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 the EU’s plans to simplify its sustainable finance rules, Mexico’s amendments to its securities law to include sustainability disclosures and new guidance from the International Sustainability Standards Board (ISSB) for companies on climate reporting.

INTERNATIONAL    EUROPE    ASIA-PACIFIC   UNITED STATES AND CANADA    LATIN AMERICA AND THE CARIBBEAN

INTERNATIONAL

ISSB releases guide on climate disclosures in sustainability reporting

The ISSB in January published a guide to clarify which elements of its first standard are applicable if a company chooses to disclose only climate-related information in its first annual reporting period. The guide explains that under IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, companies are permitted to disclose information on only climate-related risks and opportunities in their first year of reporting to give them more time to prepare for reporting on other sustainability-related risks. The guide sets out jurisdictional and voluntary reporting considerations and describes how to apply the ISSB’s IFRS S2, Climate-related Disclosures, in addition to IFRS S1 requirements, when a company takes a “climate-first approach.” The guide explains how companies should report material risks, strategy, timing of reporting, metrics and targets and location of disclosures, among other topics.

EUROPE

EU announces plans to simplify sustainability reporting rules

The European Commission on Jan. 29 announced  plans to boost the EU’s economic competitiveness that would include simplification of the bloc's sustainability reporting rules. In its Competitiveness Compass, the commission said it will publish a proposal to simplify the Corporate Sustainability Reporting Directive, Corporate Sustainability Due Diligence Directive and the EU taxonomy, a classification system of sustainable economic activities. The commission said it aims to reduce "the administrative burden" for companies by at least 25% and for small and medium-sized enterprises by at least 35%. It also intends to announce a Clean Industrial Plan that “will set out a competitiveness-driven approach to decarbonization.” The Commission also said it plans to simplify the carbon border adjustment mechanism for smaller companies. Note: The European Commission announced details on its simplification proposals on Feb. 26.

EU bank regulator publishes final guidelines on ESG risk management

The European Banking Authority (EBA) on Jan. 9 issued its final guidelines on how banks should manage environmental, social and governance risks. The guidelines will apply from Jan. 11, 2026, for large institutions. Small institutions will be subject to the guidelines from Jan. 11, 2027.  They detail the minimum standards under which banks are required to identify, measure, manage and monitor ESG risks. They also set out the criteria for assessing the impact of ESG risks on institutions’ solvency over the short, medium and long term. They also include the internal and risk management processes that banks need to implement in accordance with EU supervisory rules. Banks will also have to set targets and intermediate goals to help them manage the transition and reach the EU’s aim of being net-zero by 2050. They will also be asked to carry out scenario analysis, and the EBA opened a consultation on Jan. 16 with proposals on the requirements for scenario analysis.

UK regulator sets out for 2025 expectations for insurers on climate-related risks

The Bank of England's Prudential Regulation Authority (PRA) on Jan. 9 indicated to insurance CEOs that that it expects firms to make more progress on climate risk management in 2025. The regulator said insurance firms have “yet to fully embed” the regulator’s expectations on managing climate-related risks, adding that it planned to work with insurers “where physical climate risks are the most material.” It also said companies would be required to make more progress on scenario analysis and risk management. The PRA said it is planning to hold a consultation to update its 2019 supervisory statement on climate risk management as it seeks to guide insurers in improving their management of climate-related financial risks.

EU regulator recommends recalibration of climate risks in insurer capital requirements

The European Insurance and Occupational Pensions Authority (EIOPA) on Jan. 30 recommended updates to the way insurers calculate capital requirements for natural catastrophe underwriting risk, taking into account new climate data and advanced risk modelling. The regulator said it is proposing adjusting standard formula risk factors in 24 regions for perils such as flood, hail, earthquake and windstorm. It said flood hazard would see the most significant update, with three countries’ flood risk factors to be recalibrated to better match the risks insurance companies face in underwriting business in those regions. It is also proposing that seven other countries, including Ireland, Luxembourg and Norway, be included in the standard formula for flood risk after their exposures were found to be material. The regulator said extreme weather events may become more relevant than in the past for the insurance sector because of the effects of climate change. EIOPA said it had submitted its proposals to the European Commission.

