ESG+ Newsletter – 5 February 2026

Climate reporting mandatory, remainder comply or explain under FCA sustainability reporting  

The UK’s Financial Conduct Authority (FCA) has initiated a consultation on sustainable reporting standards, with initial proposals indicating that only climate reporting will be mandatory under the UK’s listing rules, in line with standards set by the International Sustainability Standards Board (ISSB). The FCA initially mandated climate reporting for all listed companies in 2021 based on the Taskforce on Climate-related Financial Disclosures recommendations; however, market feedback has since indicated that Scope 3 reporting “remains difficult for some companies” due to data collection and accuracy challenges. Responsible Investor reports on the FCA’s update, noting that while UK-listed companies would be expected to report climate-related information from January next year, an opt-out provision for reporting of Scope 3 emissions will be in place until 2028, at which stage a “comply or explain” regime will apply, in a similar manner to the UK’s Corporate Governance Code. Similarly, listed companies can also opt out of reporting non-climate sustainability information for two years until 2029, at which stage the “comply or explain” regime will apply. The FCA’s approach appears to balance a recognition of the importance of sustainability information to companies and investors, while accepting the challenges around certain aspects of disclosure. The challenge now for external stakeholders will be around comparability of information, with materiality assessments potentially seen as guidance in what should be disclosed and what can be explained as unnecessary reporting. 

Companies face a fragmented global climate disclosure landscape 

As noted by ESG Dive, companies are entering a more complicated regulatory landscape in 2026 since the United States and European Union moved away from climate disclosure alignment last year. In 2025, the US halted the defense of the SEC’s climate rule; simultaneously, the EU retained its CSRD and CSDDD reporting regime, while scaling back scopes and delaying timelines. Even with these regulatory pullbacks, overall disclosure requirements are expanding globally, including strengthened rules emerging in states like California and New York, in addition to countries such as the United Kingdom (as detailed above), Mexico, Australia, Spain, and others. Nearly 40 jurisdictions have already or are in the process of aligning with ISSB disclosure frameworks, IFRS S1 (general sustainability requirements) and IFRS S2 (climate), signalling a continued global drive toward standardised reporting. At the same time, investor demand continues to push for corporate ESG disclosures, with 61% of surveyed asset owners viewing ESG regulations as helpful for standardising frameworks, according to a Morningstar Sustainalytics’ survey. Amidst this evolving landscape, companies are prioritising governance, data quality, and internal controls to manage differing compliance requirements. Despite the noise, global sustainability momentum progresses, with companies maintaining disclosures and investments even amid regulatory uncertainty and fragmented requirements. 

Insurers ramp up disclosures on how climate change and nature impact portfolios 

A new report from ClimateWise, the insurance industry network within the Cambridge Institute for Sustainability Leadership, has found that there is a growing impetus across the insurance industry. The key findings of the report included an increase in cohesion, particularly in relation to regulatory advocacy and product innovation as a means of supporting opportunities associated with the transition to a low-carbon economy. Highlights of the report included: 

• 58% of members have conducted, or plan to conduct, double materiality assessments. 
• 39% of members now integrating nature-related risks into board-level governance processes. 
• One third of members have already submitted full transition plans, while another third have formally committed to developing them. 
• Advances in climate risk management, transition planning, and the integration of nature-related considerations within governance structures will remain key priorities into 2026. 

In many ways, insurance has proven to be the canary in the coal mine. Despite protestations around climate change and the push for a greater focus on climate and sustainability in risk management, insurers are ploughing ahead. The industry continues to integrate the additional cost related with significant climate-related events into premiums while taking steps to uncover opportunities as the world continues to look at decarbonisation. 

Gas power expansion risks accelerating global warming 

In contrast to efforts to decarbonise, according to Global Energy Monitor, 2026 is on track to become a record year for new gas power projects worldwide. The US is driving much of this growth, having nearly tripled its gas-fired capacity under development in 2025. More than one-third of this new capacity is intended to directly supply data centres, with additional projects planned to meet the rapidly rising energy demands of AI. An analysis by Impakter warns of the climate consequences of these projects. If all proposed US gas plants are built and operated over their lifetimes, they could emit approximately 12.1 billion tonnes of CO₂, which is roughly double the country’s current annual emissions from all sources. Globally, the planned gas build-out could generate 53.2 billion tonnes of CO₂ over the lifetimes of the projects, undermining any efforts to fight global warming and its consequences. As the AI gold rush continues apace, it is likely that the impact on water and energy consumption will come under scrutiny from a policy and regulatory perspective, a potential risk for the industry that continues to implement significant expansion plans. 

GHG Protocol releases new agriculture focused standards  

The GHG Protocol has announced the release of its new Land Sector and Removal (LSR) Standard, ESG today reports. The newly released standard will be the first global standard available for companies to use to track GHG emissions and CO2 removals from agricultural land use. The standard has been long-awaited, as according to the GHG protocol, the agricultural sector accounts for 22% of global emissions. The guidance aims to provide companies with a credible way to report on their GHG emissions, something that was previously lacking. The new standard, which will come into effect in 2027, underwent a thorough review process, spanning 5-years, with over 300 stakeholders involved in its creation, and 96 companies and supporting partners piloting the standards. The introduction of the standards has seen early praise from industry players, with Craig Hanson, Managing Director of programs at WRI, noting the new standards will provide companies with “Credible methods to track their progress and prove their impact”. 

ICYMI

• Hong Kong has broadened its Taxonomy to cover transition finance and climate adaptation. According to ESG News, the framework now distinguishes Green, Transition, and Exclusion categories, enabling investors to price credible decarbonisation pathways.