In this issue: 

Chapter 1: UK developments

Chapter 2: EU Developments

Chapter 3: International developments

This month, against the backdrop of London Climate Action Week, we saw a number of new partnerships and initiatives on climate and nature. We also saw developments on ESG ratings and climate reporting requirements for investment products.

a. UK FCA confirms that consumer duty does not apply to ESG ratings

On 29 June 2026, the UK Financial Conduct Authority confirmed in its consultation paper on Consumer Duty (CP26/23) that ESG rating activity is typically a wholesale activity and there is limited direct use of ESG ratings by retail customers. Therefore, it proposes to reflect this position in the list of activities to which the Duty does not apply and will align this final approach with the final rules for ESG ratings providers due to be published in Q4 2026.

b. ASA rules on environmental claims in the retail fashion sector

On 24 June 2026, the Advertising Standards Authority (“ASA”) made three adverse rulings, as part of its wider work, on online environmental claims in the retail fashion sector. Three connected rulings challenged the environmental claims (such as “recycled” and “organic”) being made by fashion companies and considered how consumers would interpret the claims.

c. London Climate Action Week 2026 (“LCAW”)

London hosted LCAW 2026 from 20 to 28 June, drawing over 45,000 government, finance and business leaders from across the globe to a sweltering London. The UN Secretary-General quipped that "London isn't just calling - it's cooking" as the Met Office issued a rare red extreme heat warning and temperatures hit 37°C, forcing the cancellation of at least one event on heat adaptation. Three themes dominated:

• Adaptation and resilience – focused on mobilising capital for adaptation, as physical climate risks increasingly translate into concrete legal and financial exposure for clients.
• Nature and nature finance – nature-based solutions and financing nature for adaptation featured prominently, highlighting the twin crises of climate and nature and reflecting growing regulatory and investor focus on biodiversity and nature. 
• Electrification and energy security – there were discussions on energy transition, clean power and grid resilience, with energy price volatility giving energy security arguments renewed urgency for business and policy clients alike. The UK also committed to “Electrify Now” as set out below.

d. UK launches a number of new partnerships and strategies as part of LCAW

i. UK Taskforce to strengthen climate security: On 26 June 2026, the UK Government launched a taskforce to strengthen climate security bringing together leading security, military and academic experts to tackle growing climate threats.

The new taskforce will boost UK preparedness for climate change - identifying gaps, assessing risks and providing independent recommendations and expertise on climate and nature threats to national security.

ii. UK Government publishes Government Estate Nature Plan: On 26 June 2026, the UK Department for Environment, Food & Rural Affairs (“Defra”) published the Government Estate Nature Plan which sets out how it will coordinate nature recovery across government land, supporting resilience, public services and delivery of national environment targets in England.

iii. Australia-Canada-UK energy and climate cooperation: joint statement: On 25 June 2026, the UK, Canada and Australia signed a statement of joint co-operation on climate change, setting out shared commitments on energy and climate cooperation. In light of this each of the countries has joined a new global electrification initiative “Electrify Now”.

iv. UK launches new AI partnership to boost climate security: The UK Foreign Office and Met Office have joined forces to improve global preparation for climate shocks. The new partnership will support AI forecasting to predict weather patterns, as climate security becomes increasingly important for governments around the world.

v. UK FDO publishes International Climate Strategy 2026: On 22 June 2026, the UK Foreign, Commonwealth & Development Office (“FDO”) published the UK’s International Climate Strategy, setting out the UK’s approach to international climate and nature finance. The Department for Energy Security and Net Zero also published a memorandum of understanding with Mexico on climate, energy and nature on the same date.

e. UK Environment Secretary announces deforestation regulations

On 23 June 2026, the UK Environment Secretary announced new rules intended to protect rainforests from deforestation.

Under the proposals, UK businesses who trade in commodities sourced from rainforests such as soy, palm oil, cocoa and rubber, would need to check that their supply chains are not contributing to illegal deforestation.

The government will consult businesses, civil society and international partners later this year on the details of Great Britain’s proposed deforestation policy. This will include consulting on the introduction of these mandatory due diligence requirements for businesses in Great Britain including using powers such as under the Environment Act which target illegal deforestation, and by strengthening the existing UK Timber Regulation.

The announcement confirms that the upcoming consultation will propose that the GB regime covers the same core commodities and underlying information requirements applicable in Northern Ireland as the EU Deforestation Regulation will apply in Northern Ireland in phases from 30 December 2026.

f. UK climate reporting – FCA consults on changes to climate reporting for investment products

On 5 June 2026, the UK Financial Conduct Authority (“FCA”) published its Quarterly Consultation CP26/17. Chapter 2 proposes simplifications to climate disclosure requirements for investment products. Read more here.

g. UK Biodiversity Net Gain (“BNG”) – Defra publishes guidance for NSIPs

On 2 June 2026, Defra published a collection of guidance relevant to BNG for nationally significant infrastructure projects (“NSIPs”).  In England, BNG will be mandatory for NSIPs from 2 November 2026. 