ASIA-PACIFIC

Pakistan’s market regulator adopts global sustainability disclosure standards

Pakistan’s Securities and Exchange Commission on Jan. 1 announced adoption of the ISSB’s two sustainability-related disclosure standards. The regulator said the standards will be implemented with a phased-in approach for listed companies. The first phase of annual reporting will start as of July 1, 2025, for companies with annual revenues of more than 25 billion Pakistani rupees in the last two consecutive financial years; or with more than 1,000 employees 1,000 as of the last financial year-end; or total assets of more than 12.5 billion Pakistani rupees as of the last financial year-end. The second will commence as of July 2026 for companies with annual revenues of more than 12.5 billion Pakistani rupees in the last two consecutive financial years; more than 500 employees as of the last financial year-end; or total assets of more than 6.25 billion Pakistani rupees as of the last financial year-end. Other listed companies will start reporting on July 1, 2027, as will unlisted “public interest companies,” the regulator said. Companies will be required to obtain assurance from the second year of reporting, it said.

Sri Lanka mandates adoption of sustainability standards for large companies

The Institute of Chartered Accountants of Sri Lanka on Jan. 6 announced mandatory adoption of the country’s two sustainability standards as of Jan. 1, 2025, for the largest 100 listed companies on the Colombo Stock Exchange. All listed entities on the exchange's main board will be required to report by 2026, while all listed companies will have to comply with the standards as of Jan. 1, 2027, the Institute said. Entities listed on the exchange’s Empower Board, designed for small and medium-size companies, will also be required to adopt the standards by 2030. Companies subject to Sri Lanka Accounting Standards, with annual revenues of more than 10 billion Sri Lanka rupees in the last two consecutive financial years, will have to report by 2028. Those with annual revenues of more than 5 billion Sri Lankan rupees in the last two consecutive financial years will have to report by 2029. Sri Lanka’s two standards — SLFRS S1 for general reporting of sustainability-related risks and opportunities and SLFRS S2 for climate-related disclosures — are based on the ISSB’s two sustainability standards.

Indonesia launches consultation on adoption of sustainability standards

The Institute of Indonesia Chartered Accountants on Jan. 20 announced the publication of its draft sustainability-related disclosure standards largely aligned with the ISSB’s two disclosure standards. The first standard, DE PSPK 1, is based on IFRS S1, which requires companies to disclose sustainability-related financial information. DE PSPK 2 is based on IFRS S2, the ISSB’s climate disclosure standard. Under the Indonesian standards, companies are required to start reporting as of Jan. 1, 2027. Companies would have a three-year exemption before they report on emissions throughout their supply chain, known as Scope 3 emissions. The ISSB has given companies a one-year relief for Scope 3 disclosures. Commercial banks would have to disclose financed emissions for industries using an industry classification established by a regulator, while under the ISSB standards, banks are required to use the Global Industry Classification Standard. The consultation will run until March 31.

UNITED STATES AND CANADA

Trump moves to roll back US role in climate

In his first week in office after being sworn in on Jan. 20, US President Donald Trump took steps to open previously off-limits areas for oil and gas leasing and drilling and bolster domestic metals production, while also rescinding existing executive actions on climate change and other sustainability initiatives. Trump kicked off the year-long process of withdrawing the US from the Paris Agreement on climate change and declared a national energy emergency aimed at promoting fossil fuel development. He also tasked the US Department of Energy with restarting reviews of liquified natural gas projects and directed the US Department of the Interior to halt leases and permits for both onshore and offshore wind projects on federal land and waters. In addition, Trump ordered the termination of federal government offices and positions related to diversity, equity and inclusion (DEI) and environmental justice, as well as any mandates, policies and programs tied to DEI.

LATIN AMERICA AND THE CARIBBEAN

Mexico amends securities law to include global sustainability disclosure standards

Mexico’s Banking and Securities Commission on Jan. 28 published amendments to the country’s securities law that require issuers to include sustainability information in their financial statements in accordance with the ISSB’s two standards, IFRS S1 and IFRS S2. Under the amendments, issuers will have to start reporting from 2026 based on the financial year 2025. Issuers reporting from 2027 based on financial year 2026 and then for subsequent years will be required to include assurance from an external auditor in their sustainability reports, the regulator said.

Colombia adopts plan for development of sustainable aviation fuel

The Colombian government on Jan. 22 said it had adopted a plan to decarbonize its aviation sector under which it will increase production of sustainable aviation fuel (SAF) to 450 million gallons in 2050 from a projected 100 million gallons in 2035. A decree from the country’s Civil Aviation Authority seeks to create a legal and regulatory framework that would facilitate the production and use of SAF and establish mechanisms to encourage the production and consumption of SAF nationally and internationally, the government said. The decree also aims to develop infrastructure to produce and distribute SAF throughout Colombia and create financing mechanisms to support the industry.