This edition of the Sustainability & Stewardship bulletin contains a special in-depth discussion of the recent proposal to review the Sustainable Finance Disclosure Regulation.
ICMA
The International Capital Market Association Publishes Guidelines for Climate Transition Bonds
The International Capital Market Association (ICMA) published Guidelines for Climate Transition Bonds (CTBs) on November 1. The Guidelines introduce a standalone CTB label under the ICMA Principles and are intended to facilitate financing of critical projects aligned with the goals of the Paris Agreement, particularly in high-emitting sectors. The Guidelines also introduce a process for helping to establish the credibility of climate transition projects (CT projects), and their financing, with appropriate definitions and safeguards, as well as a non-exhaustive list of eligible CT projects. The Guidelines also make recommendations for climate transition-themed Sustainability Linked Bonds (SLBs) issued by high emission issuers.
ISSB
The International Sustainability Standards Board Announces Decision to Pursue Further Standard Setting in the Realm of Nature-Related Disclosures
The International Sustainability Standards Board (ISSB) announced on November 7 its decision to advance work on nature-related risks and opportunities, building upon the Taskforce for Nature-related Financial Disclosures (TNFD) framework. As per the announcement, in response to identified investor needs, the ISSB will undertake standard-setting to introduce disclosure requirements on nature-related risks and opportunities on an incremental basis. The ISSB’s exact approach to standard setting is yet to be determined but may involve a combination of application guidance and/or amendments to existing ISSB Standards, industry-based guidance, and additional sources of guidance. The ISSB intends to have the Exposure Draft of incremental nature-related disclosure requirements ready in time for the Convention on Biological Diversity COP17 in October 2026.
The TNFD issued a statement welcoming the ISSB’s decision to pursue further standard setting based on the TNFD framework and announced its intention to provide technical support to the ISSB during the development process.
The Global Reporting Initiative (GRI) also welcomed the ISSB’s plans for further standard setting and highlighted the close collaboration between the GRI and the TNFD over the last three years.
GRI
The Global Reporting Initiative Launches a New Tool for Corporate Climate Action
The Global Reporting Initiative (GRI) launched on November 10 a new resource intended to help organizations align their climate reporting, where based on GRI standards, with the UN’s official approach to setting credible climate commitments, targets, and transition plans. According to the GRI, the Integrity Matters Checklist provides a framework for reporting on climate action based on UN guidance, including how organizations should report on efforts to cut greenhouse gas emissions, implement transition plans, and reduce investment in fossil fuels.
SBTi
The Science Based Targets initiative Releases Second Draft of Its Revised Corporate Net-Zero Standard for Public Consultation
The Science Based Targets initiative (SBTi) published on November 6 the second draft of its revised Corporate Net-Zero Standard for public consultation. The second draft of the Corporate Net-Zero Standard reflects feedback received during the first public consultation and from expert working groups. According to the SBTi, the updated draft reinforces scientific integrity while improving clarity, actionability, and usability. The draft intends to make science-based climate action more accessible, reflect the operational realities of different economic sectors through greater differentiation between companies and geographies, and provide a focused and flexible framework to address operational and value chain emissions. The consultation will remain open until December 12.
The SBTi Opens Pilot Testing Applications for Updated Timber and Wood Fiber Pathway
The SBTi opened pilot testing for its draft timber and wood fiber pathway on November 18. The draft timber and wood fiber pathway is included in the Forest, Land and Agriculture (FLAG) Target-Setting tool. The SBTi has invited companies active in the FLAG sector to participate in the pilot test to assess the pathway’s approach to near-term target setting and new long-term target-setting methods. The pilot test is expected to begin in Q1 2026 and to run for approximately six weeks. Applications to participate in the pilot test will be accepted until January 5, 2026.
GHG Protocol
The Greenhouse Gas Protocol Opens Two Public Consultations on Scope 2 Guidance and Accounting Methods for Estimating Avoided Emissions from Electricity-Sector Actions
The Greenhouse Gas (GHG) Protocol opened two public consultations on October 20. The first of these consultations relates to Guidance on Scope 2 emissions, in which GHG Protocol is consulting on whether corporate inventory accounting based on location and market-specific methods is fit for purpose. The second consultation relates to consequential electricity-sector emissions impacts, covering the formula for quantifying emissions impacts from electricity projects, marginal emission rate methodologies, and margin emission rates. Both consultations will remain open until January 31, 2026.