Defra also published a number of policy papers setting out BNG requirements for NSIPs including for data centres, hazardous waste, national networks, waste water, water resources, energy, airports, geological disposal, ports and for NSIPs with no specific policy statement.

This month, we have seen developments in the review of the Sustainable Finance Disclosure Regulation (“SFDR 2.0”), a decision from the European Ombudswoman on the Commission's omnibus procedures, as well as a couple of EFRAG publications and the Commission's consultation on the Corporate Sustainability Due Diligence Directive (“CSDDD”) implementation guidelines.

a. Commission adopts European Sustainability Reporting Standards (“ESRS”) and Sustainability Reporting Standard for Voluntary Use (“VESRS”) for smaller companies outside the scope of the Corporate Sustainability Reporting Directive (“CSRD”)

On 3 July 2026, the European Commission adopted the revised, simplified ESRS and VESRS which were produced as part of the omnibus simplification package. The revised documents include updates from the May draft, including in relation to anticipated financial effects where:

• Phase-in period has been extended – An additional year of phasing-in is introduced for both qualitative and quantitative information.
• They can be updated when new data comes to light without being classed as a reporting error.
• Information that could be seriously prejudicial to the commercial position of companies may be omitted in certain circumstances.

The staff working document sets out the development of both standards and supporting reasons. The delegated act revising the ESRS and the delegated act establishing the voluntary reporting standard will now be transmitted to the European Parliament and the Council of the EU for scrutiny. The measures will apply once the scrutiny period of two months, which can be extended by a further two months, is over.

b. ESMA publishes statement on publication or distribution of ESG ratings by third parties pending authorisation

ESMA confirms that from 2 July 2026 (the date from which the EU ESG Ratings Regulation applies) the exemption for third parties publishing or distributing ESG ratings of existing, but still unauthorised, ESG rating providers will be able to continue to do so from 2 July 2026.

The announcement clarifies how the transitional regime will work from 2 July 2026 to 2 November 2026 stating that “from 2 July 2026 third parties may continue publishing or distributing the ESG ratings of such ESG rating providers until ESMA has adopted a decision to grant or refuse the application for authorisation or recognition, or to register the notifier as a small ESG rating provider, as relevant”.

c. EFRAG publishes State of Play 2026 Report on the implementation of European Sustainability Reporting Standards

On 1 July 2026, EFRAG published its 2026 edition of the State of Play Report, providing an evidence-based assessment of sustainability reporting practice over 900 assured 2025 sustainability statements prepared under ESRS.  It provides “an objective and data-driven picture of where reporting practice stands today: a factual contribution to a debate that deserves to be grounded in evidence”.

EFRAG found that the broad contours of the FY2024 picture have carried forward into FY2025, in the stability of topical materiality, the structural features of sustainability statements, and the patterns observed across geographies and sectors. At the same time, the data reveals areas of active development: in the growing adoption of Climate Transition Plans, in the first systematic look at governance disclosures, and in an increasingly detailed picture of how companies are, and are not, linking material topics to measurable targets and executive incentives.

d. EU Ombudswoman publishes Decision on the European Commission’s compliance with its ‘Better Regulation’ rules and other procedural requirements

On 23 June 2026, the European Ombudswoman published her Decision on the omnibus procedures aimed at simplifying EU laws, including the corporate sustainability reporting and due diligence omnibus. Based on her inquiries, she found procedural shortcomings in how the Commission prepared the legislative proposals in question, which, taken together, amounted to maladministration. She has recommended that (i) the Commission “ensure a predictable, consistent and non-arbitrary application of its Better Regulation rules, by defining ‘urgent’ situations that justify a derogation from their requirements, as well as by recording and explaining the reasons for any derogations granted” and (ii) “where derogations are granted, the Commission should establish a procedure to ensure that the urgent preparation of legislative proposals still complies with the principles of a transparent, evidence-based and inclusive law-making process”. Read more about her findings here.

e. SFDR 2.0 updates and “Building governance expectations in sustainable finance under SFDR 2.0”

Governance has always been important and in the EU, one of the aims of the sustainable finance legislation is to set a level playing field for governance, as well as protecting consumers and the markets from greenwashing.

