Monthly Updates on Regulatory Developments in Environmental, Social, and Governance (ESG) Practices within Financial Services Sectors

Monthly Updates on Regulatory Developments in Environmental, Social, and Governance (ESG) Practices within Financial Services Sectors

The world of sustainable finance continues to evolve, with various governments, regulatory bodies, and international organisations taking significant steps to address climate change and promote green initiatives. Here's a round-up of some of the recent developments:

UK Government Initiatives

• The UK government has issued three consultations aimed at helping large banks and companies develop climate transition plans. This move is part of the government's commitment to a net-zero economy.
• In a bid to prevent greenwashing, the Financial Conduct Authority (FCA) proposed new guidance on the anti-greenwashing rule.
• The Transition Plan Taskforce published the final version of its Disclosure Framework, providing a standardised approach for companies to disclose climate-related risks and opportunities.
• The UK government announced it will not pursue a UK Taxonomy and will instead focus on the delivery of its commitments on transition plans and the sustainability reporting standards.

International Developments

• The International Sustainability Standards Board (ISSB) published its inaugural standards, providing a global baseline for climate-related and general sustainability disclosures.
• The European Commission published its sustainable finance package, which includes proposals for a new taxonomy for sustainable activities, sustainability-related disclosures, and low-carbon benchmarks.
• The European Commission adopted the European Sustainability Reporting Standards (ESRS), setting out a common framework for sustainability reporting across the EU.
• The European Securities and Markets Authority (ESMA) called for evidence on the integration of sustainability preferences in the suitability assessment and product governance arrangements.
• The European Council agreed on a position to simplify sustainability reporting and due diligence requirements.

Notable Court Cases

• In the landmark case Pabai v Commonwealth of Australia, the Federal Court ruled that the government does not owe a duty of care to Torres Strait Islanders regarding climate change.
• The International Court of Justice (ICJ) issued a historic judgment affirming states' obligations to protect the climate from greenhouse gas emissions.

Regulatory Enforcement

• The UK Financial Conduct Authority's anti-greenwashing rule marked a year of active supervisory enforcement on 31 May 2025.
• The Australian Securities and Investments Commission (ASIC) initiated a greenwashing penalty proceeding.

Collaborative Efforts

• The European Supervisory Authorities (ESAs) published Progress Reports on greenwashing in the financial sector.
• The Australian Competition and Consumer Commission authorized the Australian Sustainable Finance Institute to collaborate on sustainable finance initiatives in Australia.
• The FCA's multi-firm review of climate reporting in the UK highlighted progress in integrating climate change risks but noted challenges with data availability and reporting complexity.

Recommendations for Small and Medium Enterprises (SMEs)

• The European Commission adopted a recommendation for voluntary sustainability reporting for SMEs in the EU, although no specific EU member state governments were mentioned as being affected by the publication in June-July 2025 in the available search results.
• The UK government is yet to issue similar recommendations for SMEs in the UK.

These developments underscore the global push towards sustainable finance and the increasing focus on climate change risks and opportunities. As more countries and organisations take action, it's clear that the shift towards a more sustainable financial system is gaining momentum.