Recent announcements on regulation for sustainability-related disclosures give the impression that it is developing at different speeds and in different directions around the world. But it is actually reflecting the fact that expectations from capital markets around sustainability are converging—and regulation is adapting. Let’s look at some of the developments and what they mean for corporates.
A Move for Global Harmonisation…
The International Financial Reporting Standards (IFRS) Foundation—with its mandate of setting global standards for financial reporting that improve the communication between corporates and the capital markets—has been leading the charge on harmonising regulation on sustainability-related disclosures around the world.
In 2026, there were 19 jurisdictions where the IFRS S1 and S2 standards were adopted, with a total of 40 considering their adoption. This is replacing a fragmented and often bewildering landscape of regulations and making it easier for global companies to meet one simple set of requirements.
…Has Led to Regional Fragmentation
But under the headline of “convergence,” there are a lot of different approaches that mean regulation can actually vary significantly. Some jurisdictions have adopted the standards in full, some adopt the climate standard S2 only and some write local standards aligned to the IFRS. The United Kingdom, the European Union and the United States are not adopting IFRS standards directly but taking their own approach.
The Financial Conduct Authority developed its own “Sustainability Reporting Standards” (SRS)—modelled closely on IFRS S1 and S2. It announced recently that it would require companies to take a ‘comply or explain’ approach on these sustainability-related disclosures from 2027. This policy shift reflects feedback from recent consultations with the capital markets and corporates.
Whilst this might seem like a significant shift away from the current regime of mandatory reporting under the Task Force on Climate-related Financial Disclosures (TCFD), it is following capital market expectations. If sustainability-related risks are strongly featured, companies will in effect still be required to disclose along the SRS anyway, replacing existing TCFD requirements.
The European Union
The European Union has aligned its own “European Sustainability Reporting Standards” (ESRS) to IFRS standards following the recent simplification under Omnibus regulation. These changes have reduced the number of corporates captured by the regulation and lessened the disclosure requirements for those companies.
Although some have argued that this reflects a softening of sustainability-related disclosure requirements, it reflects feedback from the capital markets to align the regulation closer to investor expectations above other stakeholders. Core sustainability requirements remain in place under the ESRS.
The United States
The approach in the United States has become a patchwork without alignment to IFRS standards. At the federal level, the Securities Exchange Commission proposed climate disclosure rule from 2024 never entered into force and is earmarked for rescinding in full. With states pursuing a different agenda, the most significant developments are California’s SB 253 and SB 261. Due to legal challenges, their implementation is delayed with disclosures currently voluntary.
The practical point for corporates here is that weakened federal oversight does not necessarily mean that there are fewer obligations for companies in the United States. Much proposed legislation refers to IFRS standards, but enforcement regimes differ as feedback from the capital markets is taken into consideration.
Softer Regulation Does Not Mean Lower Expectations
2026 may have given the impression that regulation on sustainability-related disclosures has weakened across key jurisdictions. But instead, the picture is one of continuing convergence globally. This may not be along ambitious global benchmarks as the IFRS Foundation had intended but instead reflecting capital market and investor expectations.
What remains key for investors is that sustainability-related information is disclosed alongside financial information in a way that shows that it is material for the operation of the business. For corporates, that means that key data and evidence to back up why sustainability helps improve business performance and growth is still on the ‘to-do list’ for disclosures.
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