse impact (PAI) statements and remuneration-related disclosures, with the changes taking effect immediately upon entry into force. The broader revised framework would remain subject to a 24-month application period, aligned with the Council’s position. Separately, the ECON Committee backed an opt-out mechanism for professional investors and the removal of financial advice and portfolio management from the rules’ scope under the SFDR 2.0 negotiating mandate, potentially leaving room for greenwashing risks. The mandate introduces an additional disclosure requirement for the ‘ESG Basics’ category on exposure to the fossil fuel sector, while maintaining the requirement that all three SFDR 2.0 categories — Sustainable, Transition and ESG Basics — exclude investee companies that violate social objectives, including human rights.

The SFDR overhaul was initiated in response to Articles 8 and 9 becoming de facto fund labels across the sustainable investment landscape, despite the absence of clear, concise criteria. Without more robust definitions and safeguards, risks of mislabelling and greenwashing could persist. Although the Omnibus has addressed some practical implementation challenges, key questions remain, including how social objectives should be defined, the need to tailor product criteria to different asset classes, particularly private and real assets, and the absence of the Do No Significant Harm (DNSH) principle from the ‘Sustainable’ category. Read more

• EmpCo Q&A goes into effect

The European Commission’s June 2026 Q&A on the Empowering Consumers for the Green Transition (EmpCo) Directive provides non-binding guidance, offering preliminary interpretations ahead of the rules’ application from 27 September 2026. It clarifies that generic environmental claims must be substantiated by recognised excellent environmental performance, while specific claims must be clear, prominent, and verifiable. Existing products are not exempt, although corrective measures such as stickers may address non-compliant claims. The guidance also clarifies the ban on product-level climate claims based on offsetting, requirements for repairability and durability information, and the treatment of sustainability labels. Mandatory CSRD sustainability reporting is generally outside scope, but sustainability information reused in consumer-facing marketing remains subject to the rules. Read more

• Sweden transposes CSDDD

Sweden’s corporate responsibility inquiry has proposed a new Corporate Responsibility Act to transpose the EU Corporate Sustainability Due Diligence Directive into Swedish law. The proposed framework would require in-scope companies to identify, prevent, mitigate and address adverse human rights and environmental impacts across their operations and value chains. Read more

• Turkey publishes Green Taxonomy Regulation

Türkiye’s Green Taxonomy Regulation, published on 24 September 2026, establishes a national framework largely aligned with the EU Taxonomy, covering six environmental objectives and introducing a legal definition of greenwashing. Economic activities must make a substantial contribution to at least one environmental objective, do no significant harm to the others, and comply with minimum social safeguards to qualify as taxonomy-aligned; activities using solid fossil fuels are excluded from classification as environmentally sustainable. Companies conducting eligible activities may report voluntarily, while banks, investment firms, portfolio managers, insurers, reinsurers and pension companies will be subject to mandatory reporting from 1 January 2029, with reports covering taxonomy-eligible and aligned turnover, capital expenditure (CapEx) and operating expenditure (OpEx). Although non-financial companies are not directly subject to mandatory reporting under the Regulation, financial institutions may request their taxonomy data to support their own disclosures, potentially affecting access to finance and investor expectations. Technical screening criteria and further implementing rules are expected to clarify the framework’s practical application. Read more

• CEAOB issues technical advice on limited assurance for sustainability reporting

The Committee of European Auditing Oversight Bodies (CEAOB) has issued technical advice to the European Commission on developing an EU limited assurance standard for sustainability reporting. It specifically addresses requirements including digital markup and Article 8 Taxonomy disclosures under the CSRD. The aim is to develop non-binding guidance that promotes consistent national implementation and mitigates fragmentation and implementation challenges in sustainability reporting assurance and oversight. The advice assesses the International Standard on Sustainability Assurance (ISSA) 5000 and identifies potential EU-specific additions or carve-outs. It will inform the Commission’s development of a standard expected to be adopted through a delegated act, with a public call for evidence anticipated as the next step. Read more

