Regulation is shaping the sustainability agenda and changing the way companies do business in different jurisdictions, but keeping pace with constant regulatory updates has become a mammoth task for businesses and investors. In this recurring series, S&P Global Sustainable1 presents key environmental, social and governance regulatory developments and disclosure standards from around the world.

In this month’s update, we look at Malaysia’s proposed climate change law, a delay for the EU’s deforestation-related regulation and Canada’s plan to mandate climate-related financial disclosures, among other topics.

INTERNATIONAL    ASIA-PACIFIC    EUROPE    LATIN AMERICA AND THE CARIBEAN    UNITED STATES AND CANADA

INTERNATIONAL

TNFD publishes draft guidance on nature transition planning

The Taskforce on Nature-related Financial Disclosures (TNFD) on Oct. 27 published draft guidance for corporates and financial institutions that are using the TNFD-recommended disclosures to develop nature transition plans as part of their business strategy. A nature transition plan outlines what steps a company is taking to address biodiversity loss, including avoiding and reducing negative impacts, as well as protecting, conserving, regenerating and restoring nature, according to the TNFD. The plan should include information about how a company is responding to nature-related risks and opportunities, how it is addressing impacts on nature and supporting the resilience of dependencies and what actions it is taking to address nature restoration across its business and throughout the wider economy, the TNFD said. Companies should also have a clear roadmap on how it aims to achieve the plan’s goals and implement strong governance and reporting, the TNFD said. A consultation on the draft guidance closes on Feb. 1, 2025.

ASIA-PACIFIC

Pakistan holds consultation on adoption of ISSB standards

The Securities and Exchange Commission of Pakistan on Oct. 3 launched a consultation on adopting the International Sustainability Standards Board (ISSB) sustainability standards. Under the proposals, the standards would be phased in depending on the size of a company’s total assets, annual revenues and number of employees. Companies with annual revenues of more than 25 billion Pakistan rupees in last two consecutive financial years, or with more than 1,000 employees at the end of their last financial year, or with total assets of more than 12.5 billion Pakistan rupees at last financial year-end would be required to report as of Jan. 1, 2025. Smaller companies would begin reporting as of Jan. 1, 2026, and Jan. 1, 2027, depending on their size. Companies would be required to provide assurance from their auditors on sustainability reporting as of the second year of reporting, the regulator said. The consultation closed on Oct. 18.

Malaysia proposes climate change bill to support energy transition

Malaysia’s Ministry of Natural Resources and Environmental Sustainability on Oct. 4 published a proposed climate change bill designed to facilitate the country’s transition to a low-carbon economy and to strengthen its resilience to climate change impacts. The proposed law will provide a framework for future climate-related legislation and regulations at the national and local levels, the Ministry said in the consultation document. The proposal would include national targets for greenhouse gas (GHG) emission reductions, the establishment and regulation of emission reduction mechanisms, guidelines on managing data, the creation of a national climate fund and a requirement for companies to report on carbon emissions to regulators, among other things.  

New Zealand standard setter proposes amendments to climate standards

New Zealand’s External Reporting Board (XRB), which establishes financial reporting standards, proposed on Oct. 8 amendments to its climate-related reporting standards to give companies more time to prepare for disclosures. The amendments would grant companies an additional accounting period to report on Scope 3 emissions, or those emissions that occur up and down a company's value chain, as well as one more accounting period to disclose anticipated financial impacts and transition planning. The amendments would also establish a new adoption provision for the assurance of Scope 3 carbon emissions disclosures for accounting periods ending before Dec. 31, 2025. A consultation closed on Oct. 30.

Singapore holds consultation on plans to decarbonize the economy

Singapore’s National Climate Change Secretariat launched a public consultation on Oct. 8 regarding its plans to achieve net-zero emissions by 2050 and transition toward a low-carbon economy. Singapore is seeking views on plans to increase its carbon taxes to up to S$80 per metric ton of CO₂-equivalent by 2030. The island state raised the tax to S$25/tCO₂e from $5/tCO₂e in 2024. Singapore also plans to roll out solar power to reach its target of at least 2 gigawatt-peak by 2030, which would account for 3% of its 2030 projected electricity demand. It also aims to increase importations of low-carbon electricity by 2035 to 6 gigawatts, up from a previous target of 4 gigawatts. The Secretariat also said Singapore aims to increase the output of sustainable products by 1.5 times by 2030 from 2019 levels and achieve at least 2 million tCO₂e of carbon abatement annually through carbon capture, which captures carbon before it is released into the atmosphere. By 2050, Singapore wants to increase the output of sustainable products by four times compared to 2019 levels and reach more than 6 million tCO₂e of carbon abatement annually from low-carbon solutions, the Secretariat said. The consultation closed on Nov. 5.