In the linked briefing, we look at the governance requirements introduced by the EU’s Sustainable Finance Disclosure Regulation (“SFDR”), enforcement actions and guidance from the regulators and how the rules might change following review and amendment of the current SFDR (the new rules have been dubbed “SFDR 2.0”), setting out what entities need to do to make sure that they maintain transparent and robust governance and stay compliant with regulatory expectations now and in the future. Read more here.

We also note that on 24 June 2026, EU Member States endorsed their negotiating position on SFDR 2.0. The Council press release sets out an overview of the agreed position, highlighting the main changes the Council has suggested:

• Required disclosure of at least three principal adverse impact (“PAI”) indicators when claiming compliance with “sustainable” or “transition” categories.
• Allowing the inclusion of entities with “investments in companies active in the fossil fuel sector that allocate 20% of their investment expenditure to economic activities in line with EU taxonomy rules (green classification) and that have a clear strategy with a clear timeline to reduce greenhouse gas emissions” in the “transition” category subject to disclosure of a mandatory fourth PAI indicator.
• Allowing inclusion of public sector bodies into the “transition” category.
• To reduce administrative burden, financial market participants should not need to apply the categorisation requirements to alternative investment funds offered exclusively to professional investors,

The Council text is available here.

f. EFRAG publishes unapproved exposure drafts of the sustainability reporting standards for non-EU companies (“N-ESRS”)

On 16 June 2026, as part of its SR TEG meeting documentation, EFRAG published the first version of its unapproved first Exposure Draft of ESRS for non-EU groups (“N-ESRS”), together with a mark-up against the revised ESRS. SR TEG members were asked to discuss and provide comments on the draft N-ESRS. This work was paused whilst omnibus negotiations were ongoing and has now been resumed. EFRAG has also published a presentation comparing N-ESRS to the revised ESRS.

It also published a cover note which sets out that “Non-EU companies not listed on the EU regulated markets that generate net turnover in the Union exceeding EUR 450 million in each of the last consecutive financial years, and that have either EU branches with net turnover exceeding EUR 200 million in the preceding financial year or are the ultimate parent of EU subsidiaries with net turnover exceeding EUR 200 million in the preceding financial year, will have to report”.

The cover note also sets out a timeline:

• Mid-July 2026 – public consultation expected, closing in mid-/end-Oct 2026
• January 2027 – EFRAG technical advice to be delivered to Commission
• Mid-July 2027 – N-ESRS adoption expected

EFRAG noted that it was seeking feedback from companies in scope of N-ESRS and invited companies to get in touch to communicate interest by 1 July 2026.

g. Commission consults on guidelines to support the implementation of the Corporate Sustainability Due Diligence Directive (“CSDDD”) 

On 12 June 2026, the European Commission published a consultation on guidelines to support the implementation of CSDDD.

CSDDD requires large EU companies and non-EU companies with a significant market presence in the EU to identify, prevent, mitigate and bring to an end adverse impact on human rights (including labour rights) and the environment in their own operations, those of their subsidiaries and in their value chains.

This consultation will inform the development of guidelines to support the effective implementation of the CSDDD providing practical orientation to companies on how to fulfil their due diligence obligations, to Member State authorities on how to implement and enforce the Directive, and to stakeholders on how to pursue their rights.

The consultation closes on 24 July 2026. The Commission plans to adopt the guidelines in Q1 2027.

h. ETS2 market stability reserve: Council and Parliament reach provisional agreement

The European Parliament and Council have reached a provisional agreement on the market stability reserve (“MSR”) for the European Trading System (“ETS2”). The key elements of the agreement can be found here.

i. Commission publishes guidance document on the European Packaging and Packaging Waste Regulation (“PPWR”)

On 10 June 2026, by means of Notice C/2026/3084, the European Commission published in the Official Journal of the European Union a guidance document on the PPWR, which came into force on 11 February 2025 and will apply from 12 August 2026. Read more here.

Our briefing “No time to waste IV – European Commission publishes practical guidance”, sets out long-awaited clarifications from the Commission as contained in the recent Guidance Document on the PPWR and Frequently Asked Questions document (FAQ). Read more here.

Linked is our briefing “Packaging, PFAS, carbon footprint: How can health care industries prepare for upcoming regulatory deadlines?” which includes a discussion of the practical implicationsfor the packaging of medicinal products and medical devices. Read more here.

This month, we bring you international developments on nature-related disclosures from TNFD, California climate reporting developments, adaptation and resilience finance from GFANZ, new sustainable bond guidance from ICMA and new ISO standards.

a. New TNFD publications

The Taskforce on Nature-related Financial Disclosures (“TNFD”) has launched a number of new publications in June:

ii. Discussion paper on environmental crime: TNFD’s paper on environmental crime sets out an approach for incorporating considerations of environmental crime into an organisation’s assessment of its nature-related dependencies, impacts, risks and opportunities, using the TNFD LEAP approach. 

