30 March, 2026
March 2026 — European Commission proposes EU Taxonomy revisions, California sets deadline for emissions reporting, Japan finalizes mandatory sustainability disclosures
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 Energy Horizons presents key developments to sustainability regulations and standards from around the world.
In this month's update covering Feb. 20 to March 19, we look at the European Commission’s proposals to revise the EU Taxonomy, California’s approval of a deadline for emissions reporting under its climate reporting law and Japan’s finalization of mandatory sustainability standards, among other developments.
EUROPE
European Commission holds consultation on revisions to EU Taxonomy
The European Commission on March 17 launched a consultation on proposed revisions to the EU Taxonomy, a classification system of sustainable economic activities, to make it easier to use. The Commission's proposals would streamline criteria for applying the taxonomy and bring it into line with updated EU legislation following a simplification of the EU’s sustainability reporting requirements. The proposed changes cover most activities under the Climate and Environmental Delegated Acts, including forestry and environmental protection, manufacturing, energy, transport and construction, as well as for all the generic “do no significant harm” appendices. To align with the taxonomy, an eligible activity must substantially contribute to one of its six environmental objectives while doing no significant harm to the other five objectives. The consultation is open until April 14. The Commission plans to adopt the revisions in the second quarter of 2026.
UK regulator updates guidance on corporate governance code
The UK Financial Reporting Council (FRC), which regulates auditors, accountants and actuaries, on March 16 updated its guidance on “comply or explain” reporting that forms an integral part of its corporate governance code. The code was revised in 2024 and requires companies to report on matters including board leadership, risk and internal control and remuneration, among other things, and operates on a ‘comply or explain basis.’ The FRC said a departure from the code is not a governance failure if accompanied by a “thoughtful, well-reasoned explanation.” The update is intended to guide investors and advisors in what to look for when reading a departure explanation. It also explains “why a departure accompanied by a clear and transparent explanation should be seen as a positive indicator of a board engaging seriously with its governance responsibilities,” the FRC said. The guidance comes as companies whose financial year closed end-December 2025 start publishing financial reports under the revised code.
UK publishes finalized sustainability reporting standards
The UK government on Feb. 25 published two sustainability reporting standards, UK SRS S1 and UK SRS S2, based on the two sustainability standards developed by the International Sustainability Standards Board (ISSB). UK SRS S1 acts as a framework on how to apply the standards, as well as requirements for reporting general sustainability-related risks and opportunities, while UK SRS S2 sets out requirements on climate-related risks and opportunities. Following a consultation held in June 2025, the government said it had decided to allow voluntary reporters to use reliefs indefinitely regarding non-climate sustainability reporting and disclosure of Scope 3 emissions, which are emissions that occur up and down a company’s value chain. Under IFRS S2, the ISSB’s climate standard, companies can take an extra year to disclose Scope 3 emissions. The standards are voluntary but may become mandatory for listed companies in the future. The UK financial regulator, the Financial Conduct Authority, in January 2026 proposed aligning its current climate disclosure rules for listed companies with UK SRS S1 and UK SRS S2. Current UK rules are aligned with the Task Force on Climate-related Financial Disclosures (TCFD), and the ISSB took over monitoring of the TCFD’s climate disclosures in 2023.
Council of the EU signs off on sustainability reporting simplification
The Council of the EU on Feb. 24 gave the final green light on a simplification package for EU sustainability reporting and due diligence requirements for companies. This step codifies the previously announced changes to the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D) that reduce the scope of both regulations, reducing the number of companies that need to comply. The CSRD’s scope was narrowed by raising its thresholds to companies with more than 1,000 employees and above €450 million in net annual turnover, while the CS3D’s thresholds were raised to companies with more than 5,000 employees and above €1.5 billion in net turnover. CS3D’s requirement that companies adopt a climate transition plan was also cut.
UNITED STATES AND CANADA
California regulator sets deadline for emissions reporting
The California Air Resources Board (CARB) on Feb. 26 approved regulation establishing the first-year reporting deadline and administrative fees for the state’s two climate disclosure laws. CARB set Aug. 10, 2026, as the reporting deadline for SB 253, the Climate Corporate Data Accountability Act, which US companies that do business in the state and have annual revenues exceeding $1 billion to disclose their Scope 1 and Scope 2 emissions, or the emissions associated with their operations and with their purchased energy. CARB also said more 120 companies had submitted climate-related financial risk reports under SB 261, the Climate-related Financial Risk Act, which requires businesses operating in the state with more than $500 million in revenues to biennially disclose their climate-related financial risks and impacts as of Jan. 1, 2026. CARB is not enforcing SB 261 due to a court order, and companies are currently reporting on a voluntary basis.
ASIA-PACIFIC
New Zealand standard setter finalizes sustainability assurance standards
New Zealand’s External Reporting Board (XRB), which establishes financial reporting standards, on March 12 issued a new sustainability assurance standard to align the country with the latest developments in the global adoption of sustainability assurance standards. The XRB also said it had also published another new standard, the International Ethics Standards for Sustainability Assurance. The standards replace a temporary standard for the assurance of greenhouse gas (GHG) disclosures and another on assurance engagements on GHG statements. The new standards will be applicable from Dec. 15, 2026.
