UK and EU round-up of the Sustainable Finance outlook for 2026

This post provides a round-up of key sustainable finance themes for 2026 in the UK and EU. 

Read on for what's next in relation to:

• corporate sustainability disclosure;
• product level disclosures;
• ESG ratings;
• management of climate- and environment-related financial risks (prudential focus); and
• transition plans.

Streamlined corporate disclosure requirements

EU. In February, the first Omnibus package shook up corporate sustainability reporting under CSRD and CSDDD. 

Omnibus makes substantive changes to both directives, including a significant reduction to the number of in-scope companies and removal of the transition plan disclosure from CSDDD. Follow the developments in this tracker, and follow progress with national transposition here.

In the Omnibus trilogues, political agreement was reached in December 2025. Key elements of the deal are explained here.

In respect of CSRD, key elements include:

• EU companies and non-EU listed issuers will be in scope, if they have more than 1000 employees during the financial year and a net turnover of EUR 450 million on their balance sheet dates – on a solo basis;
• EU companies and non-EU listed issuers that are parent companies in scope as above, but the tests apply on a consolidated basis to the group;
• Article 40a ultimate non-EU parent company scoping thresholds - a non-EU ultimate parent company will be in scope if (i) the group overall derives more than EUR 450m turnover from the EU for each of the last 2 consecutive years; and (ii) its largest EU subsidiary, or an EU branch, exceeds a net turnover of EUR 200 m in the preceding financial year;
• Financial holding undertaking exemption has been introduced for “financial holding undertakings” whose sole object is to acquire holdings in other undertakings and to manage such holdings and turn them to profit, without involving themselves directly or indirectly in the management of those undertakings (without prejudice to their rights as shareholders) if their subsidiaries have business models and operations that are independent from one another. The Recitals make clear the intention was for this exemption to be narrowly interpreted, and transposition of this exemption into Member State laws will need to be carefully monitored. 

For CSDDD, key elements include:

• EU companies will be in scope if they have more than 5000 employees and a net worldwide turnover of more than EUR 1.5 billion in the last financial year;
• Ultimate EU parent companies will be in scope if they have more than 5000 employees on average and a net worldwide turnover of more than EUR 1.5 billion in the last financial year across the group on a consolidated basis;
• Non-EU companies will be in scope if they generate a net turnover from the EU of more than EUR 1.5 billion in the financial year preceding the last financial year;
• Ultimate non-EU parent companies will be in scope if they generate a net turnover from the EU of more than EUR 1.5 billion in the financial year preceding the last financial year, across the group on a consolidated basis;
• Mandatory transition plan obligation has been deleted – but the CSRD transition plan disclosure obligations will still apply to firms that remain in scope of CSRD;
• CSDDD start date has been deferred to 26 July 2029.  

UK. The move from TCFD- to ISSB-aligned corporate reporting for listed issuers (UK SRS) has been slow. 

The Government’s consultation papers on UK SRS, on building an assurance framework and on what to do about transition plan disclosure closed in September with no word on next steps.

However, the FCA’s consultation on changes to the UK Listing Rules for UK SRS was published on 30 January 2026. The FCA intends to finalise its rules in 2026 (subject to the outcome and timing of the Government’s final UK SRS endorsement decision), with a view to them coming into force on 1 January 2027 and applying to accounting periods beginning on or after that date.  Now this has been published, we expect that the Government’s UK SRS finalisation is imminent too.

All change for product level disclosure

EU. The proposed SFDR amendments, published in November, signal significant changes including a new product categorisation framework (replacing articles 8 and 9), very strict limitations on ESG marketing and disclosures for uncategorised products, the removal of portfolio management and investment advice from scope and  of the entity level requirements for PAI reporting.

There’s long way still to go – SFDR 2.0 is unlikely to be finalised until mid-2027 and applicable from around mid to late 2028.

UK. Extension of FCA’s SDR labels to portfolio management services and OFR funds is paused, although work on SDR is expected to recommence in 2026. 

First SDR entity reports were due by the end of 2025. FCA continues to apply high standards for SDR labels but its approach has relaxed since the regime's inception – as the FCA’s understanding of products and the market has evolved.

Data transparency: regulation imminent for UK and EU ratings providers 

EU. The EU’s ESG Ratings Regulation applies from 2 July 2026. 

ESMA is working on RTS to provide detail on authorisation and compliance, although these RTS are on the Commission’s list of de-prioritised Level 2 measures meaning they will not be adopted until October 2027.

UK. The Government and the FCA have prepared the UK’s legislative and regulatory regime for this space, with law laid in November 2025. The FCA’s proposed rules have been published in December, with more detail on the authorisation process and the conduct obligations – including in relation to transparency obligations and conflicts management - that will apply to ESG ratings providers. 

The UK statutory instrument includes helpful exemptions from the regime, including amendments to the existing overseas persons exemption and a new exemption for firms providing ESG ratings in the course of other regulated activities. This provides clarity on scope e.g. to investment firms that produce ESG ratings as part of their investment research and is more clear-cut that the EU’s equivalent that includes complex territorial aspects and retains a disclosure obligation even if availing of the exemption.

The UK regime will go live by 29 June 2028. FCA authorisation can be sought from June 2027.

Identifying and managing climate and environment risk

EU: The ECB is tightening oversight of climate and environmental (C&E) risks. In 2025, 28 banks were censured, one fined, and two warned over shortcomings. 

In 2026, ECB thematic reviews and stress tests will move towards the inclusion of climate risk in risk management and Pillar 2 processes. In the Aggregated Results of the 2025 SREP, the ECB confirmed its 2026 focus on financial institutions embedding these risks meaningfully into decision-making frameworks, including promoting sustainable finance.

The EBA’s ESG risk management guidelines have applied from 11 Jan 2026, with CRD VI scenario analysis guidelines following on 1 Jan 2027 to allow time for alignment.

UK: The PRA has replaced Supervisory Statement 3/19 with the new SS 4/25 – Enhancing banks’ and insurers’ approaches to managed climate-related risks. This SS contains a lot of detail in relation to the expected governance and risk management framework. PRA regulated firms are given until early June to assess the uplift needed to meet the new expectations and make a plan for implementation, which must be “credible and ambitious”.

Transition plans

The role and status of transition plans remains uncertain, with clarity hoped for in 2026.

EU: transition plans and associated disclosure requirements feature in CSRD and CRD VI. 

CSRD requires entities to disclose their transition plan or explain its absence; Omnibus leaves this intact.

CSDDD mandated a plan and its disclosure, but Omnibus has removed this obligation. 

CRD VI requires credit institutions to have risk-based prudential transition plans by 11 January 2026. These will be supervised as part of SREP for the first time in 2026.

UK: The Government is reviewing whether transition plans should be mandatory and for which entities, with a further consultation on details promised. Its likely approach remains uncertain.

Read more

The role and focus on transition plans internationally, as well as four other global themes, are explored in our ESG Outlook 2026.

This Sustainable Finance round-up is part of our wider Financial Regulatory Outlook for 2026.