The key areas of focus are described as:

• The nature and implications of environmental crime as a growing source of nature-related risk, including its role in degrading ecosystems and obscuring organisations’ true dependencies and impacts.
• The implications for organisations’ risk management and disclosures, including how addressing environmental crime can strengthen risk identification, improve visibility of hidden exposures and enhance credibility.
• How to integrate considerations of environmental crime into assessments of nature-related dependencies, impacts, risks and opportunities using the TNFD LEAP framework.
• Where exposure to environmental crime may arise across operations, value chains and investment portfolios. 

The TNFD invites feedback by 7 August 2026.

iii. Additional Sector Guidance – Alternative Fuels: this supplements TNFD’s Guidance on assessment of nature-related issues – the LEAP approach – and should be read in conjunction with that guidance. It can be found here.

iv. Nature in transition plans use cases: this sets out cases showing how organisations are integrating nature into transition planning. It can be found here.

b. US: CARB pushes SB 253 reporting deadline to November

On 24 June 2026, the California Air Resources Board (“CARB”) issued a notice announcing a three-month delay in the reporting deadline for entities to submit their Scope 1 and Scope 2 greenhouse gas emissions under the Climate Corporate Data Accountability Act (“SB 253”).

Pursuant to the notice, presuming the regulations are finalised by the California Office of Administrative Law (“OAL”), initial SB 253 reports will now be due on 10 November 2026.

CARB has also withdrawn its Initial Regulation, which was undergoing review by OAL. In its notice, CARB stated that it intends to “make limited changes to clarify certain requirements,” in addition to amending the reporting deadline. A revised regulation will be made available as part of a 15-day public comment period prior to resubmission to OAL. CARB has not indicated when the revised regulation will be published beyond stating that it is “forthcoming.” Read more here.

c. The Glasgow Financial Alliance for Net Zero (“GFANZ”) publishes report highlighting new ways private finance is investing in adaptation and resilience

On 22 June 2026, GFANZ released its new report “Investing in Resilience: Lessons from Private Finance for Unlocking Investment in Adaptation”. The report draws on 22 case studies to highlight how global financial institutions are helping unlock investment in climate adaptation and resilience solutions across sectors and markets worldwide.

d. ICMA publishes FAQs on Climate Transition Bond Guidelines and other documents

On 22 June 2026, the International Capital Market Association (“ICMA”) published complementary FAQs for Climate Transition Bonds, a comparison of the Green Bond Principles and the European Green Bond Standard (“EuGBS”), and a publication on structural demand for sustainable bonds. Additional updated and supplementary technical guidance is also being released. This includes:

• Guidance Handbook (update includes additional Q&As on Climate Transition Bonds)
• Guidelines for External Reviews (update includes differentiation between pre-issuance, post-issuance, and entity level evaluation).
• Harmonised Framework for Impact Reporting for Green Bonds (update includes elevation of projects’ “Annual absolute gross GHG emissions” to a “Core Indicator” within the Energy Efficiency and Renewable Energy categories).
• Harmonised Framework for Impact Reporting for Social Bonds (supplemented with indicators for Affordable Basic Infrastructure projects).

ICMA also refers readers to the Mapping of the Principles for a holistic overview.

e. ISO releases Net Zero Aligned Organizations Standard (ISO 14060) for consultation

On 17 June 2026, the International Organization for Standardization (“ISO”) launched a consultation on its new standard for corporations with net zero commitments. Responses through national organisations are due in the next 12 weeks, and ISO’s members, including the British Standards Institution, will collect feedback. The standard was produced in collaboration between ISO and the Greenhouse Gas Protocol. The ISO aims to reach consensus by September, depending on the number of responses.

The ISO has also published document for strategic transition planning by financial institutions: ISO 32212:2026 - Sustainable finance - Net zero transition planning for financial institutions.

The requirements and recommendations are designed to enable financial institutions to develop and maintain transition planning objectives and targets that advance the temperature and resilience goals of the Paris Agreement and establish robust policies and processes to integrate these into their financial activities.

Our global Sustainable Finance & Investment group brings together a multidisciplinary global team that provides clients with best-in-market support. We are following developments relating to ESG regulation, so please get in touch if you would like to discuss.

Stay ahead with timely curated developments, insights and thought leadership on ESG regulation with our ESG Regulatory Alerts tool. 

This note is intended to be a general guide to the latest ESG developments. It does not constitute legal advice.

Authored by Emily Julier and Rita Hunter.