Hong Kong financial regulator publishes sustainable finance development plan

The Hong Kong Monetary Authority (HKMA) on Oct. 21 released its Sustainable Finance Action Agenda designed to support the development of sustainable finance in Asia. Under the plan, all banks should strive to achieve net-zero across their operations by 2030 and net-zero financed emissions by 2050, the regulator said. HKMA will support banks in reaching those goals by providing guidelines on transition planning and climate scenario analysis and by setting science-based targets in its own corporate operations, it said. Banks should also align their disclosures with international frameworks including those of the ISSB and the Basel Committee on Banking Supervision’s planned Pillar 3 disclosure framework for climate-related financial risks, HKMA said. The regulator is also planning to boost investment in sustainability projects throughout Asia, it said.

EUROPE

European Commission proposes delay for deforestation rule

The European Commission proposed on Oct. 2 a delay to a new regulation that aims to ensure that key goods placed on the EU market will not contribute to deforestation and forest degradation. The regulation was due to be implemented at the end of 2024, but the Commission is proposing to shift the deadline to the end of 2025 for large companies and to June 30, 2026, for micro- and small enterprises. The Commission said the extension would give countries and companies more time to prepare for the regulation and that “several global partners have repeatedly expressed concerns about their state of preparedness.” It said the state of preparedness among European stakeholders was “uneven.” The Commission also published additional guidance on how to implement the regulation.

EU financial regulator provides guidelines on accounting for carbon allowances

The European Securities and Markets Authority (ESMA) on Oct. 8 issued a public statement to guide issuers on how they should account for carbon allowances in their financial reporting. The document looks at the different accounting approaches used by European- listed issuers in their financial statements regarding carbon pricing programs and outlines what accounting standards can be used to account for carbon allowances in financial reporting. It also recommends what disclosures issuers should include in their financial statements regarding carbon pricing. ESMA said issuers should ensure that the information they disclose about carbon allowances in financial statements is connected to the disclosures required under the European Sustainability Reporting Standards (ESRS). The standards require issuers to disclose the amount of GHG emissions or removals it has financed or intends to finance through the purchase of carbon credits.

EU financial regulator sets out expectations for sustainability disclosure reporting

ESMA published on Oct. 24 its enforcement priorities for issuers’ 2024 financial reports, including its expectations for sustainability reporting. The document asks companies to “carefully consider the materiality regime” related to the ESRS, which requires companies to think about reporting both in terms of financial materiality and in terms of how their business affects the environment, employees and consumers. ESMA also said it expects companies to file their sustainability statements in the same manner as financial statements. The regulator also outlined how it expects companies to report according to the EU Taxonomy, which aims to define sustainable economic activities and investments. ESMA said it, together with national regulators, would undertake “enforcement actions” should they identify “material misstatements.”

LATIN AMERICA AND THE CARIBBEAN

Brazil’s President signs law on developing sustainable fuels

Brazilian President Luiz Inácio Lula da Silva signed on Oct. 8 into law the country’s Fuel of the Future package, which aims to develop green diesel and biofuels and establishes regulatory frameworks for sustainable aviation fuels and carbon capture and storage. Under the measures, airlines will be required to reduce carbon emissions by 1% from 2027 and increase that to 10% by 2037. The program will also raise the range for anhydrous ethanol blended with gasoline sold at the pump to 22% to 27%, with the potential to reach up to 35%, compared with minimum levels of 18% currently. It will increase the blend content of biodiesel in diesel by one percentage point annually to 20% by 2030. The Brazilian government said the program will create investments in transportation of 260 billion Brazilian reais and help the country meet its commitments to reduce emissions by preventing 705 million metric tons of carbon emissions by 2037.

UNITED STATES AND CANADA

Canada to mandate climate-related financial disclosures for large companies

The Canadian government said on Oct. 9 that it would mandate climate-related financial disclosures for large, federally incorporated companies through amendments to its Canada Business Corporations Act. It said it would launch a “regulatory process” to define the disclosures and the number of firms that would be subject to them. Small and medium-sized businesses would not be subject to the disclosures, but the government said it would look at ways to encourage voluntary disclosure among smaller companies. The government also announced plans for a “Made-in-Canada sustainable investment guidelines,” a taxonomy specially developed for the Canadian market. It will act as a tool for investors, lenders and other stakeholders to identify “green” and “transition” economic activities, the government said.