3 May – 3 June 2026

Introduction

ESG is changing the landscape for financial institutions as stakeholders, including investors, increasingly expect them to make their operations more sustainable.

Financial services regulators also view ESG as a priority, embedding the principles of climate-related financial risks into their supervisory frameworks and dealing with greenwashing issues.

There is limited uniformity in regulation as financial services regulators are at different stages in developing their ESG regulatory framework, particularly in relation to disclosures and taxonomy, which is a challenge for many institutions operating across borders. It is therefore critical to monitor the latest regulator updates.

To help you, we have tracked ESG regulatory developments from 3 May 2026 – 3 June 2026, from the UK, France, EU, the Netherlands, the US, Australia as well as other key international regulators.

This month’s highlights

CRD VI – It’s not just about third country branches, there are ESG elements too

Many non-EU banks are preparing for the Article 21c requirements under the Capital Requirements Directive 6 (CRD 6) which prohibits non-EU banks and large investment firms from providing core banking services cross-border into the EU. To serve EU clients, these institutions must establish a locally authorized branch or subsidiary in the relevant Member State unless an exemption applies. The prohibition applies from 11 January 2027.

However, whilst the Article 21c requirements are important the CRD 6 and its accompanying regulation, the Capital Requirements Regulation 3 (CRR 3), contains certain ESG related measures that should not be overlooked.

Starting with disclosure and supervision. Whilst the CRR3 does not introduce either ‘green supporting’ or ‘brown penalising’ capital factors it does focus on transparency and comparability through Pillar 3 disclosures. It updates both the disclosure mandate in Article 434a and the ESG disclosure provision in Article 449a and the scope of the detailed ESG Pillar 3 disclosures (Article 449a) are extended to “all institutions”, subject to proportionality. ESG is also embedded in the CRD 6, which strengthens the supervisory review of ESG risks, calling for consistent ESG stress‑testing methodologies across the European Supervisory Authorities.

There is also a critical governance angle with the ‘G’ in ‘ESG’ being significantly upgraded under the CRD 6. For example, the directive strengthens the “fit and proper” assessment process in certain ways including establishing a suitability assessment process by regulators prior to appointments to the management body and chair of the supervisory function for “large institutions”, including globally systemically important banks and other systemically important entities. Also, the directive sets out a new mandate for institutions to prepare, maintain, and update “individual statements” of roles and responsibilities alongside a “mapping of duties”, which covers all members of the management body in its management function, senior management, and key function holders. Linked to governance, the CRD 6 requires institutions to ensure that their remuneration policies and practices are consistent with and promote sound and prudent risk management, including specifically their risk appetite in terms of ESG risks.

With the CRD 6 transposition deadline approaching, firms would be well advised not to focus solely on the Article 21c third country branch requirements. The ESG-related measures outlined above will require careful analysis and, in many cases, changes to existing governance structures, policies, and reporting capabilities. Firms that begin assessing these requirements early will be best placed to meet supervisory expectations and avoid last-minute compliance gaps. If you would like to discuss how any of these changes may affect your institution, or if you need assistance preparing for the CRD 6 and CRR3 requirements more broadly, please do not hesitate to get in touch.

United Kingdom

22 May 2026 – FCA publishes findings from Transition Finance Pilot

The Financial Conduct Authority (FCA) published its findings from its Transition Finance Pilot (the Pilot) which examined barriers to scaling finance for climate solutions.

Background

Announced as part of the Financial Services Growth and Competitiveness Strategy in July 2025, the Pilot was a market engagement exercise led by the FCA and supported by the Prudential Regulation Authority and the Green Finance Institute. Its findings are based on a literature review and bilateral engagement with a wide range of stakeholders, including finance providers and climate solutions developers.

Through the Pilot the FCA sought to develop a clearer understanding of how effectively the UK financial system supports climate solutions projects and companies, identifying any practical actions that could support the market to work more effectively. This focus emerged in response to market feedback that there may be particular barriers hindering the flow of capital to this sector.

Findings

Three main findings have been identified:

Some climate solutions struggle to reach a commercial maturity sufficient to attract private capital. Many climate solutions face challenges moving from technical readiness to market readiness, meaning proven technologies do not always translate into commercially investable projects without coordinated policy and risk-sharing measures.
Capital is not always well-matched to opportunity, despite strong appetite. While the UK financial system has depth and diversity of capital, this capital is not always well aligned with the scale, tenor, or risk-return profile of climate solutions opportunities.
Information and capacity gaps create frictions across the market. Information asymmetries and capacity gaps across policy, finance, and industry create frictions that increase costs and reduce confidence, especially for small and medium-sized enterprises (SMEs).

Next steps

The FCA is sharing its findings with UK and international stakeholders to inform policy development and market coordination. It is also exploring how its regulatory framework can better support SME access to finance.

European Union

4 May 2026 – SFDR 2 – Draft ECON report

The European Parliament’s Economic and Monetary Affairs Committee issued a draft report on the European Commission’s (Commission) proposal for a Regulation amending Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR), Regulation (EU) No 1286/2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) and repealing Commission Delegated Regulation (EU) 2022/1288.

7 May 2026 – ESMA presents the results of the CSA on MiFID II sustainability aspects

The European Securities and Markets Authority (ESMA) issued a public statement presenting the results of its Common Supervisory Action (CSA) on the sustainability aspects of the Markets in Financial Instruments Directive II (MiFID II).

The statement summarises the results of the CSA, it highlights the key themes emerged from the work and, in this context, it also provides some high level interim supervisory expectations on a few key areas to foster consistent implementation while reducing burden during the current transition period where the broader sustainable finance framework – particularly the SFDR – is under review, and consequential amendments to the MiFID II sustainability-preference requirements are anticipated.

ESMA invites Member State competent authorities to adopt a proportionate supervisory approach, encouraging dialogue with firms to address identified issues during the transition period rather than prioritising enforcement actions, without prejudice to cases involving clear breaches or mis-selling. Building on the insights gained from the exercise, ESMA will further reflect on the results in the context of any future updates of the MiFID II Delegated Acts on sustainability (Commission Delegated Regulation (EU) 2021/1253 and Directive 2021/1269) and the related updates of the ESMA Guidelines on suitability and product governance, with a view to simplifying the framework where appropriate and supporting a more consistent and effective application of the relevant requirements.

19 May 2026 – ECB updates good practices for climate and nature-related risk management

The European Banking Authority (ECB) updated its compendium of non-binding good practices for climate and nature risk manage...

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