Introduction

ESG is changing the landscape for financial institutions as stakeholders, including investors, increasingly expect them to make their operations more sustainable.

Financial services regulators also view ESG as a priority, embedding the principles of climate-related financial risks into their supervisory frameworks and dealing with greenwashing issues.

There is limited uniformity in regulation as financial services regulators are at different stages in developing their ESG regulatory framework, particularly in relation to disclosures and taxonomy, which is a challenge for many institutions operating across borders. It is therefore critical to monitor the latest regulator updates.

To help you, we have tracked ESG regulatory developments from January 3 2026 – 3 February 2026, from the UK, France, EU, the Netherlands, the US, Australia as well as other key international regulators.

This month’s highlights

MLROs – have you thought about ESG risk?

ESG risk increasingly shapes the financial‑crime landscape in which Money Laundering Reporting Officers (MLROs) operate, primarily because rising regulatory scrutiny of sustainability claims amplifies exposure to misleading disclosures, mis‑selling and governance failures. Regulators and investors are demanding far greater accuracy and transparency in ESG data, with ESG funds now under intensified scrutiny. At the same time, many compliance experts identify ESG compliance itself as one of the top regulatory risks for 2026, placing it alongside financial crime, sanctions and data‑privacy obligations.

For MLROs, this means that inaccurate sustainability statements, weak governance controls, or deficiencies in ESG reporting can quickly escalate into potential financial‑crime concerns—triggering misrepresentation risks, investor deception issues, and, in some cases, the need to raise internal red flags or consider suspicious activity reports. ESG‑related social and environmental risks also intersect directly with anti-money laundering and financial‑crime duties, especially as banks and investors increasingly rely on deeper due‑diligence to uncover issues such as child labour, human‑rights violations and other social‑risk indicators within value chains. These social harms frequently correlate with predicate offences such as trafficking, corruption and organised crime—areas firmly within the MLRO’s remit. Meanwhile, banks continue to face challenges with ESG‑related data fragmentation and reporting inconsistencies, which undermine governance and risk‑management frameworks and raise red flags relevant to AML oversight.

For MLROs, ESG risk is no longer peripheral: it is a core dimension of financial‑crime exposure, requiring integrated assessment across client onboarding, monitoring, product governance and disclosure controls.

United Kingdom

30 January 2026 – FCA consults on aligning listed issuers’ sustainability disclosures with international standards

The Financial Conduct Authority (FCA) published a consultation paper setting out proposals to evolve its rules in relation to listed companies’ sustainability disclosures (CP26/5).

Background

The FCA highlight in CP26/5 that there are already rules for listed companies’ sustainability disclosures that are aligned with the Task Force on Climate-related Financial Disclosures (TCFD), which was created in 2015 but disbanded in 2023, and that the International Sustainability Standards Board (ISSB) was established in 2021, to unify fragmented climate and wider sustainability reporting frameworks–including the TCFD. As a result, the FCA make clear that it considers that given the end of the TCFD and the transition to ISSB Standards its rules need to evolve.

Summary

The FCA explains in CP26/5 that around 40 jurisdictions are planning to adopt or use the ISSB Standards, including the UK, and the government is currently in the process of developing UK Sustainability Reporting Standards (UK SRS) to tailor the ISSB Standards for the UK. The FCA explains that it is consulting now, based on the draft UK SRS to ensure it has sufficient time to consult. However, the FCA further explains that once it has considered feedback and the UK SRS is finalised, it will finalise the proposed rules.

The current proposals include the following:

  • The FCA is proposing that companies in scope move to mandatory reporting against UK SRS S2, which covers climate disclosures and is an area where reporting is already high across companies.
  • The FCA is not proposing to require mandatory reporting of Scope 3 emissions data, which it proposes can continue to be reported on a ‘comply or explain’ basis.
  • The FCA sets out that it recognises that wider sustainability (non-climate) reporting (against UK SRS Scope 1) will be new to many of these listed companies and may present challenges and are therefore proposing that this non-climate reporting can be on a ‘comply or explain’ basis against UK SRS S1.
  • The FCA highlights that mandating that companies have transition plans is a matter for government. However, it also explains that in its view investors find this information useful and so it is proposing that companies in scope disclose whether and where they have published a transition plan, or the reason why not.
  • The FCA also propose requiring them to disclose whether they have obtained third-party assurance on sustainability disclosures.
  • The exception to the approach described above, is in relation to international companies that have their primary listing in another jurisdiction. To minimise duplication with requirements that international issuers face in the markets where they have their primary listing, the FCA is proposing a flexible approach. As the proposals focus on transparency of the sustainability-related reporting requirements and standards (including in relation to transition plans) applicable in an issuer’s primary listing location or place of incorporation, or any standards or requirements that such issuers voluntarily apply. Under these proposals, these issuers would also be required to disclose whether they have obtained third-party assurance on sustainability disclosures.

Next steps

The FCA has requested feedback on CP26/5 by 20 March 2026.

