Regulation is shaping the sustainability agenda and changing the way companies do business in different jurisdictions but keeping pace with constant regulatory updates has become a mammoth task for businesses and investors. In this recurring series, S&P Global Sustainable1 presents key environmental, social and governance regulatory developments and disclosure standards from around the world.

In this month's update, we look at South Korea’s proposal to align with standards developed by the International Sustainability Standards Board (ISSB), the UK’s guidance on transition planning for carbon-intensive sectors and new US rules aimed at reducing emissions.

ASIA-PACIFIC    UNITED STATES AND CANADA    EUROPE

ASIA-PACIFIC

South Korea issues draft sustainability disclosure standards aligned with ISSB

The Korea Sustainability Standards Board (KSSB) published draft sustainability-related disclosure standards based on the ISSB’s global sustainability standards IFRS S1 and IFRS S2, with modifications for the South Korean market. The standards consist of two mandatory disclosure standards: KSSB 1, based on the ISSB’s IFRS S1; and KSSB 2, based on IFRS S2. It also published KSSB 101, a country-specific standard that is not mandatory and allows companies to “selectively” disclose additional sustainability-related information as required by domestic laws or to meet sustainability-related policy objectives. Differences from the ISSB standards include reporting on emissions throughout a company’s supply chain, known as Scope 3 emissions. The ISSB requires Scope 3 reporting but has given companies a relief period of one year before reporting. The KSSB said the obligation and timing of mandatory Scope 3 disclosure would be based on feedback on the exposure draft.

Hong Kong Stock Exchange publishes climate disclosure requirements

The Hong Kong Stock Exchange published on April 19 the conclusions from its consultation on climate-related disclosures for listed companies and guidance on how to apply the requirements. The exchange said it developed the new requirements based on the ISSB’s IFRS S2 climate-related standard and will be phased in from Jan. 1, 2025. Constituents of the Hang Seng Composite LargeCap Index, main board issuers and small and medium-sized listed enterprises will be subject to mandatory disclosure of their Scope 1 and Scope 2 emissions for financial years beginning on or after Jan. 1, 2025. For Scope 3 emissions and other disclosures, large-cap issuers will either have to “comply or explain” for the financial year commencing on or after Jan. 1, 2025, and then will be subject to mandatory disclosure for the financial years beginning on Jan. 1, 2026. Main board issuers will have to “comply or explain” as of 2025 while small and medium-sized enterprises (SMEs) can voluntarily disclose from the beginning of 2025 for Scope 3 emissions and other disclosures. 

Malaysia launches consultation on sustainability disclosures for certain sectors

Capital Markets Malaysia (CMM), an affiliate of Securities Commission Malaysia, on April 26 launched a consultation on a proposed guide on enhanced environmental and social disclosures for the energy, transport and storage, construction and real estate, agriculture, and manufacturing sectors. The CMM said the consultation’s focus would be SMEs, but it encouraged larger companies as well as multinationals and publicly listed companies to participate. The sector guide is designed to complement the CMM’s Simplified ESG Disclosure Guide, which it published in October 2023 to give SMEs in global supply chains standardized ESG disclosure guidelines aligned with global and local frameworks such as the ISSB’s standards and the Malaysian Code on Corporate Governance. The consultation was scheduled to run to May 17. 

Australia advises on scope of financial sector’s climate exposure self-assessment

The Australian Prudential Regulation Authority (APRA) said on April 3 it would launch a voluntary self-assessment survey of financial entities it oversees to assess their exposure to climate-related risks. The regulator said the survey is designed to improve both APRA’s and financial industry’s understanding of what approaches regulated entities are taking to identify, assess and manage climate-related financial risks. It will aim to gather insights on how APRA-regulated entities are currently managing these risks, using an APRA guide on climate-related risks as a benchmark, the regulator said. The survey will also support incorporating climate-related risks into APRA’s supervisory assessments and will improve comparability, benchmarking, and practices within and across industry, the regulator said. The survey is open to banks, insurers and superannuation entities supervised by APRA. Entities will have six weeks to reply to the survey, the regulator said. 

Australia announces plan to create environmental regulator 

The Australian government announced on April 16 plans to introduce new legislation to establish Environment Protection Australia (EPA), the country’s first national, independent environment protection agency. EPA will initially operate within the Australian government’s Department of Climate Change, Energy, Environment and Water before transitioning to an independent statutory agency, the government said. It will administer Australia’s environmental protection laws, including making environmental assessments; deciding project approvals and conditions; issuing permits and licenses; speeding up development decisions, including project assessments; and enforcing the law through new monitoring and enforcement powers. The agency will also be responsible for regulatory activities related to recycling, hazardous waste, wildlife trafficking, sea dumping, ozone protection, underwater cultural heritage and air quality. 