ASEAN
The ASEAN Taxonomy Board Releases Complete Version of the ASEAN Taxonomy for Sustainable Finance
The ASEAN Taxonomy Board (ATB) published on November 6 Version 4 of the ASEAN Taxonomy for Sustainable Finance. The release of Version 4 signifies the conclusion of a multi-year process to develop ASEAN’s own regional reference framework for classifying sustainable economic activities. Version 4 of the ASEAN Taxonomy offers complete coverage over the six focus and three enabling sectors included in the framework, introduces Grandfathering rules for the Amber Tiers, and guidance on entity and portfolio assessment, among others. According to the ATB, the completion of the ASEAN Taxonomy framework represents a major milestone in promoting sustainable finance across Southeast Asia by providing a comprehensive, science-based, and inclusive taxonomy that is adapted to the realities of the region.
Malaysia
The Securities Commission Malaysia Releases Corporate Governance Monitor 2025
The Securities Commission (SC) Malaysia published its Corporate Governance Monitor 2025 (CG Monitor) on November 14. The CG Monitor documents continued progress in the adoption of the Malaysian Code on Corporate Governance (MCCG) by public listed companies (PLCs). According to the Monitor, adoption levels of the MCCG’s best practices are high, with 33 out of the 48 best practices having been adopted by approximately 90% of PLCs. In addition, board governance and sustainability-related practices have improved significantly. However, the Monitor also indicates that progress has been slower in other areas, such as board diversity and executive remuneration disclosure.
Malaysia’s Joint Committee on Climate Change SME Focus Group Holds First Climate Conference for SMEs 2025
The SME Focus Group (SFG) of the Joint Committee on Climate Change (JC3) held its first SFG Climate Conference for SMEs 2025 on November 17. The aim of the conference was to support SMEs in future-proofing their businesses, enhancing understanding of climate-related risks, and providing access to practical tools for SME action. According to the organizers, the conference drew more than 400 participants from across the SME ecosystem in Malaysia, including entrepreneurs, financial institutions, government agencies, and solution providers. A range of practical tools for SMEs were distributed at the conference, including the ESG Jumpstart Portal, the Relief and Adaptation Facility (RAFt), the JC3 Climate Data Catalogue, the Simplified ESG Disclosure Guide (SEDG) and GHG Emissions Calculator, and the SME Loss Prevention Framework.
South Korea
The Financial Services Commission Proposes Improvements to Corporate Disclosures to Enhance Market Accessibility and Shareholder Rights
The Financial Services Commission (FSC) of South Korea and the Korea Exchange published a series of proposed amendments to existing corporate disclosure requirements on November 17. The aim of the amendments is to improve the accessibility of the Korean market for international investors and to facilitate the exercise of shareholder rights. For example, the application of mandatory disclosures in English with respect to material information will be broadened to KOSPI-listed companies with assets worth KRW 2 trillion or more (so-called Phase 2 companies) as of May 1, 2026. Further broadening of the scope of mandatory English disclosure is also envisaged in the future.
The FSC also proposes that listed companies be required to provide more granular disclosure of the voting results of annual general meetings (AGMs). Moreover, the FSC is encouraging companies to distribute AGMs more evenly across the year. According to FSC figures, at present up to 90% of Korean companies hold their AGMs in late March, creating “the problem of heavy concentration of AGM schedules and of shareholders not being able to participate and exercise their rights effectively, leading to conditions of having AGMs only in a perfunctory manner.”
Finally, the FSC proposes improvements to disclosures on executive compensation, to address the issue of restricted stocks being disclosed separately from executive compensation and a “lack of information demonstrating a relationship between business performance and executive compensation.”
Hong Kong
The Hong Kong Monetary Authority and the Dubai Financial Services Authority Host the Second Joint Climate Finance Conference
The Hong Kong Monetary Authority (HKMA) and the Dubai Financial Services Authority (DFSA) hosted the second Joint Climate Finance Conference on November 26. The conference is part of the flagship initiative of the DFSA-HKMA partnership to support climate finance in the Middle East and Asia. This year’s conference focused on financial risks arising from climate change and innovation.
Thailand
The Securities and Exchange Commission, Stock Exchange of Thailand, and the Organisation for Economic Co-operation and Development Hold Joint Roundtable on Corporate Governance
The Securities and Exchange Commission (SEC), the Stock Exchange of Thailand (SET) and the Organisation for Economic Co-operation and Development (OECD) convened a joint roundtable on corporate governance in Thailand on November 27 and 28. The roundtable served as an appropriate platform for the OECD to release the OECD Capital Market Review of Thailand, providing several policy recommendations to strengthen Thailand’s capital market ecosystem. The OECD recommendations include improvements to corporate governance and transparency through a review of the 2017 Thai Corporate Governance Code. Specifically, the Code should be revised with a view to strengthening board independence and disclosure practices, as well as improving oversight of related-party transactions and minority shareholder protection.
