From skimming headlines, one might think the world has given up on climate and sustainability regulations. Delays in the European Union. Pushback in the US. A continuing acronym soup. However, with a step back, a very different picture emerges: not one of retreat, but of recalibration.
Firms should see this period as an opportunity to build the processes that will enable them to effectively meet both future regulatory requirements and manage emerging climate and sustainability risks.
A whistle-stop regulatory tour
While the EU is reviewing the scope and timing of some sustainability regulations, it would be a mistake to see this as a headlong sustainability retreat. Many are still highly supportive of regulatory action on sustainability, with the release of updated climate commitments in early July 2025 reaffirming the bloc’s ambition. The European Banking Authority’s environmental risk management guidelines will soon come into force in 2026, and they demand significant steps from financial institutions, especially on scenario analysis and integration of climate into credit, market and operational risk.
Across the channel, the UK is keen to assert its position as a green finance leader. Amid uncertainty elsewhere, the UK seeks to be an anchor for climate-aligned capital. On climate risk management, the Bank of England’s consultation paper CP10/25 sets a high bar. Meanwhile, the UK is advancing plans to adopt the International Sustainability Standards Board’s sustainability standards, reinforcing expectations that firms will need robust, forward-looking reporting systems.
In the US, things are complicated. The cancellation of the Securities and Exchange Commission’s climate disclosure rule has been widely covered. While federal ambition has ebbed, it would be a mistake to assume firms will not face regulatory requirements. California has already passed sweeping disclosure laws, and other states like New York are introducing their own frameworks. The result is a challenging landscape of regulatory fragmentation.
Globally, we are seeing increasing uptake of the ISSB standards. Dozens of jurisdictions are in the process of adopting or aligning with them. Japan and Singapore are among the leaders, while China has made major strides in setting out environmental, social and governance expectations. Regulatory ambition in the Middle East is also rising rapidly with jurisdictions like the United Arab Emirates, Kuwait and Qatar issuing reporting requirements to firms too.
Three steps firms should be taking now
Too many organisations are adopting a ‘wait-and-see’ approach. But an effective response to sustainability regulation takes time. It requires preparation, new systems and cross-team coordination. It also provides a competitive advantage as firms will be able to better manage their risks and opportunities in a changing world. Here’s what financial actors should be doing:
Mobilise, don’t freeze
Regulatory shifts, while real, do not change the overall direction of travel. While supervisors may extend deadlines or tweak scopes, the core expectations will remain relevant: institutions must integrate sustainability into governance, strategy, risk management and targets. Building effective data infrastructure, streamlining internal workflows and engaging boards and business lines now will pay dividends later. On the compliance front, supervisors like the European Central Bank have repeatedly criticised financial institutions for failing to embed sustainability into credit and market risk processes.
Focus on no-regret moves
A common excuse for inaction is that the rules are still evolving. But that is not a reason to delay taking foundational steps. Given that climate and sustainability risks are financially material, developing internal capabilities, models and controls is prudent risk management. Do not wait for jurisdictional convergence on definitions of materiality or scope. Build the core competencies now including quality data systems, emissions calculations, scenario analyses and integrated disclosure processes.
These are the same capabilities that will help firms comply with multiple frameworks, from ISSB to the Corporate Sustainability Reporting Directive to state-level mandates. They also build resilience and trust with clients and stakeholders.
Map the cross-border impacts
Global businesses face cross-jurisdictional complexity. An entity operating in Singapore may fall under European disclosure rules due to parent company structure or market exposure. Even in their potentially revised forms EU’s CSRD and Corporate Sustainability Due Diligence Directive will have extraterritorial reach. In the US, California’s SB 253 applies based on revenue thresholds, not location. Firms must understand where and how different regulations apply across their footprint and take steps to avoid internal fragmentation.
Firms should see this as more than a compliance issue, but a strategic one instead. Those that understand the regulatory landscape across markets can align capital, structure supply chains and communicate with investors more effectively. Conversely, a lack of coordination can result in duplicative efforts, wasted resources and conflicting narratives.
A moment of strategic alignment
This global wave of sustainability regulation is not about box-ticking. It is about building the operating model of the future. Done well, regulatory compliance becomes a catalyst for business transformation: improving risk management, unlocking efficiencies and opening new market opportunities.
But it won’t happen by accident. It requires intention, coordination and timely action.
The sustainability regulatory landscape may be noisy, but the signal is clear: expectations are rising, not falling. The window to prepare won’t stay open forever. Now is the time to act with purpose.
David Carlin was Head of Risk at the United Nations Environment Programme’s Finance Initiative and Co-Founder of UNEP FI’s Risk Centre.
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