Global Regulation Tomorrow

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

This month’s highlights

CRD VI – It’s not just about third country branches, there are ESG elements too

Many non-EU banks are preparing for the Article 21c requirements under the Capital Requirements Directive 6 (CRD 6) which prohibits non-EU banks and large investment firms from providing core banking services cross-border into the EU. To serve EU clients, these institutions must establish a locally authorized branch or subsidiary in the relevant Member State unless an exemption applies. The prohibition applies from 11 January 2027.

However, whilst the Article 21c requirements are important the CRD 6 and its accompanying regulation, the Capital Requirements Regulation 3 (CRR 3), contains certain ESG related measures that should not be overlooked.

Starting with disclosure and supervision. Whilst the CRR3 does not introduce either ‘green supporting’ or ‘brown penalising’ capital factors it does focus on transparency and comparability through Pillar 3 disclosures. It updates both the disclosure mandate in Article 434a and the ESG disclosure provision in Article 449a and the scope of the detailed ESG Pillar 3 disclosures (Article 449a) are extended to “all institutions”, subject to proportionality. ESG is also embedded in the CRD 6, which strengthens the supervisory review of ESG risks, calling for consistent ESG stress‑testing methodologies across the European Supervisory Authorities.

There is also a critical governance angle with the ‘G’ in ‘ESG’ being significantly upgraded under the CRD 6. For example, the directive strengthens the “fit and proper” assessment process in certain ways including establishing a suitability assessment process by regulators prior to appointments to the management body and chair of the supervisory function for “large institutions”, including globally systemically important banks and other systemically important entities. Also, the directive sets out a new mandate for institutions to prepare, maintain, and update “individual statements” of roles and responsibilities alongside a “mapping of duties”, which covers all members of the management body in its management function, senior management, and key function holders. Linked to governance, the CRD 6 requires institutions to ensure that their remuneration policies and practices are consistent with and promote sound and prudent risk management, including specifically their risk appetite in terms of ESG risks.

With the CRD 6 transposition deadline approaching, firms would be well advised not to focus solely on the Article 21c third country branch requirements. The ESG-related measures outlined above will require careful analysis and, in many cases, changes to existing governance structures, policies, and reporting capabilities. Firms that begin assessing these requirements early will be best placed to meet supervisory expectations and avoid last-minute compliance gaps. If you would like to discuss how any of these changes may affect your institution, or if you need assistance preparing for the CRD 6 and CRR3 requirements more broadly, please do not hesitate to get in touch.

United Kingdom

22 May 2026 – FCA publishes findings from Transition Finance Pilot

The Financial Conduct Authority (FCA) published its findings from its Transition Finance Pilot (the Pilot) which examined barriers to scaling finance for climate solutions.

Background

Announced as part of the Financial Services Growth and Competitiveness Strategy in July 2025, the Pilot was a market engagement exercise led by the FCA and supported by the Prudential Regulation Authority and the Green Finance Institute. Its findings are based on a literature review and bilateral engagement with a wide range of stakeholders, including finance providers and climate solutions developers.

Through the Pilot the FCA sought to develop a clearer understanding of how effectively the UK financial system supports climate solutions projects and companies, identifying any practical actions that could support the market to work more effectively. This focus emerged in response to market feedback that there may be particular barriers hindering the flow of capital to this sector.

Findings

Three main findings have been identified:

• Some climate solutions struggle to reach a commercial maturity sufficient to attract private capital. Many climate solutions face challenges moving from technical readiness to market readiness, meaning proven technologies do not always translate into commercially investable projects without coordinated policy and risk-sharing measures.
• Capital is not always well-matched to opportunity, despite strong appetite. While the UK financial system has depth and diversity of capital, this capital is not always well aligned with the scale, tenor, or risk-return profile of climate solutions opportunities.
• Information and capacity gaps create frictions across the market. Information asymmetries and capacity gaps across policy, finance, and industry create frictions that increase costs and reduce confidence, especially for small and medium-sized enterprises (SMEs).