EU — In-Depth Update
The European Commission Publishes Legislative Proposal Amending the Sustainable Finance Disclosure Regulation
The European Commission (EC) published on November 20 its long-anticipated proposal to review the Sustainable Finance Disclosure Regulation (SFDR). The proposal aims to address a range of apparent shortcomings in the existing SFDR framework that have hampered its effective application, including unclear concepts such as “sustainable investment,” complicated disclosure requirements, and the lack of clear product categories and underpinning standards.
The changes proposed by the EC are substantial. Among the most notable is the introduction of three product categories: the Transition category (Article 7), the ESG Basics category (Article 8), and the Sustainable category (Article 9).
Each of the product categories would be underpinned by several criteria, including investment thresholds (whereby a high proportion of a portfolio’s assets would have to align with the product’s stated focus or objective), a list of eligible investments, and clear exclusions. Among the eligible investments, a role is envisaged for EU Climate Benchmarks, EU Green Bonds, and Taxonomy-aligned investments. The product categories may be summarized as follows:
- Transition category: Products making investments in companies and/or projects that are not yet “sustainable,” but that are on a credible transition path, or investments that contribute toward improvements in e.g., climate, environment, or social areas (transition plans, tracking Climate Transition Benchmarks (CTBs), etc.).
- ESG basics category: Other products that integrate a variety of ESG investment approaches but do not meet the criteria of the sustainable or transition investment categories (e.g., focusing on best-in-class performers on a given ESG metric, pursuing financial returns while excluding the “worst” ESG performers).
- Sustainable category: Products contributing to sustainability goals (e.g., climate, environment, or social goals), such as investments in companies or projects that are already meeting high sustainability standards under the EU sustainable finance framework (Taxonomy-alignment, EU Green Bonds, tracking Paris Aligned Benchmarks (PABs), etc.).
Under the draft legislation, the EC has a number of empowerments to further elaborate on, or qualify the criteria of, the different product categories.
Products belonging to one of the categories are to be subject to sustainability-related disclosures. However, use of the Principal Adverse Impact (PAI) indicators, a set of common ESG metrics previously introduced under the original SFDR, would be voluntary, and financial market participants (FMPs) would be allowed to use bespoke sustainability-related indicators for the purposes of their disclosures. Relatedly, the EC has made the use of estimated data permissible in view of persistent challenges around data availability.
Also noteworthy is how the EC proposal builds upon the ESMA fund-naming Guidelines, as a financial product would not be able to use an ESG or Sustainability-related term in its name unless it belongs to one of the three product categories described above.
Among other changes, the scope of the SFDR is altered by removing financial advisers, as well as investment firms and banks providing portfolio management services from scope. Entity-level disclosures and transparency over remuneration policies at investment firms are also proposed to be removed.
Importantly, the EC proposal initiates the legislative process. With its adoption, the European Parliament and the Council of the EU will debate their respective amendments to the text. The legislative process is likely to continue until the end of 2026, and SFDR in its current form will remain in effect during this period.
EU
The European Commission Publishes Frequently Asked Questions to Clarify Provisions of the EU Green Bond Standard Regulation
The European Commission published on November 6 a Frequently Asked Questions (FAQ) document on the interpretation and implementation of certain legal provisions of the EU Green Bond Standard (EuGBS) Regulation. The FAQ addresses 5 areas: (i) the appropriate use of the European Green Bond designation, which should only be ascribed where the bond is fully aligned with the EU Taxonomy and has been subject to appropriate review, (ii) the use of proceeds, (iii) the use of the “flexibility pocket,” (iv) guidance on the Green Bond factsheets and other disclosure types, and (v) the external review process. The FAQ is intended to facilitate issuers of European Green Bonds and external reviewers in correctly interpreting and applying the Regulation’s requirements.
