3 February – 3 March 2026

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 February 3 2026 – 3 March 2026, from the UK, France, EU, the Netherlands, the US, Australia as well as other key international regulators.

This month’s highlights

Independent Directors – have you thought about ESG risk?

ESG risk has become a core governance issue for Independent Directors in 2026, driven by rapidly rising regulatory scrutiny of sustainability disclosures and expectations for far greater transparency from investors and stakeholders. According to the media ESG‑labelled funds have now exceeded $3 trillion, placing boards under heightened pressure to ensure the accuracy, robustness and defensibility of all sustainability‑related statements and strategic commitments.

At the same time, ESG compliance is recognised as one of the top global regulatory concerns for 2026, elevating the accountability of Independent Directors for overseeing governance structures, reporting processes and internal controls that mitigate the risk of misstatements, misleading disclosures or oversight failures. These heightened expectations make it essential for Independent Directors to challenge management on data quality, risk assumptions and the operational readiness of ESG reporting systems.

Independent Directors also face growing exposure to social and human‑rights‑related risks, particularly as investors increasingly rely on enhanced due‑diligence tools—often AI‑based—to uncover supply‑chain issues such as child labour, human‑rights abuses and other social‑risk indicators that can degrade valuation, erode trust and invite regulatory scrutiny. Weak or fragmented ESG data across the organisation further amplifies governance and reputational risks, as data silos and inconsistent reporting make it harder for boards to discharge their oversight responsibilities and assure the integrity of disclosures submitted to regulators and the market.

Collectively, these factors mean Independent Directors must adopt a more proactive and interrogative approach to ESG governance—probing assumptions, validating data and ensuring risk management frameworks robustly capture environmental, social and governance exposures across the full value chain.

United Kingdom

4 February 2026 – Non-Financial Misconduct: what do firms need to do and when?

Following publication of the Financial Conduct Authority’s (FCA’s) Policy Statement: Tackling non-financial misconduct (NFM) in financial services (PS25/23), we take a look at what it means for firms and what actions they should be taking as we move towards 1 September 2026 when the new Code of Conduct (COCON) rule; the new COCON guidance and the new guidance on the fit and proper test (FIT) all come into effect.

Read our note here.

25 February 2026 – UK publishes Sustainability Reporting Standards S1 and S2

The UK has published the UK Sustainability Reporting Standards (S1 and S2), providing a mandatory framework for companies to disclose material sustainability and climate-related risks and opportunities, aligning with international ISSB standards.

These standards, based on ISSB IFRS S1 and S2, aim to enhance transparency, combat greenwashing and support investor decision-making.

27 February 2026 – FCA publishes good and poor practice in relation to the SDR regime

The FCA published a new webpage, outlining its findings in relation to good and poor practice for using labels under the Sustainability Disclosure Requirements (SDR) regime.

Background

The FCA explains that firms in scope have been able to use sustainability labels under the SDR regime since July 2024 and that the examples it sets out here are intended to help firms prepare pre-contractual disclosures for use of labels, following the pre-contractual disclosure examples it published previously.

Summary of findings

The FCA set out the following examples of good and poor practice in relation to each of the sustainability labels, in particular:

  • Sustainability focus:
    • Good practice – it is clear that the objective is to invest in assets that are environmentally or socially sustainable; the disclosures outline potential negative outcomes from this investment approach; there is a scoring system that classifies assets as sustainable if they score 7 out of 10 which includes a description of the criteria that assets would need to meet or attributes that they would need to have to get that score; and, where a fund has a sustainability objective to invest in products/services across several themes, it uses KPIs that show how the fund is invested across those themes.
    • Poor practice – the objective is not clear, specific and measurable; a company is selected based on some sustainable attributes without considering the complete picture; the standard of sustainability is not backed by evidence; the firm claims that 100% of the company’s revenues is derived from sustainability products/services but cannot substantiate that claim.
  • Sustainability improvers:
    • Good practice – the disclosure sets out how the firm intends to measure an outcome in relation to an objective; the firm decides which assets have the potential to meet the standard based on disclosures, clear strategies, and transition plans; KPIs show decarbonisation where the fund’s sustainability objective is to invest in assets with the potential to decarbonise.
    • Poor practice – a fund has a climate-related objective that is only based on reducing Scope 1 and 2 emissions, but gives the impression that the aim is to reduce ‘all’ emissions (including Scope 3); the firm assumes that assets will set decarbonisation targets, without any robust evidence to support this; firms continue to engage with companies that aren’t making progress towards the objective, with no timeframe for them to respond to the engagement, or next steps if they don’t.
  • Sustainability impact:
    • Good practice – the outcomes are clear in each of the areas of intended impact; a fund’s assets aim to provide the general population with access to education and the firm clearly sets out what change it expects, the firm does not clarify what change it expects by investing the relevant assets or why.
    • Poor practice – the fund seeks broad or unmeasurable impacts; the KPIs are not consistent with the objective and theory of change. 
  • Sustainability mixed goals:
    • Poor practice – the fund intends to invest in assets that focus on sustainability (Focus) or have the potential to improve over time (Improvers); however, all assets have Improvers’ attributes, and it is not clear which assets already meet a standard of sustainability and are therefore considered Focus.