European Union

8 January 2026 – ESAs Joint Guidelines to ensure that consistency, long-term considerations and common standards for assessment methodologies are integrated into the stress testing of ESG risks

The Joint Committee of the European Supervisory Authorities (ESAs) issued their Final Report on Joint Guidelines to ensure that consistency, long-term considerations and common standards for assessment methodologies are integrated into the stress testing of environmental, social and governance (ESG) risks pursuant to Article 100(4) of the Capital Requirements Directive IV (CRD IV) and Article 304c(3) of the Solvency II Directive.

The Joint Guidelines should be read in conjunction with the CRD IV and Solvency II Directive which sets out obligations to Member State competent authorities’ (NCAs), procedural rules and prudential assessment criteria on how NCAs perform supervisory stress tests, either as part of the relevant regulatory framework or as an ad hoc assessment.  The Joint Guidelines do not include a new requirement for NCAs to carry out ESG supervisory stress tests. Rather, the Joint Guidelines have two main objectives which are to:

  • Improve the legal certainty, clarity and transparency of the supervisory approval process with regard to the integration of ESG risks into NCAs stress testing frameworks and scenario analysis frameworks.
  • Ensure consistency, long-term considerations and common standards for assessment methodologies throughout the EU and across sectors

Next steps

The Joint Guidelines will be translated into the official languages of the EU and published on the websites of the ESAs. The deadline for NCAs to notify the respective ESA whether they comply or intend to comply with the Joint Guidelines will be two months after the publication of the official translations.

The Joint Guidelines apply from 1 January 2027.

8 January 2026 – Published in OJ – Commission Delegated Regulation (EU) 2026/73 of 4 July 2025 amending Delegated Regulation (EU) 2021/2178

There was published in the Official Journal of the EU, Commission Delegated Regulation (EU) 2026/73 of 4 July 2025 amending Delegated Regulation (EU) 2021/2178 as regards the simplification of the content and presentation of information to be disclosed concerning environmentally sustainable activities and Delegated Regulations (EU) 2021/2139 and (EU) 2023/2486 as regards simplification of certain technical screening criteria for determining whether economic activities cause no significant harm to environmental objectives. Commission Delegated Regulation (EU) 2026/73 applied from 1 January 2026.

14 January 2026 – ESMA thematic notes on clear, fair and not misleading sustainability-related claims and ESG strategies

The European Securities and Markets Authority (ESMA) issued a thematic note on sustainability-related claims, focusing on ESG strategies.

The thematic note contains four principles for making sustainability claims to ensure that all claims are clear, fair, and not misleading and thereby avoid the risk of greenwashing. The principles do not create new disclosure requirements but aim to remind market participants about their responsibility to make claims only to the extent that they are clear, fair and not misleading.

References to ESG strategies, notably to ESG integration and ESG exclusions are often made by market participants and widely referenced in marketing communications aimed at retail investors. The thematic note also focuses on the way these two types of ESG strategies are described, communicated to investors and includes observed market practices.

16 January 2026 – Commission consults on draft Delegated Regulations supplementing ESG Rating Regulation

The European Commission issued a consultation on draft Delegated Regulations supplementing Regulation (EU) 2024/3005 (ESG Rating Regulation) with regard to:

  • Fees charged by the European Securities and Markets Authority (ESMA) to ESG rating providers. Article 42, paragraph 2, of the ESG Rating Regulation requires the European Commission (Commission) to adopt, by means of a delegated act, a Regulation to supplement that Regulation by  specifying the type of fees, the matters for which fees are due, the amount of the fees and the respective justification, the manner in which they are to be paid and, where applicable, the way in which ESMA is to reimburse the competent authorities in respect of any costs that they might incur when carrying out tasks pursuant to the Regulation, in particular as a result of any delegation of tasks pursuant to the ESG Rating Regulation. The draft Commission Delegated Regulation addresses all these points.
  • Rules of procedure on fines and periodic penalty payments imposed to ESG rating providers by ESMA. Article 39, paragraph 9, of the ESG Rating Regulation requires the Commission to adopt, by means of a delegated act, a Regulation on further rules of procedure for the exercise of ESMA’s power to impose fines or periodic penalty payments, including provisions on rights of defence, temporal provisions and the collection of fines or periodic penalty payments, and by adopting detailed rules on the limitation periods for the imposition and enforcement of fines and periodic penalty payments. The draft Commission Delegated Regulation addresses all these points.

The deadline for comments is 13 February 2026.

France

There have been no reported updates this month.

