The UK Financial Conduct Authority (FCA) has published a letter highlighting progress in the overall functioning of the sustainability-linked loans (SLLs) market since its last review in 2023. The letter highlights the importance of robust internal controls, governance frameworks, and transparency in SLL arrangements.
Key takeaways:
Overall, the FCA recognises that - despite headwinds - the SLL market has matured, with firms adopting better practices and stronger product structures. Specifically, the FCA noted:
- Improvements in the quality of SLL structuring, including more robust KPIs and stronger governance processes;
- Post-transaction monitoring could be a tool to inform self-assessments of existing approaches to SLL provision and help ensure internal frameworks evolve to account for best practice;
- Regulated firms should remain alert to risks of misleading disclosures and ensure sustainability claims are accurate and appropriately communicated.
Next steps:
Firms should continue to review their internal systems and governance arrangements for SLLs in light of the FCA's observations. The FCA will continue to work closely with the UK's Transition Finance Council as it drives forward the UK Government's recommendations to promote a credible transition finance ecosystem.
EBA advises national supervisors to de-prioritise ESG pillar 3 enforcement amid ongoing EU reforms
The European Banking Authority (EBA) has issued guidance to EU national supervisors recommending that they do not prioritise enforcement of certain ESG Pillar 3 disclosure requirements for banks, pending the adoption of revised technical rules (the so-called implementing technical standards (ITS)). The move is intended to ease legal and operational uncertainties during the transition period linked to the EU Commission's Omnibus Simplification package and amendments to the EU Taxonomy.
Context:
This follows publication of draft revised ITS earlier this year and reflects regulatory overlap concerns between EBA's Pillar 3 disclosure templates and forthcoming updates to CSRD and the EU Taxonomy. The EBA will issue the final ITS once the outcome of the legislative Omnibus process is known.
Key takeaways:
- Scope of Relief: Supervisors are advised not to prioritise enforcement of:
- Purpose: Aims to mitigate duplication and legal uncertainty during the ongoing legislative reform phase affecting disclosure regimes under the EU's Banking Package (CRR3), CSRD, and the EU Taxonomy.
- Applicability: The EBA's guidance applies for disclosures relating to the reporting period starting 30 June 2025 and remains effective until revised ITS are adopted.
Next steps:
The EBA will finalise the revised ITS only once the Omnibus package is formally adopted. Separately, the draft amended EU Taxonomy proposes optional ESG disclosure reliefs for banks until end-2027; however, it is still unclear how fully these changes will translate into the EBA regime and Pillar 3 disclosures.
The EBA has also released an updated ESG Risk Dashboard based on December 2024 data.
UAE consults on climate transition planning principles
Members of the UAE Sustainable Finance Working Group (financial regulators, Ministries and national exchanges) have launched a public consultation on proposed "Principles for Climate Transition Planning" to guide UAE financial firms in developing credible, effective, and transparent climate transition plans. These principles are designed to align with UAE national climate goals and evolving global best practices.
Key guidelines:
- Clear Objectives: Firms should define transition goals aligned with strategy and risk management frameworks.
- Strong Governance: Board and senior management must oversee planning, with clear accountability.
- Integration with Business Strategy: Transition planning must be embedded into firm-wide decision-making and risk frameworks.
- Data, Metrics, and Engagement: Firms should track science-based metrics and engage clients and investees on transition alignment.
- Transparent Reporting: Regular internal and public disclosures on plans, progress, and methodologies are encouraged.
Next steps:
The consultation closed in mid-July and further rule-making will follow.
Taiwan FSC proposes mandatory sustainability disclosures
Taiwan's Financial Supervisory Commission (FSC) has released draft amendments to regulations for securities and futures firms, proposing a phased-in approach to mandatory sustainability disclosures starting from the 2026 fiscal year.
In more detail: The proposed rules, which are currently open for a 60-day public consultation, are part of Taiwan's wider roadmap to align with IFRS Sustainability Disclosure Standards. The requirements would apply to qualifying firms based on their capitalization and would mandate the inclusion of sustainability-related financial information in their annual reports. The new disclosures must be approved by the board of directors, but will not be subject to a formal audit. To ease the transition, the FSC is offering several reliefs, including allowing cross-referencing for firms already disclosing sustainability information elsewhere and a "proportionality principle" that allows for qualitative disclosures based on a firm's technical capabilities. In the first year of reporting, firms will only be required to disclose climate-related information and will be exempt from providing comparative data from the previous year. The proposal also streamlines existing financial reporting requirements by removing redundant disclosures on major shareholders.
What's next:
The public consultation is currently open for feedback from industry stakeholders on the proposed changes. The 60-day period began with its publication on July 25, 2025, and will close on September 23, 2025. After the consultation period ends, the FSC will finalize the amendments.