27 February 2026 – FCA publishes a new webpage on how to use sustainability labels

The FCA published a new webpage on how to use sustainability labels as part of the SDR regime.

The FCA explains that the labels are for funds with environmental or social goals and these firms can choose to use labels if their funds meet the criteria.

In particular, the FCA reminds firms of the following:

  • Criteria: all products using labels must meet the general criteria, as well as criteria specific to each label as set out in see Annex 2 of its Policy Statement (PS23/16).
  • How to use a label: firms must notify the FCA of plans to use a label by completing a notification form but that the full process to use a label will be different depending on the type of fund in scope.
  • Downloadable labels: firms and distributors in scope of the SDR regime intending to use labels should download the relevant label from the form when notifying the FCA of their intention to use a label. 

European Union

Omnibus I package published in OJ

On 26 February 2026, there was published in the Official Journal of the EU (OJ), Directive (EU) 2026/470 of the European Parliament and of the Council of 24 February 2026 amending Directives 2006/43/EC, 2013/34/EU, (EU) 2022/2464 and (EU) 2024/1760 as regards certain corporate sustainability reporting requirements and certain corporate sustainability due diligence requirements. The Directive will enter into force on the 20th day following its publication in the OJ. Member States must transpose the Directive into national law within 12 months of its entry into force, save for Article 4 (amendments to the Directive on corporate sustainability due diligence), the transposition deadline is 26 July 2028.

France

26 February 2026 – AMF publishes summary of SPOT inspections on the consideration of sustainability preferences in the client journey

The Autorité des marchés financiers  (AMF) published a summary of its SPOT inspections on the consideration of sustainability preferences in the client journey. The SPOT summary analyses how sustainability preferences are taken into account by investment services providers. The summary is fully in line with the AMF’s “Impact 2027” strategic orientations, which aim to promote sustainable finance and ensure investor protection. It is also fully in line with the supervisory measures defined at the European level by the European Securities and Markets Authority.

The Netherlands

17 February 2026 – 4 guidelines for audit firms to contribute to a robust approach CSRD assurance

On 17 February 2026, the Dutch Authority for the Financial Markets (AFM) issued four guidelines on Corporate Sustainability Reporting Directive (CSRD) assurance.

In 2025, public interest entity (PIE) audit firms provided assurance according to the CSRD for the first time. The AFM observes that they have taken substantial steps. To support the (further) development of a robust approach to CSRD assurance, the AFM presents four key pillars. CSRD assurance contributes to reliable, understandable and consistent sustainability reporting, helping investors and society to make well-informed decisions.

In summary, the four pillars are:

  • Maintain a robust quality control system for CSRD assurance.
  • Ensure a competent assurance team and effective project management.
  • Understand the client and its processes for an appropriate assurance plan.
  • Tailor the procedures in the execution phase to the assessed assurance risks and assurance materiality.

4 March 2026 – AFM ESG update pages

On the AFM’s ESG-update page the regulator publishes updates on its most important expectations on market participants – where appropriate – have to comply with the SFDR, the sustainability requirements for product oversight & governance and the suitability assessment, and sustainability claims. The AFM expects market participants to improve their compliance with ESG regulations. Market participants should use the ESG-updates of the AFM to their advantage.

United States- SEC and CFTC

There have been no reported updates this month.

Australia

13 February 2026 – Australian Treasury proposes sustainable investment product labelling regime

The Australian Treasury published a consultation paper on a proposed sustainable investment product labelling regime. Treasury is seeking stakeholder feedback on the design of a framework intended to improve transparency and comparability for financial products marketed as “sustainable” or similar, including for managed funds and within the superannuation system.

Background and policy objective

In the Sustainable Finance Roadmap, the Government committed to developing consistent labels and disclosure requirements for investment products marketed as “sustainable” or similar, with a targeted commencement date of 2027 subject to final policy decisions. The regime aims to address growing concerns that investor expectations are not being matched by the actual investment strategies of product issuers.

The prohibition against misleading or deceptive conduct in the Corporations Act 2001 (Cth) (the Corporations Act) and the Australian Securities Investments Commission Act 2001 (Cth) have an important role in protecting the market from ‘greenwashing’ practices. However, the Government is aware the lack of consistency between product issuer claims makes it difficult for investors to compare the merits of different sustainable investment options.

Purpose

The proposals in the consultation paper are intended to be a starting point for designing a sustainable investment product labelling regime for Australia. The proposals cover the core elements of the regime: products that qualify as part of the regime; consumer-facing disclosures; criteria that trigger requirements; and the evidentiary requirements to support sustainability claims.

Element 1: Scope of Sustainable Investment Product Labelling – what products will be included?