The European Commission Opens Calls for Evidence on Technical Amendments to the Climate and Environmental Delegated Acts of the EU Taxonomy
The European Commission (EC) published on November 7 two separate Calls for Evidence on technical amendments to the Climate Delegated Act (DA) (accessible here) and the Environmental DA (accessible here) of the EU Taxonomy Regulation. The Calls for Evidence have been prepared in accordance with a legal obligation under the Taxonomy Regulation to regularly review and, where necessary, amend the technical screening criteria (TSC) of the EU Taxonomy. Accordingly, the amendments proposed by the EC are limited to targeted, technical amendments, such as adjustments to the “do no significant harm” criteria. Nevertheless, consistent with the EU’s regulatory simplification agenda, the EC has also proposed amendments to simplify the TSC to improve their overall usability. The deadline to submit comments is December 5.
The European Parliament Votes on Amendments to the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive
The European Parliament voted on November 13 to adopt its final amendments to the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). The amendments adopted by the European Parliament would narrow the scope of corporate reporting requirements to companies with 1,750 employees and a net annual turnover of €450 million. Notably, the European Parliament position maintains mandatory Taxonomy-related reporting.
With respect to due diligence, the European Parliament amendments, if enacted, would result in simplified due diligence requirements applying only to companies with 5,000 employees and an annual net turnover of €1.5 billion. Notably, MEPs have removed the requirement for companies in scope to prepare a transition plan compatible with the Paris Agreement. Furthermore, in terms of civil liability for damages, offending firms would be liable at the national, rather than EU, level.
Importantly, with the adoption of its amendments, the European Parliament has merely adopted its negotiating position vis-à-vis the Council of the EU (which adopted its position in June). Negotiations between the European Parliament and the Council have since begun with a view to reconciling their respective amendments and agreeing on the final provisions of the revised CSRD and CSDDD. An agreement is expected before the end of 2025.
The European Parliament Finalizes Amendments to the EU Deforestation Law
The European Parliament voted on November 26 to adopt amendments to the EU’s Deforestation Regulation. The Parliament’s amendments are intended to simplify requirements stemming from the Regulation and grant companies in scope additional time to come into compliance. Specifically, according to the Parliament text, large operators and traders will have until December 30, 2026, to apply the regulation, while micro- and small enterprises will have until June 30, 2027. In addition, the due diligence requirements for market intermediaries trading in timber products have been reduced in favour of a framework that puts the onus on the entities that first introduce the timber products into the supply chain. Importantly, this does not conclude the legislative process but merely clears the way for the European Parliament and the Council of the EU to negotiate the final provisions of the revised EU Deforestation Regulation. The Council adopted its position on November 19, 2025.
The European Banking Authority Publishes Its Final Guidelines on Environmental Scenario Analysis
The European Banking Authority (EBA) published its final Guidelines on Environmental Scenario Analysis on November 5. The final Guidelines, which are intended to complement the EBA Guidelines on the management of Environmental, Social and Governance (ESG) risks, specify supervisory expectations with regard to how credit institutions should conduct environmental scenario analysis. In particular, the Guidelines aim to strengthen institutions’ ability to use forward-looking approaches to the assessment and management of environmental risks. The Guidelines reflect two complementary elements: (i) the integration of environmental risks into institutions’ existing stress-testing frameworks, and (ii) resilience analysis whereby institutions look further ahead to evaluate the medium and long-term implications of environmental risks and opportunities for their business models, strategies, and risk profiles. The Guidelines will apply as of January 1, 2027.
The European Banking Authority Publishes the Outcome of Its Peer Review Assessing How Effectively Supervisors Implement Gender Diversity Policies
The European Banking Authority (EBA) published on November 26 the outcome of its Peer Review into the implementation of gender diversity policies within the management bodies of financial institutions by supervisors. The review found that most competent authorities assessed had largely or fully met the quotas established and adequately supervised gender diversity policies. By way of background, the Peer Review assessed six competent authorities and how they applied certain requirements under the Capital Requirements Directive (CRD) and EBA Guidelines.
Motion to Object to the Simplified EU Taxonomy Delegated Act Rejected in a Joint Meeting of the ECON-ENVI Committees of the European Parliament
The Committee on Economic and Monetary Affairs (ECON) and the Committee on the Environment, Public Health and Food Safety (ENVI) of the European Parliament rejected on December 3 a motion to object to the Simplified EU Taxonomy Delegated Act (DA). The motion to object, which was introduced by the S&D, Greens, and The Left political groups, cited multiple concerns with changes introduced by the European Commission. Most notably, the motion criticized the introduction of a materiality threshold that could allow companies to avoid meaningful disclosures, the narrower definition of harmful substances, and the delaying of disclosures for financial firms. By way of background, the European Commission adopted the simplified EU Taxonomy DA on July 4.