The Netherlands

27 January 2026 – AFM published ESG update

In its latest ESG update, the Dutch Authority for the Financial Markets (AFM) updates on its most important expectations on market participants. In its latest update the AFM sets out its expectations on the following four themes:

  • Sustainability claims: correct, clear and not misleading, balanced: The AFM expects that firms only make sustainability related claims that are correct, clear and not misleading, or, in the case of pensions, balanced. The AFM also highlights that firms should not make a sustainability claim if they cannot substantiate it.
  • SFDR: clearly worded, comparable and reliable information: The AFM highlights that the better the quality of the information entered into the templates, the better equipped investors, pension participants and advisors are to understand products, make comparisons or offer suitable advice. Furthermore, the AFM expects the following:
    • Firms publish all required information on their website.
    • Firms only publish information that is clear and easy to find for investors.
    • Firms publish reliable SFDR information, including information on sustainable characteristics of products, sustainability risks and negative impacts of investments.
  • Product Oversight and Governance: The AFM sets out that firms must incorporate the sustainability criteria in their Product Oversight and Governance policies. Firms must evaluate the product range accordingly and avoid selling products without sustainability characteristics to investors who want to invest sustainably. Furthermore, the AFM expects that:
    • Firms know and check the quality and reliability of products’ sustainability-related information, also for the purpose of the suitability assessment.
    • Firms have set up the customer journey (website, app, customer contact) according to the distribution strategy.
    • Firms monitor the distribution of grey market products to negative target markets and assess the effectiveness of their strategy to prevent this.
  • Suitability assessment: match of sustainable demand and supply: The AFM highlights that firms must collect information about their customers’ or participants’ sustainability preferences and ensure suitable investments that match these sustainability preferences. Furthermore, the AFM expects the following:
    • Firms provide an understandable explanation of the element of sustainability in the suitability assessment.
    • Firms are thorough in the collection of information about the actual sustainability preferences and do not steer investors towards a particular product or investment strategy.
    • Firms provide investors with suitable products, matching their actual/initial sustainability preferences to the extent possible. Firms will not steer towards adjusting these preferences.

The AFM expects to publish its next ESG updates in Autumn 2026.

United States- SEC and CFTC

There have been no reported updates this month.

Australia

20 January 2026 – Australian Council of Superannuation Investors releases updated Governance Guidelines

The Australian Council of Superannuation Investors (ACSI) has released its 12th edition of Governance Guidelines.

The new guidelines remind the sector of the importance of good governance, transparency and investor protection, especially in gaining a competitive advantage and promoting market confidence.

Rather than introducing new standards, the updated guidelines refine existing principles to emphasise succession planning, artificial intelligence governance, culture, workforce and diversity, and stronger alignment between board skills, experience, succession and election.

In particular, ACSI chief executive Lousie Davison said, “investors want to know that company boards have governance structures in place reflecting the scale of the risks and opportunities associated with AI and other forms of digitalisation.”

The January 2026 guidelines move away from a ‘one-size-fits-all’ approach. Instead, the guidelines focus on investors’ interests in the context of the financial material issues that vary by company and sector.

27 January 2026 – Australian Securities and Investments Commission’s 2026 key issues outlook

Joe Longo the Chair of the Australian Securities and Investments Commission (ASIC) has announced that the regulator is tracking major shifts across Australia’s financial system. This shift is designed to combat the continued cost-of-living strains for vulnerable Australians, rising debt and the surge in AI powered cybercrimes.

In particular, ASIC is alert to conduct that pushes regulatory boundaries to circumvent the application of the law that would lead to unfair investor losses and consumer harm.

For example:

  • aggressive marketing, lead-generation and cookie cutter advice models that surround complex high-risk investments that are unsuitable for the average consumer (i.e., certain managed investment schemes).
  • inconsistent investment disclosures in superannuation financial reports that limit transparency on certain expensed and provide insufficient audit evidence for valuations.

29 January 2026 – Superpower Institute proposes polluting companies pay their ‘fair share’ for damage to the environment

The Superpower Institute has released a landmark report that proposes two new policies to hold polluting companies fiscally accountable for their damages to the natural environment. The Polluter Pays Levy (PPL) would target companies that extract or import fossil fuels that are consumed in Australia. The Fair Share Levy (FSL) would tax the cashflow of Australian Gas Giants.

According to the Superpower Institute’s modelling, the levies would deliver a collective average revenue of $35 billion each year between 2026 and 2050.   

At present Australian state and federal governments take approximately 30% of fossil fuel company profits. The proposed levies would bring Australia closer to a 60% total tax level, which is more in line with the 75%-90% global average.

The Superpower Institute co-founder and director Ross Garnaut said: “A Polluter Pays Levy and a Fair Share Levy are the most effective ways to both lower emissions and create a structurally robust Australian economy into the future.”

30 January 2026 – Australian Anti-Slavery Commission Office recommends key policy reforms

The Australian Anti-Slavery Commission Office has released a position paper that recommends two key reforms to strengthen the national approach to modern slavery legislation. The report recommends the introduction of mandatory risk-based modern slavery due diligence obligations for reporting entities. It also empowers the Australian Anti-Slavery Commissioner with a capacity to declare that a product, service or industry carries a high risk of modern slavery.

The proposed reforms would require large businesses to take proportionate action, it said, by supporting firms to manage risk, protect vulnerable workers, enhance consumer confidence, and create a level playing field for responsible business practices.

The recommendations move beyond transparency-based reporting regimes to a more effective, risk-based approach in line with good practice, and domestic and international regulatory trends on corporate governance.

International regulators – FSB, IOSCO, Basel Committee, NGFS, SASB, IFRS, ISSB

There have been no reported updates this month.