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 Hong Kong’s roadmap for adopting global sustainability-related standards, South Korea’s green finance taxonomy guidelines and Switzerland’s proposed amendments to its climate disclosure law.

ASIA-PACIFIC    EUROPE    MIDDLE EAST AND AFRICA    UNITED STATES AND CANADA

ASIA-PACIFIC

Hong Kong publishes roadmap on ISSB adoption

The Hong Kong government on Dec. 10, 2024, issued its roadmap for adoption of the two disclosure standards published by the International Sustainability Standards Board (ISSB), which came into effect Jan. 1, 2024. The roadmap sets out a pathway for large “publicly accountable entities” to adopt the ISSB’s standards fully by 2028, the government said. The standards, which will be effective from Aug. 1, 2025, were published by the Hong Kong Institute of Certified Public Accountants on Dec. 12, 2024, after a consultation. Issuers on the Hong Kong Stock Exchange will be required to report on a “comply or explain” basis under the Hong Kong equivalent of the ISSB’s climate-related standard as of Jan. 1, 2025. Issuers on the Hang Seng Composite LargeCap Index will have to disclose climate-related risks on a mandatory basis from Jan. 1, 2026. The Hong Kong Exchange plans to hold a consultation in 2027 on mandatory sustainability reporting for listed companies as of Jan. 1, 2028. Financial regulators will require large financial institutions to apply the standards no later than 2028. The government also said Hong Kong’s Accounting and Financial Reporting Council would work with financial regulators and stakeholders to develop regulations for assurance of the sustainability standards. 

South Korea issues guidelines on use of green finance in taxonomy

South Korea’s financial regulator, the Financial Services Commission (FSC), its Ministry of Environment, and the Financial Supervisory Service, which oversees financial institutions, on Dec. 12, 2024, announced administrative guidelines on how green finance can be used for economic activities set out in South Korea’s green taxonomy. The guidelines aim to define green finance to prevent greenwashing and encourage lenders to increase financing of sustainable projects, the FSC said in a statement. They also include criteria to help financial institutions determine what constitutes green activities. The guidelines set internal control standards for financial institutions, creating processes for managing green projects, including the appointment of an internal supervisor. They also allow financial institutions to determine the appropriateness of green activities on the behalf of recipients of green finance because there is “currently a lack of clear understanding” about the green taxonomy among businesses, and allowing financial firms to make this determination will help alleviate that burden, the FSC said.

EUROPE

EU lawmakers reach provisional agreement on phase-in period for deforestation rule

The European Parliament and the Council of the EU, composed of government ministers of the 27 EU member states, on Dec. 3, 2024, came to a provisional agreement over a one-year phase-in period for regulation seeking to ensure that key goods placed on the EU market will not contribute to deforestation and forest degradation. The law will become applicable on Dec. 31, 2025, for large companies and June 30, 2026, for micro- and small enterprises, instead of Dec. 31, 2024. The additional time will allow third countries, member states, operators and traders to prepare for the implementation of the regulation, the European Commission said in a statement. The European Parliament said it had requested that the commission create an information system for operators and traders and a proposal for the risk classification of countries and regions available as soon as possible. It gave a deadline of June 30, 2025, at the latest. It also said a review of the regulation will take place in 2028 and that the commission would analyze additional ways of reducing the administrative burden for companies.

Switzerland opens consultation on amendments to climate disclosure law

Switzerland’s Federal Council on Dec. 6, 2024, said it had opened a consultation on changes to its climate disclosure law following the incorporation of the Task Force on Climate-related Financial Disclosures (TCFD) into the ISSB. Under the existing law, large companies are considered compliant with their obligation to report on climate-related issues if they implement the TCFD’s recommendations. The proposed amendment would allow companies to report climate-related disclosures according to an internationally recognized standard or EU’s Corporate Sustainability Reporting Directive (CSRD). The proposal also establishes minimum requirements for companies to set out roadmaps on how they aim to achieve net-zero emissions by 2050 in line with Switzerland’s target.  Financial institutions would be subject to more stringent obligations, including setting intermediate, science-based targets for greenhouse gas (GHG) emission reduction and developing financing for technology innovations to address climate change. The consultation runs until March 21, 2025.

European securities regulator consults on digital sustainability reporting

The European Securities and Markets Authority (ESMA) on Dec. 13, 2024, opened a consultation on its proposals to apply electronic financial reporting to sustainability reporting to make it easier for investors to access “relevant and comparable information.” The proposals seek to define the digital tagging rules for sustainability reporting, with phased implementation of the European Sustainability Reporting Standards (ESRS), the sustainability standards of the CSRD over two years and full implementation of Article 8 disclosures under the EU taxonomy. Under Article 8, companies must disclose taxonomy-eligible revenues, capital and operating expenditure. The proposals would also redefine the digital tagging approach for notes to IFRS consolidated financial statements, ESMA said. Companies’ digital sustainability and financial information will be integrated into the future European Single Access Point, a platform on financial and non-financial information for investors to be available for 2027. The consultation is open until March 31, 2025. ESMA will publish a final report on the proposals and submit draft technical standards to the European Commission for approval in the third quarter of 2025.

