July 2026 Newsletter

Top sustainability stories from June 2026.

SFDR 2.0: Council sets out more prescriptive classification and disclosure framework

The Council of the European Union has set out its negotiating position on the proposed overhaul of SFDR (“SFDR 2.0”), introducing a more prescriptive framework for how sustainable investment products are classified and disclosed. The proposals replace the existing Article 6, 8, and 9 regime with defined product categories based on sustainability objectives and investment strategies. They also tighten rules on the use of sustainability-related terms in product names, introduce clearer minimum criteria for each category, and enhance disclosure requirements at both product and entity level. Greater alignment with other EU sustainable finance measures, including the Taxonomy Regulation, also features prominently throughout the framework. Read our full article here.

El Niño is emerging as a material investor issue, not just an environmental story.

Forecasts suggest a strong event could develop in 2026–27, bringing heightened risks of crop failure, food price inflation, infrastructure damage and global supply chain disruption. Physical climate hazards already carry major economic costs, with annual disaster losses running into the hundreds of billions, and far more when indirect impacts are included. For investors, El Niño can affect commodities, inflation, growth and company performance across sectors. The key response is preparedness: integrating physical climate risk into investment processes, strengthening scenario analysis, engaging portfolio companies, and supporting adaptation and resilience measures. Read our full article here.

ISO and SBTi release updated net zero standards: key requirements and technical developments

The International Organization for Standardization (ISO) has released a draft Net Zero Standard within the ISO 14060 family, building on its established greenhouse gas (GHG) accounting framework. The draft sets out detailed requirements for organisations to define, achieve, and substantiate net zero claims. It specifies robust approaches to boundary setting, emissions quantification, and reporting, aligned with existing ISO 14064 principles. The standard defines net zero as reducing GHG emissions to the lowest feasible level and neutralising residual emissions through high-quality carbon removals. It also establishes a clear mitigation hierarchy, prioritising direct emissions reductions over offsetting, and introduces stringent criteria for the use of carbon credits, including additionality, permanence, and independent verification.

In parallel, the Science Based Targets initiative (SBTi) has launched an updated Net-Zero Standard 2.0, refining its corporate framework. Key updates include stricter requirements for near-term targets (typically 5–10 years), clearer thresholds for long-term emissions reductions (around 90–95% across scopes 1, 2, and 3), and expanded guidance on Scope 3 coverage, including minimum proportion thresholds. The updated standard also formalises expectations on transition planning, tracking progress, and the limited role of neutralisation and beyond-value-chain mitigation. A transition period is in place meaning that companies can start submitting targets under V2 from February 2027 though the current standard V1 can still be used until 31st January 2028 after which V2 becomes mandatory for new targets.

FCA Proposes shift away from TCFD reporting for investment products

The FCA is proposing to remove mandatory Task Force on Climate-related Financial Disclosures (TCFD)-aligned reporting requirements for investment products, reflecting a transition towards ISSB-aligned standards, particularly IFRS S2. As outlined in its June 2026 consultation (CP26/17), the FCA aims to streamline requirements by reducing duplication and focusing on core greenhouse gas disclosures (Scopes 1, 2 and 3), removing more complex or inconsistently applied metrics such as Weighted Average Carbon Intensity (WACI). While product-level TCFD reporting would be removed, entity-level climate-related disclosures will still be required. The proposals sit within the broader evolution of the FCA’s Sustainability Disclosure Requirements (SDR) framework, with a transition period envisaged for implementation.

UK Government sets updated carbon reduction target: 87% by 2040

The UK has set a target to reduce greenhouse gas emissions by 87% by 2040 compared to 1990 levels, as part of its Seventh Carbon Budget. The target follows advice from the Climate Change Committee (CCC) and represents a steeper decarbonisation trajectory in the 2030s. It covers economy-wide emissions, including energy, transport, buildings and industry, and is designed to keep the UK on track toward its legally binding net zero target by 2050. The Seventh Carbon Budget sets interim limits on total emissions over the period, providing a detailed framework to guide policy, investment, and sectoral transition pathways.

If you’d like to know more or discuss any of these topics please get in touch.