Treasury proposes that the labelling regime apply to financial products that use “sustainable” or similar terminology in their product title or marketing materials. Treasury proposes that, for example, where a product’s name includes or uses a sustainable or similar term, the product should reflect this objective in its investment portfolio or strategy in a substantive manner. This also includes where the product’s marketing materials feature sustainability or similar terminology as one of the features of the product’s composition or investment strategy.

Treasury’s approach leverages the existing definition of “financial product” in section 763A of the Corporations Act, which captures a diverse range of products available to retail investors. The wide definition would be qualified to products using the term “sustainable” or a similar term that may fall into the ESG umbrella of terminology. This could be in the form of a non-exhaustive list, and Treasury provides an example which includes terms such as “sustainable”, “green”, “climate”, “ethical”, “responsible”, “ESG”, “impact”, “net-zero”, and “socially aware”.

Element 2: Consumer-facing disclosures

Feedback to Treasury’s previous consultation, together with certain international developments, indicate that the introduction of mandatory consumer-facing disclosure requirements could materially improve transparency, credibility and comparability for sustainability-labelled investment products.

Treasury is consulting on three design options:

Option 1: Prescriptive template: This would require issuers to present prescribed information in a fixed structure — for example, a standard description of the fund’s sustainability approach (exclusions, screening, impact, transition, stewardship), key metrics such as emissions intensity, explicit sustainability targets and interim milestones, and top holdings with short sustainability descriptors.

Option 2: Principles-based template: Issuers would need to ensure consumer-facing disclosures are fair, clear and not misleading, and help consumers understand the product’s sustainability features, but without being bound to a fixed format.

Option 3: Hybrid approach: A hybrid model would mandate a small set of core disclosures in a fixed format, such as the fund’s sustainability objective, key sustainability metrics, top holdings, and any explicit targets, to ensure consistency and comparability across products. Beyond this core set, issuers would have discretion to explain their broader sustainability approach using principles-based guidance.

Element 3: Thresholds

Reflecting on international developments, Treasury notes that a common feature of labelling regimes in other jurisdictions is the requirement that a proportion of assets supporting a financial product align with the sustainability objectives of the product.  Taking these developments into account, Treasury believes that there are two broad options for adopting thresholds in the Australian context:

  • Option 1: a prescribed minimum threshold (potentially in the 70–80% range, consistent with the United Kingdom (UK) and proposed European Union (EU) frameworks); or
  • Option 2: disclosure-only, requiring issuers to disclose the proportion of assets aligned with sustainability claims without mandating a minimum.

A sub-option under consideration would require remaining assets not contributing to the threshold to not conflict with the product’s sustainability objectives, similar to requirements in the UK and EU framework.

Element 4: Evidentiary assessment

Treasury proposes a principles-based evidentiary assessment approach, requiring product issuers to demonstrate that sustainability claims are supported by robust and credible evidence at the point in time at which the claim is made. The proposed approach would provide reporting flexibility and ensure requirements are enduring. Consultation feedback indicated that flexibility in evidentiary requirements would better support product innovation and the development of industry-led best practice codes.

Next steps

The deadline for comments was 13 March 2026. Submissions to the consultation are due via Treasury’s website.

We will be contributing to industry submissions, so please contact us if you wish to discuss any of the issues raised in the consultation paper.

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

3 February 2026 — “Two Lenses on Climate Risk: A Dual Macroeconomic Reading of the NGFS Short‑Term Scenarios”

The Network for Greening the Financial System (NGFS) published Occasional Paper “Two Lenses on Climate Risk: A Dual Macroeconomic Reading of the NGFS Short-Term scenarios”.

In May 2025, the NGFS released its first vintage of short-term climate scenarios. Since the models used to generate these scenarios were new to most of its membership, the NGFS commissioned a second team to reproduce some of the narratives using a more familiar model (the NiGEM model, already used in the NGFS long-term scenarios) to provide an additional assessment of the macro-financial dynamics of the official results.

This Occasional Paper presents the main results of the exercise conducted by this second team and its main takeaways. The paper is accompanied by the complete set of results produced by the NiGEM model.

26 February 2026 — Interview with Head of ESG Risks at EBA

The NGFS published an interview with Ms Dorota Wojnar, Head of ESG risks unit, European Banking Authority.

In this interview, Ms Wojnar discusses the EBA’s involvement with the NGFS, in addition to the EBA’s climate strategy and to what extent the EBA leveraged the work of the NGFS in its own domestic journey.

Ms Wojnar also remarks that environmental challenges and risks are here to stay and they must be managed, in a cost efficient and proportionate manner.

26 February 2026 – ISSB publishes February update

The International Sustainability Standards Board (ISSB) published its update for February 2026.

Notably, the ISSB has tentatively decided to provide additional guidance to support the application of the requirement for connect information in paragraph 21 of the IFRS S1 General Requirements for Disclosures of Sustainability-related Financial Information to nature-related disclosures, in particular, to information about connections, trade off and co benefits between climate related and nature related risks and opportunities.