Singapore’s central bank issues climate risk guidelines for financial institutions
The Monetary Authority of Singapore (MAS) on March 5 published its supervisory expectations for banks, insurers and asset managers on managing the physical and transition risks they face from climate change. Under the guidelines, financial institutions should establish a process for transition planning, the central bank said. They are expected to assess and manage physical and transition risks by adapting their business models, governance and risk management practices; improve their understanding of their clients’ climate-related risks to avoid the need to withdraw credit, insurance coverage and support Singapore’s financial stability; and ensure they are up to date with ways of measuring and managing climate risks as data and methodologies continue to improve. The guidelines will take effect from September 2027 following an 18-month transition period, MAS said.
Malaysia holds consultation on sustainable finance taxonomy
Malaysia’s central bank, Bank Negara Malaysia (BNM), and Securities Commission Malaysia (SC) on March 2 kicked off a consultation on the country’s taxonomy for sustainable finance. The proposed taxonomy would build on previous efforts by both regulators to develop principles-based taxonomies: the BNM’s . It would also seek to include social measures, including the promotion of human and labor rights. The consultation is open until April 14.
South Korea finalizes sustainability reporting standards
The Korea Sustainability Standards Board (KSSB) on Feb. 26 issued its first set of sustainability-related disclosure standards based on the ISSB’s two standards. The board published KSDS 1, its general requirement standard, and KSDS 2, its climate-related disclosure standard. It had proposed a third country-specific standard called KSDS 101, but the board said it had decided not to issue it given the potential burden on companies and changes in the “government policy environment.” The standard setter said the standards are designed to take into account the needs of South Korean companies, while ensuring interoperability with the ISSB standards. Some of the differences from the ISSB’s standards include a three-year delay for reporting Scope 3 emissions and allowing companies not to publish disclosures at the same time as financial statements. The KSSB also said South Korea’s Financial Services Commission had published a draft roadmap detailing which companies would be subject to the standards and timelines for adoption. It plans to finalize its roadmap in April.
Japan’s securities regulator finalizes mandatory sustainability disclosures
Japan’s Financial Services Agency on Feb. 20 mandatory sustainability-related disclosures for listed companies under amendments to existing regulation on corporate reporting. Companies will be required to publish sustainability reports based on the Sustainability Standards Board of Japan (SSBJ)’s disclosure standards, which are aligned with the ISSB standards. Companies with market capitalization of more than 3 trillion yen listed on the Tokyo Stock Exchange’s Prime Market will be required to start publishing sustainability reports for the fiscal year ending March 2027. Companies with market capitalization of between 1 trillion and 3 trillion yen will be required to begin publishing reports for the fiscal year ending March 2028. The SSBJ in March 2025 issued three standards, with the ISSB’s IFRS S1 General Requirements standards divided into two different standards — the General Standard for disclosures of sustainability-related risks and opportunities and the Application Standard with requirements for sustainability-related financial disclosures. On March 13, 2026, the SSBJ amended its sustainability disclosures to bring them into line with amendments made by the ISSB to its climate standard.
MIDDLE EAST AND AFRICA
Ethiopia publishes draft roadmap on adoption of global sustainability standards
The Accounting and Auditing Board of Ethiopia (AABE) on Feb. 25 issued a draft roadmap for the adoption of the ISSB’s two sustainability standards. According to the , the standards would be phased in with companies first reporting on climate disclosures based on IFRS S2 but with additional reliefs. There would then be an intermediate phase with the reduction of reliefs and the introduction of limited quantitative reporting. Companies would then implement both IFRS S1 and IFRS S2, with the transitional reliefs provided by the ISSB. In a fourth and final phase, companies would be expected to fully comply with the ISSB, with no reliefs. Large companies would start reporting from financial years 2026 or 2027. Companies would have to obtain a limited assurance report for a maximum period of two years from the first year of full adoption but would have to obtain reasonable assurance after that. A consultation is open until March 25.
Nigeria amends sustainability reporting roadmap and issues guidelines
Nigeria's Financial Reporting Council (FRC) on Feb. 23 unveiled amendments to its roadmap for the adoption of the ISSB’s standards and the country’s sustainability reporting guidelines following a consultation. The FRC said the amendments take into account recent amendments to IFRS S2, reporting timelines, assurance requirements, and clarify regulatory expectations for companies. The sustainability reporting guidelines outline what methodologies companies should use in applying the standards and describe an Adoption Readiness Test Assessment, aimed at helping companies assesses their preparedness for ISSB compliance. The standards are currently voluntary but will become mandatory for banks, insurers and publicly traded companies from 2028. Small and medium-sized enterprises would be required to report from 2030.
This piece was published by S&P Global Sustainable1 and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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