Next steps

The FCA is sharing its findings with UK and international stakeholders to inform policy development and market coordination. It is also exploring how its regulatory framework can better support SME access to finance.

European Union

4 May 2026 – SFDR 2 – Draft ECON report

The European Parliament’s Economic and Monetary Affairs Committee issued a draft report on the European Commission’s (Commission) proposal for a Regulation amending Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR), Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) and repealing Commission Delegated Regulation (EU) 2022/1288.

7 May 2026 – ESMA presents the results of the CSA on MiFID II sustainability aspects

The European Securities and Markets Authority (ESMA) issued a public statement presenting the results of its Common Supervisory Action (CSA) on the sustainability aspects of the Markets in Financial Instruments Directive II (MiFID II).

The statement summarises the results of the CSA, it highlights the key themes emerged from the work and, in this context, it also provides some high level interim supervisory expectations on a few key areas to foster consistent implementation while reducing burden during the current transition period where the broader sustainable finance framework – particularly the SFDR – is under review, and consequential amendments to the MiFID II sustainability-preference requirements are anticipated.

ESMA invites Member State competent authorities to adopt a proportionate supervisory approach, encouraging dialogue with firms to address identified issues during the transition period rather than prioritising enforcement actions, without prejudice to cases involving clear breaches or mis-selling. Building on the insights gained from the exercise, ESMA will further reflect on the results in the context of any future updates of the MiFID II Delegated Acts on sustainability (Commission Delegated Regulation (EU) 2021/1253 and Directive 2021/1269) and the related updates of the ESMA Guidelines on suitability and product governance, with a view to simplifying the framework where appropriate and supporting a more consistent and effective application of the relevant requirements.

19 May 2026 – ECB updates good practices for climate and nature-related risk management

The European Banking Authority (ECB) updated its compendium of non-binding good practices for climate and nature risk management and climate and nature-related stress testing to support banks with know-how to close gaps in their risk management frameworks and address vulnerabilities in the evolving risk environment.

The compendium serves different functions within the banks, by describing good practices in sufficient detail and placing particular focus on areas where approaches are typically less advanced, such as physical or nature-related risks. The updated good practices also support in a proportionate way smaller and less materially exposed banks by pointing to less sophisticated practices as well as existing and publicly available tools that other banks have benefited from.

Next steps

As part of its ongoing supervisory dialogue, the ECB will continue to work closely with banks to make sure they are resilient to climate and nature related risks, particularly at a time of heightened uncertainty, in line with its supervisory priorities for 2026-28.

The ECB has found that prudential transition planning practices are still uneven across banks and still developing in a number of areas. It will continue to address this topic in its supervisory dialogue in the months ahead.

27 May 2026 – EU Platform response to Commission consultation on the Environmental and Climate Delegated Acts

The EU Platform on Sustainable Finance (EU Platform) published its response to the Commission’s consultation on the Environmental and Climate Delegated Acts (Commission Delegated Regulation 2021/2139 and Commission Delegated Regulation 2023/2486). In addition to its main briefing the EU Platform has published two annexes, one for each Delegated Act, setting out the specific recommendations for both substantial contribution and “do no significant harm” criteria.

Each recommendation in the annexes is presented in a table aligned with the structure of the Delegated Acts: the left column displays the amended draft text presented by the Commission for consultation, while the right column presents the EU Platform’s recommended text, with changes highlighted: additions are in green and deletions are in strikethrough format to facilitate immediate application.

The majority of the recommendations from the EU Platform relate to the Climate Delegated Act, particularly in the sectors of transport, manufacturing, construction and real estate, energy, and forestry. The EU Platform has also made two broader recommendations aimed at facilitating the practical application of the taxonomy criteria. This concerns an upgrade to the taxonomy compass by linking each criterion to relevant sectoral legislation, and databases, while also incorporating guidance to support implementation of the criteria. It also concerns a comprehensive review of all taxonomy‑related FAQs to ensure alignment with the updated Delegated Acts.

