Climate and sustainability disclosure policy continued to move in divergent directions during Q2 2026. Across jurisdictions, developments continued to cluster around three distinct paths: full or partial retrenchment, substantial simplification, and the further build-out and operationalisation of disclosure regimes. These trajectories are creating wider differences in whether reporting is mandatory, which entities and products are covered, and how prescriptive the requirements are. In the United States, Securities and Exchange Commission proposed rescinding its 2024 climate-disclosure rules in full, which would remove specified federal requirements covering climate-related risks, governance, greenhouse-gas emissions and certain financial-statement effects of severe weather. In Brazil, the Securities Commission withdrew the planned mandatory phase of its ISSB-aligned regime for listed companies, retaining voluntary reporting under national CBPS and ISSB standards, a minimum three-year reporting commitment for opt-in entities and a requirement for listed companies that do not report to explain their decision from 2027 onwards. New Zealand moved to remove health and life insurers, building on earlier decisions to raise the listed issuer threshold to NZD 1 billion and exclude managed investment scheme managers. Together, the changes would reduce the reporting population from 164 entities to around 67, with interim no-action relief applying pending legislation.

Across other geographies substantial recalibration core to the agenda. In the EU, the Omnibus I Directive adopted in February 2026 narrowed the future scope to companies exceeding both 1,000 employees and EUR 450 million in net turnover. Revised ESRS, consulted on in May and adopted shortly after quarter-end, reduced mandatory datapoints by more than 60% and total datapoints by more than 70%, simplified the materiality assessment and limited the information that reporting companies may request from value-chain partners with 1,000 or fewer employees. In early July 2026, the European Banking Authority (EBA), European Insurance & Occupational Pensions Authority (EIOPA) and European Securities & Markets Authority (ESMA) launched coordinated consultations to inform the Commission’s longer-term review of the EU Taxonomy Disclosures Delegated Act, extending the simplification agenda to sector-specific KPIs. The proposals contemplate removing or narrowing banks’ fees and commissions and trading book KPIs, refocusing non-financial companies’ operational expenditure KPI on research and development with an optional broader metric, limiting insurers’ underwriting KPI to Taxonomy eligible non-life business covering climate-related perils and renaming it the Adaptation Underwriting KPI. Within banking, the EBA’s final draft Pillar 3 standards extend ESG risk disclosures to all institutions under CRR3, but reduce the datapoints required from large institutions by 37%, remove taxonomy-linked Green Asset Ratio and Banking Book Taxonomy Alignment Ratio templates, and defer the first reference date for small and non-complex institutions to end-2027.

The UK Financial Conduct Authority has proposed replacing product-level Task Force on Climate-related Financial Disclosures (TCFD) reporting for investment products with a simpler, more targeted regime that distinguishes between retail and institutional investor needs. For retail clients, firms would need to periodically consider whether climate risks or opportunities could be materially relevant to a product’s financial performance or returns. Where they are material, firms would disclose them in retail communications that provide general information on risk and financial returns. For institutional clients, firms would have to provide, on request, at least scope 1, 2 and 3 greenhouse gas emissions data to clients that need the information for their own climate disclosure obligations. Eligible clients could request the information once per calendar year per product.

At global level, the ISSB finalised the content of proposed nature-related disclosures during Q2 and is targeting an October 2026 exposure draft in the form of an IFRS Practice Statement. The proposals will draw on the Taskforce on Nature-related Financial Disclosures framework, be used alongside IFRS S1 and IFRS S2, and remain optional for companies unless a jurisdiction requires their use. The approach develops common international content while preserving national discretion over adoption, scope and legal force.

