Regulatory roundup: UK SRS moves towards a ‘comply or explain’ approach; EU Parliament adopts SFDR 2.0 trilogue position – negotiations to follow | NatWest Corporates and Institutions

Regulatory roundup: UK SRS moves towards a ‘comply or explain’ approach; EU Parliament adopts SFDR 2.0 trilogue position – negotiations to follow

Our Sustainable Finance Policy & Regulation roundup highlights the latest developments shaping the market.

27 Oct 2026 . 25 min read

UK

1. UK Sustainability Reporting Standards published, introducing a ‘comply or explain’ approach 2. UK FCA publishes simplifying TCFD-aligned product-level reporting requirements 3. UK Government announces major overhaul of corporate reporting rules, amending the Companies Act 2006

EU

1. EU SFDR 2.0 – EU Parliament adopts final position, trilogue negotiations to follow – where do the amendments stand? 2. ESMA publishes thematic notes on ‘impact’ and ‘transition’ claims 3. The European Financial Reporting Advisory Group (EFRAG) published the draft ESRS and VESRS datapoints 4. EU sets out Delegated Regulation for common rating scheme for Data Centres alongside consultation on minimum performance standards 5. EU Commission adopts legislative proposal to modernise the EU’s public procurement framework

Global

1. UNEP publishes report stating ‘the global temperature rise is set to cross 1.5°C’ 2. UNEP FI publishes guide on nature-related risks and opportunities across portfolios 3. California confirms series of reliefs to ease first year of reporting for SB253 4. Hong Kong Monetary Authority issues Supervisory Policy Manual on transition planning

EU | Sustainable Finance Disclosures Regulation (SFDR 2.0) – EU Parliament adopts final position, trilogue negotiations to follow – where do the amendments stand?

The European Parliament’s Economic and Monetary Affairs Committee (ECON) adopted its negotiating position [1] on the revision of the SFDR 2.0 in September 2026. The position broadly supports the EU Commission’s proposed replacement of the existing Article 8 and Article 9 disclosure regime with three formal product categories: Transition, ESG Basics and Sustainable, each subject to a minimum 70% qualifying investment threshold and category-specific exclusions.

The Parliament’s position now completes the principal negotiating positions following the Commission’s proposal in November 2025 and the EU Council’s mandate in June 2026, clearing the way for trilogue negotiations. We have broadly summarised the key requirements for each product category in each of the positions (subject to trilogue negotiations).

Click here to read the full summary

Issuer/investor implications

Issuer implications: As fund managers begin preparing for SFDR 2.0 product classification and reclassification, issuers may face increasing expectations for taxonomy alignment metrics, transition plan disclosures, PAI-related data and evidence of sustainability governance. More importantly, they may also need to reassess their eligibility for, and participation in, current funds and portfolios, although this will ultimately depend on the degree of adoption of new labels, given the increased restrictiveness. Companies able to demonstrate credible transition pathways and measurable sustainability outcomes may be better positioned to attract capital allocated to Transition and Sustainable-labelled products. Additionally, under the proposed SFDR 2.0 framework, European Green Bonds (EuGBs) issued under the EU Green Bond Regulation are expected to qualify as eligible investments for both the Sustainable and Transition categories. As a result, allocations to EuGBs may count towards the minimum qualifying investment thresholds for these product labels, potentially supporting investor demand for green issuances aligned with EU sustainable finance frameworks.

Investor implications: SFDR 2.0 is likely to require a reclassification of existing Article 8 and 9 products against the new Sustainability, Transition and ESG Basics categories. This may driveh canges to investment policies, portfolio construction, stewardship expectations and exclusion frameworks, while increasing scrutiny of investments contributing towards the proposed 70% qualifying investment threshold. Investors may also need to reassess whether current holdings continue to qualify for Sustainable or Transition-labelled products under the proposed eligibility criteria.

UK | UK Sustainability Reporting Standards (UK SRS) published, introducing ‘comply or explain’ approach

The UK Financial Conduct Authority (FCA) published the Policy Statement (PS 26/19) [2], containing the final rules under the UK SRS. The new standards aim to replace the existing climate-reporting rules to create a consistent framework aimed at enabling companies to disclose sustainability and climate-related financial risks and opportunities. Key considerations include:

- In-scope companies: Although initial expectations pointed to a mandatory disclosure regime for large, listed UK companies, the Government has applied a comply or explain approach, consistent with the current TCFD framework. The rules have also been extended to non-UK companies (with a secondary listing and depository receipt issuers), which was earlier restricted to signposting requirements under their home jurisdiction. - Reporting reliefs: The FCA has offered certain transitional reliefs to issuers, allowing issuers to omit reporting against certain types of disclosure, including

- 1-year transitional relief for Scope 3 GHG emissions disclosures. - 1-year transitional relief permitting the use of an alternative recognised methodology for measuring GHG emissions, rather than the GHG Protocol. - 2-year transitional relief for non-climate (UK SRS S1) disclosures. - Interoperability: The standards are closely aligned with the ISSB’s IFRS S1 and S2. UK SRS S1 sets out overarching requirements for reporting sustainability-related financial