UNITED STATES AND CANADA

US announces final rules on emission reductions for power plants 

The US Environmental Protection Agency said on April 25 it had finalized four rules aimed at limiting carbon emissions and reducing pollution. The first rule requires all existing coal-fired power plants that will be in operation beyond 2039 to capture 90% of their CO2 emissions. New natural gas-fired combined-cycle generators — those set to come online 60 days after the rule's publication — will be subject to the same limit, effectively mandating the installation of carbon capture technology. The second rule strengthens the EPA's mercury and air toxics standards, tightening the standard for toxic metals by 67% and reducing the limit for mercury from existing lignite-fired units by 70%. The third rule requires operators of coal-fired power plants to reduce pollutants discharged through wastewater by more than 660 million pounds annually to ensure clean water for affected communities. The final rule requires operators to manage coal ash safely to protect communities from contamination. 

Canada to require companies to report on plastic production 

Canada announced on April 22 plans to establish a Federal Plastics Registry that will require companies to report annually on the quantity and types of plastic they manufacture, import, and place on the market. The registry will apply to resin manufacturers, service providers and producers of plastic products, the government said in a statement. Plastic producers and service providers will also have to report on the quantity of plastic collected for reuse, recycling and landfills, the government said. Reporting on the amount of packaging and other plastic waste generated on industrial, commercial and institutional premises will be mandatory, it added. Reporting requirements will be phased in as of September 2025 through 2027. 

US securities regulator pauses climate rule to avoid ”regulatory uncertainty”

The US Securities and Exchange Commission (SEC) issued on April 4 a stay in the implementation of its recently announced climate disclosure rule to avoid "regulatory uncertainty" as a federal appeals court reviews legal challenges to the rule. "Given the procedural complexities accompanying the consolidation and litigation of the large number of petitions for review of the final rules, a commission stay will facilitate the orderly judicial resolution of those challenges," the SEC wrote. The SEC also said it is not departing from its view that the rule is "consistent with applicable law and within the commission's long-standing authority to require the disclosure of information important to investors in making investment and voting decisions."

EUROPE

UK financial regulator proposes sustainability rules for portfolio managers 

The UK Financial Conduct Authority (FCA) proposed on April 23 to extend its sustainability disclosure requirements and investment label regime to portfolio managers. The regulator said it was proposing to apply a “broadly similar approach” for portfolio managers as it had introduced for fund managers. The FCA issued the requirements in November 2023, and they create four product labels for sustainable investments. A consultation on the proposal runs to June 14. The FCA also said it had finalized its guidance on its anti-greenwashing rule, which aims to ensure investment firms’ sustainability-related claims are clear and do not mislead investors. The rule is effective from May 31. 

UK publishes guidance on transition plans for financial institutions and energy companies

The UK Transition Plan Taskforce (TPT)  published on April 9 sector-specific transition guidance for seven sectors: asset owners; asset managers; banks; electric utilities and power generators; food and beverage; metals and mining; and oil and gas. The taskforce said it chose those sectors because of their greenhouse gas emissions, their need for transition finance within the UK context and the quality of existing guidance in the market. It also issued high-level guidance for 30 sectors, including consumer goods, insurance and healthcare. The guides complement the TPT’s disclosure framework published in October 2023 and build on the ISSB’s disclosure standards, which include requirements on transition planning, the taskforce said. 

European Parliament approves supply chain due diligence rules

The European Parliament on April 24 approved rules aimed at ensuring companies are assessing and managing their social and environmental supply chain risks. The EU Corporate Sustainability Due Diligence Directive (CSDDD) requires companies to prevent, end, or mitigate their adverse impact on human rights and the environment across their upstream and downstream "chain of activities," including supply, production and distribution, according to the Parliament. The new rules will be phased in from 2027 for EU companies with more than 5,000 employees and annual revenues of more than €1.5 billion; from 2028 for those with more than 3,000 employees and annual revenues of more than €900 million; and from 2029 for firms with more than 1,000 employees and annual revenues of more than €450 million, Parliament said. For non-EU companies operating within the EU, the rules will apply with the same revenue thresholds but based only on turnover in the EU. The Council of the EU gave its final approval to the directive on May 24. 

EU adopts revised energy efficiency rules in buildings

The European Union adopted on April 12 revised energy efficiency rules in buildings designed to reduce emissions and energy use in the built environment, the European Commission said in a statement. The revised Energy Performance of Buildings Directive will require all new residential and non-residential buildings to have zero on-site emissions from fossil fuels, from Jan. 1, 2028, for publicly owned buildings and from Jan. 1, 2030, for all other new buildings.  The rules require member states to implement measures to reduce the average primary energy use of residential buildings by at least 16% by 2030 and between 20% and 22% by 2035. EU countries will have to renovate the 16% worst-performing non-residential buildings by 2030 and the worst-performing 26% by 2033. The revised directive will enter into force after publication in the EU’s Official Journal. EU member states will then transpose it into national legislation.