• ESMA publishes Q2 2026 Green Finance Dashboard

ESMA has published its Q2 2026 Green Finance Dashboard, highlighting continued resilience in EU ESG markets, alongside mixed developments across market segments. SFDR Article 8 and 9 funds accounted for 62% of UCITS assets under management (AUM), with combined assets rising during the quarter to €9.44 trillion, despite a 3% decline in the number of Article 9 funds. Meanwhile, EU funds using ESG-related terms in their names continued to decline for the sixth consecutive quarter, reflecting the ongoing impact of ESMA’s fund-naming guidelines. Sustainable private markets also showed momentum. ESG private funds launched in the first half of 2026 reached €6.7 billion, while venture capital investment in EU cleantech deals totalled €3.5 billion, already exceeding the €3 billion recorded for full-year 2025. The EU ESG bond market similarly grew 7.5% year-on-year to June 2026, with green bond issuance reaching €105 billion in Q2, up 16% year-on-year. Issuance under the European Green Bond Standard also accelerated, reaching €12 billion in Q2, a 116% increase year-on-year. By contrast, assets in funds tracking ESG benchmarks declined, while EU Emissions Trading System trading volumes fell as market volatility eased. Overall, the dashboard points to continued investment and market development, alongside uneven performance across ESG products and strategies. Read more

UNITED KINGDOM

• FCA finalises UK SRS comply-or-explain reporting requirements for listed companies

The UK Financial Conduct Authority (FCA) has finalised rules requiring listed companies to report against the UK Sustainability Reporting Standards (UK SRS) on a comply-or-explain basis. Aligned with the UK-endorsed International Sustainability Standards Board (ISSB) standards, the framework allows companies to explain where and why they have not complied with specific reporting requirements. Previously, the FCA had proposed mandatory climate-related disclosures under SRS 2, with reporting requirements becoming mandatory after a two-year transition period. The proposals also included a one-year relief from Scope 3 reporting, followed by a comply-or-explain approach after two years. The new disclosure regime will take effect on 1 January 2027. While sustainable investment groups have welcomed the greater proportionality for smaller companies, given their limited reporting readiness and capacity, the changes have also raised concerns about the potential lack of sufficiently material information for investors, including professional investors. The FCA has also published a Technical Note providing guidance on the application of the new requirements. Stakeholders are invited to submit feedback by 28 October 2026. Read more

NORTH AMERICA

• Canada explores Article 6 framework to expand international carbon markets

The Canadian government is exploring a policy framework to enable the international trading of internationally transferred mitigation outcomes (ITMOs) under Article 6 of the Paris Agreement. The proposed framework could allow Canadian companies to participate in international carbon markets, mobilising investment in emissions reduction and carbon removal projects, including nature-based solutions. The government intends to align any trading arrangements with Article 6 requirements on additionality, environmental integrity and the prevention of double counting. Consultations with provinces, territories, Indigenous organisations and other stakeholders will inform the approach. Read more

ASIA-PACIFIC

• Australian Treasury launches Guidance on Transition Planning

The guidance provides practical advice and examples, including: illustrative examples of different transition planning approaches (blue boxes) points and principles for transition planning (green boxes) supporting resources for transition planning (grey boxes) information on other sustainability-related ambitions and actions (orange box) The guidance is targeted toward providing general advice because all organisations are different. 1 To promote global consistency in approaches and improve clarity, this guidance is intended to build on the TPT Transition Planning Cycle and can be referred to in whole or in part. Providing voluntary guidance for transition planning is one of the ten priority initiatives identified as part of the Government’s Sustainable Finance Roadmap to help build the market structures and frameworks for organisations, investors and the broader community to prepare for and leverage the benefits of the net zero transformation. Transition planning guidance (Priority 3) complements other sustainable finance initiatives by assisting reporting entities undertake effective transition plans that may be disclosed as part of their climate-related financial disclosures (Priority 1) and leveraging the Australian Sustainable Finance Taxonomy (Priority 2) as a voluntary tool. Requirements for disclosing information on an entity’s climate-related transition plan under the mandatory climate-related financial disclosure regime are not addressed in this guidance. Organisations seeking information on disclosure obligations should refer to the relevant disclosure-specific resources available to reporting entities. Read more

Other News & Resources

• EU launches Sustainability Label for Data Centers — Read more
• TNFD releases Additional Sector Guidance – Technology and Communications — Read more
• NGFS launches 2026 Supervisory Guide on Climate and Nature Risks — Read more
• Connecticut poised to enact SB 5: Artificial Intelligence Responsibility and Transparency Act — Read more
• Institute of Chartered Accountants India launches ISSA 5000-aligned Sustainability Assurance Standard. Read more
• GRI announces upcoming Food and Beverage Standard — Read more
• UNEP FI releases resources to enhance sustainability-related disclosures for prudential risk management. Read more

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