New supervisory reviews released in Australia and New Zealand during the quarter provide a further view of how mandatory climate reporting regimes are translating into practice. The findings point to a gradual strengthening of the reporting base, while also showing that implementation quality remains uneven across entities and disclosure areas. In May, the Australian Securities and Investments Commission’s (ASIC) early review of a subset of the first sustainability reports lodged by the largest Australian reporting entities found that the new standardised requirements had increased the quantity and quality of climate-related financial information relative to previous voluntary reporting and were supporting greater consistency and comparability. Reports using tables, diagrams and other visual aids were identified as particularly effective. The New Zealand Financial Markets Authority’s (FMA) review of 62 second year climate statements similarly found clearer report structures, stronger greenhouse gas emissions disclosures, better articulation of governance and risk management processes and increasing recognition of material climate-related business risks.

Despite these advancements, deficiencies remain in relation to the specificity, analytical basis and internal coherence of disclosures. In New Zealand, the FMA found that physical risk reporting often did not explain clearly how climate hazards change over time and translate into material risks, which assets, operations or activities are exposed and vulnerable, or how those risks transmit through other risk categories—such as operational disruption, asset impairment, rising insurance costs, credit risk or market risk—into anticipated impacts. It called for stronger underlying data and analysis to avoid risks being understated, overstated or misidentified, alongside a clearer distinction between risks and their impacts. Beyond physical risk reporting, the FMA also identified recurring weaknesses in period-on-period consistency, cross-referencing on the climate-related disclosures register and disclosure of the extent to which targets rely on offsets. Although most entities made reasonable efforts to disclose transition plan aspects of strategy, it was often unclear whether material risks had corresponding targets or actions, or whether none were in place. The information covered by greenhouse gas assurance was also not always clearly identifiable. ASIC’s findings point in a similar direction. Some Australian entities did not reflect previously reported financial impacts from extreme weather in their assessment of future risks and related mitigation, while judgements, assumptions and measurement uncertainty were not always disclosed clearly or close to the relevant information. It also identified disclaimers that conflicted with the statutory purpose of sustainability reports, additional voluntary information that obscured mandatory material disclosures, non-compliant cross-referencing and inconsistent treatment of climate-related targets required by law or regulation, including greenhouse gas targets under the Safeguard Mechanism.

In May, the European Central Bank (ECB) published an updated compendium of good practices for climate and nature risk management. Drawing on follow-up work to its 2022 thematic review and observations from its five year climate and nature risk programme, the compendium provides an additional view of the institutional processes underpinning the quality of climate and nature risk reporting. The ECB’s observations indicate that institutions’ approaches typically comprise three connected components: a data gap analysis, a data collection strategy and a data management and reporting framework. More developed approaches begin by assessing data needs against disclosure requirements, internal risk reporting needs, business objectives and voluntary commitments, before identifying gaps in available information, IT infrastructure, aggregation capabilities and collection processes. Centralised steering committees commonly oversee data priorities, definitions, metrics, methodologies and remediation. At an operational level, institutions use data catalogues to record ownership, collection deadlines and actions for closing gaps; prioritise actual client or asset-level data; supplement these with verified public and external sources; and use proxies as interim inputs with their limitations documented. Dedicated questionnaires embedded in client due diligence are used to collect information such as greenhouse gas emissions, transition plans, energy performance certificates, asset locations and physical risk exposure.

The compendium also highlights more structured controls over data quality and reporting consistency. Institutions cross-check information from different sources, assign quality scores and assess third-party providers against criteria including completeness, granularity, geographic and hazard coverage, methodologies, assumptions, scenarios and time horizons. Data dictionaries, defined responsibilities, remediation procedures and centralised IT platforms are then used to establish a controlled “golden source” or single version of the truth. Internal climate and nature risk reporting is generally integrated into established risk reports and aligned with risk appetite, client risk scores, financed emissions, portfolio alignment measures and performance against targets, with reporting to management bodies typically taking place quarterly and more frequent monitoring used for selected exposures. Where frameworks remain incomplete, some institutions initially focus on material exposures for which indicators are already available. Internal audit reviews may extend to third-party data procurement, KPI calculations, sustainable product classification and the compliance and methodologies underpinning sustainability disclosures, linking externally reported information to the data, controls and methodologies used in internal decision-making.