EU advisor publishes sustainability reporting standard for non-listed SMEs

The European Financial Reporting Advisory Group (EFRAG), which serves as technical advisor to the European Commission, on Dec. 17, 2024, released its voluntary sustainability reporting standard for non-listed micro-, small-, and medium-sized entities. The standard is designed for companies that are not required to report under the CSRD and provides a standardized set of information that companies can provide to investors, clients and financial institutions. It also simplifies the requirements of the CSRD for small companies regarding elements of the directive such as the materiality analysis. The CSRD anchors the concept of “double materiality,” in which firms need to think of reporting not only in financial terms but also in how their business affects the environment, employees and consumers. EFRAG said it plans to publish materials throughout 2025 to aid adoption of the voluntary standard.

UK government proposes adoption of carbon offsetting scheme for aviation

The UK government announced proposals for implementing the UN’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), which requires airlines to offset carbon emissions on international routes. The proposals set out how the scheme would be regulated in the UK, including financial penalties for non-compliance. Airlines could be fined up to £100 per metric ton of carbon emissions for not complying with the rules. The proposals also include options on how the UK will implement CORSIA while maintaining commitments under the UK emissions trading scheme (ETS). The first option is that only the ETS would be applicable on flights between the UK and the European Economic Area and Switzerland. In the second option, both CORSIA and the ETS would apply but airlines would be compensated for the costs of CORSIA offsetting on these flights. A consultation closes on Feb. 10, 2025.

UK financial regulator publishes recommendations on adoption of ISSB standards

The UK Financial Reporting Council, which regulates auditors, accountants and actuaries, on Dec. 18, 2024, published its recommendations on the UK’s adoption of the ISSB standards in its capacity as Secretariat to the UK Sustainability Disclosure Technical Advisory Committee (TAC). The body recommended extending the “climate first” reporting relief under the ISSB’s standard on general requirements for disclosures for sustainability-related information (IFRS S1) from one to two years. Under the “climate first” relief, companies are allowed to disclose only climate-related information in the first year of reporting under the ISSB instead of disclosing all sustainability-related risks. The TAC also suggested that the UK Sustainability Disclosure Policy and Implementation Committee, which coordinates implementation of sustainability-related disclosure standards, develop guidance on implementing IFRS S1 to ensure it aligns with the current UK legal framework. The recommendations will form the basis for UK-specific standards based on the ISSB that the UK plans to publish in the first quarter of 2025.

MIDDLE EAST AND AFRICA

Qatar financial regulator proposes amendments to sustainability reporting rules

The Qatar Financial Centre Regulatory Authority proposed on Dec. 17, 2024, amendments to its rules on corporate sustainability reporting to bring the country’s disclosure requirements in line with the ISSB’s two disclosure standards. The regulator said a limited number of firms would be impacted by sustainability reporting requirements, including incorporated companies, banks and insurers. It also said it would provide mechanisms and transitional reliefs to help companies adopt the standards. For example, it is proposing to extend the transitional reliefs for GHG emission calculations by two years compared to one year for the ISSB. It said it would also provide firms with a guide on applying the ISSB standards. The regulator also said it would develop an assurance framework for sustainability reporting. The amendments would apply as of Jan. 1, 2026. A consultation closes on March 25, 2025.

UNITED STATES AND CANADA

Canada publishes sustainability standards based on ISSB standards

The Canadian Sustainability Standards Board issued on Dec. 18, 2024, its first two sustainability disclosure standards based on the ISSB’s two disclosure standards. CSDS 1 sets out the general requirements for companies to disclose material sustainability-related financial information, the board said. CSDS 2 focuses on disclosure of material information on critical climate-related risks and opportunities. While the two standards are largely aligned with those of the ISSB, they grant companies more time for adopting some of the reporting requirements. For example, companies have a transition period of two years for disclosing sustainability-related risks other than climate, compared with one year under the ISSB. Companies will have a period of three years to prepare for reporting on the emissions throughout their supply chain, known as Scope 3 emissions, instead of one year under the ISSB. They will also have three years of relief compared to the ISSB’s one year to align reporting on financial and sustainability disclosures, with reporting required within the first six months following the second- and third-year end respectively. The Canadian standards are effective on a voluntary basis as of Jan. 1, 2025.

California regulator to allow companies extra time to report on climate disclosures

California Air Resources Board (CARB), the state agency charged with implementing the state's climate disclosure laws, on Dec. 5, 2024, announced it will grant companies reporting under new climate-related disclosure rules additional time to prepare for the new rules. A law enacted in 2023 requires large companies doing business in the state to begin reporting Scope 1 and Scope 2 emissions, which are emissions associated with their operations and with their purchased energy, in an annual report starting in 2026. CARB said it will “exercise its enforcement discretion” for the first year of reporting. It acknowledged that companies might need additional time to collect the necessary data to comply with the reporting requirements. It also said it would not take “enforcement action for incomplete reporting” against companies in the first year of reporting as long as entities have made a “good faith effort” to collect the relevant data on emissions reporting.