27 May 2026 – RTS specifying the information to be included in the application for authorisation or recognition as an ESG rating provider

The Commission adopted a Delegated Regulation supplementing Regulation (EU) 2024/3005 (the ESG Rating Regulation) with regard to regulatory technical standards specifying the information to be included in the application for authorisation as an ESG rating provider and in the application for recognition of an ESG rating provider.

Before supervision of ESG rating providers can take place, it is first necessary for ESMA to authorise an applicant in accordance with the processes set out in Articles 6 to 8 of the ESG Rating Regulation or to recognise an applicant in accordance with Article 12 of the ESG Rating Regulation.

The Commission Delegated Regulation:

• Specifies which elements are relevant for an application for authorisation and then what elements are relevant for an application for recognition.
• Deals with the format and formal requirements of the application.
• Deals with the requirements concerning the information provided regarding number of employees.
• Clarifies how to fulfil the obligation to provide information regarding policies and procedures.

Annexes to the Commission Delegated Regulation have also been adopted.

Next steps

The Delegated Regulation enters into force on the day following its publication in the Official Journal of the EU.

It applies from 2 July 2026.

France

There have been no reported updates this month.

The Netherlands

There have been no reported updates this month.

Australia

12 May 2026 – The Federal Budget 2026-27 redirects green subsidies to hardening environmental enforcement and efficiency

The 2026-27 Federal Budget reshuffled priorities within the Climate Change, Energy, Environment, and Water portfolios, creating savings of $2.2 billion over a 14-year period by redirecting unallocated capital from water and renewable energy initiatives.

The clawed-back funds will be largely distributed toward the establishment of the National Environmental Protection Agency and the optimisation of streamlined approvals processes. Additional capital remains earmarked for long-term funding to reinforce the integrity of the carbon credit system and to modernise national water policy.

20 May 2026 – ASIC issues early observations on sustainability reporting ahead of 30 June 2026

The Australian Securities and Investments Commission (ASIC) shared its observations on the first sustainability reports prepared under Chapter 2M of the Corporations Act 2001 (Cth) (Corporations Act). ASIC is sharing these observations to help other reporting entities as they approach the 30 June 2026 reporting season. ASIC’s observations are based on some of the sustainability reports that Group 1 entities have filed for financial years commencing on or after 1 January 2025.

ASIC reports that it has seen an increase in the quantity and quality of climate-related financial information in the market compared to previous voluntary climate-related disclosures. However, it has also identified opportunities to strengthen the quality of reporting, and it encourages entities to consider the following when preparing reports:

• Disclaimers that conflict with the statutory framework and objectives of Chapter 2M sustainability reporting may confuse or mislead and are not permitted to be used.
• The ‘reasonable and supportable’ information available to entities to identify climate-related risks includes information about ‘past events, current conditions and forecast future conditions.’
• Reports should provide clear, effective and proximate disclosure of relevant judgements, assumptions and areas of measurement uncertainty.
• The disclosure of additional climate-related information must not obscure material climate-related financial information.
• When cross-referencing information outside the sustainability report, entities must ensure they meet disclosure requirements.
• When determining whether an entity has a ‘climate-related target’, entities are reminded that the definition of ‘climate-related targets’ in Australian Sustainability Reporting Standard (i.e. AASB S2) extends to targets that the entity is required to meet by law or regulation. This includes greenhouse gas emissions targets such as the Safeguard Mechanism.

ASIC’s review of sustainability reports will continue over the coming months and as part of this it may engage with reporting entities about their disclosures. ASIC will publish its final observations from the reviews in the second half of 2026.

United States- SEC and CFTC

There have been no reported updates this month.

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

There have been no reported updates this month.