EFRAG Provides Its Technical Advice on Draft Simplified European Sustainability Reporting Standards to the European Commission
EFRAG submitted its technical advice to the European Commission on draft simplified European Sustainability Reporting Standards (ESRS) on December 3. The draft simplified reporting standards reflect substantial scope reduction, removing approximately 61% of the mandatory datapoints contained in the initial ESRS. In addition, the revised ESRS envisage greater flexibility, reporting reliefs, and phasing-in of reporting obligations. The materiality assessment, identified by EFRAG as the most practically challenging requirement for companies to report on, has been adjusted to focus on useful information for users while companies may use estimates when reporting on their value chain. In terms of next steps, with EFRAG’s technical work now concluded, the European Commission will prepare a Delegated Act based on EFRAG’s technical advice to give the changes to the ESRS formal effect.
UK
The Financial Reporting Council Publishes Annual Review of Corporate Governance Reporting and Practical Insights to Help Smaller Listed Companies Improve Corporate Reporting Quality
The Financial Reporting Council (FRC) published its Annual Review of Corporate Governance Reporting on November 13. The Annual Review analyzes reporting trends and practices among 100 UK-listed companies against the UK Corporate Governance Code 2018. The FRC highlights that the review revealed examples of good practices in reporting, such as the manner in which companies “signpost” important information on their governance practices. In addition, the analysis found that companies that depart from the Corporate Governance Code are improving their explanations as to why. According to the FRC, the flexibility of the Code is one of its core strengths, with 25 companies departing from at least one of the Code’s provisions. The FRC highlights that this is the last Annual Review of the 2018 Code, as future reviews will be made under the updated 2024 Code.
The FRC also published on November 19 a thematic review providing practical insights on corporate reporting for smaller listed companies. The thematic review analyzes the annual reports of 20 companies listed outside the FTSE 350 and focuses on the quality of reporting in four key areas: (i) revenue recognition, (ii) cash flow statements, (iii) impairment of non-financial assets, and (iv) financial instruments. The review provides practical guidance to assist smaller listed companies in satisfying market expectations with respect to their corporate reporting in these areas.
The Financial Conduct Authority Publishes Proposed Rules for ESG Ratings Providers
The Financial Conduct Authority (FCA) opened a public consultation on draft rules for ESG ratings providers on December 1. The draft rules aim to address four focus areas: (i) the transparency of rating methodologies to enable easier comparison between rating products, (ii) the governance, systems, and controls of ESG rating providers to ensure strong oversight and quality assurance, (iii) the identification and management of conflicts of interest, and (iv) establishing clear expectations for “stakeholder engagement” and complaints handling. The areas of focus broadly correspond to those addressed in the EU ESG ratings regulation but include different proposed provisions, such as something akin to a certification regime for senior managers. The FCA consultation will remain open until March 31, 2026.
United States
The Securities and Exchange Commission Chair Discusses Potential Changes to US Capital Markets Rules in Speech at New York Stock Exchange
The Securities and Exchange Commission (SEC) Chair, Paul S. Atkins, delivered a speech on December 2 at the New York Stock Exchange on “Revitalizing American Markets at 250.” In his remarks, the SEC Chair stated that the number of companies listed on US exchanges has fallen by approximately 40% since the 1990s, reflecting, in part, the cumulative effect of “decades of accretive rulemakings” that have ultimately been detrimental to the quality of annual reports and proxy statements published by issuers.
Accordingly, Chair Atkins highlighted that one of his priorities is to reform SEC disclosure rules to help ensure they prioritize financial materiality and that disclosure obligations are proportionate “with a company’s size and maturity.” More specifically, to promote more Initial Public Offerings (IPOs) on US markets, only “large” companies could be subject to all of the SEC’s disclosure rules, while “small” companies could be subject to only some of them. This could form part of an “IPO on-ramp,” as also envisaged by the Jumpstart Our Business Startups (JOBS) Act of the US Congress.
Chair Atkins described disclosure reform as one of three pillars to incentivize IPOs. The second pillar “involves de-politicizing shareholder meetings and returning their focus to voting on director elections and significant corporate matters,” with Chair Atkins indicating that proposals to reform the conduct of shareholder meetings were being developed. Finally, Chair Atkins highlighted the need to “reform the litigation landscape for securities lawsuits to eliminate frivolous complaints, while maintaining an avenue for shareholders to continue to bring forth meritorious claims.”
By:
Hugo Gallagher, Associate Vice President, Regulatory Affairs & Public Policy, ISS STOXX
Karina Karakulova, Director of Regulatory Affairs & Public Policy, ISS STOXX
