Environmental, social and governance | UK Regulatory Outlook April 2026

UK 

HMRC consults on draft UK CBAM emissions calculation and verification regulations 

HMRC has launched a technical consultation on the draft Carbon Border Adjustment Mechanism (Emissions and Verification) Regulations 2026, published on 9 April 2026 ahead of the UK CBAM's commencement on 1 January 2027. 

The draft regulations set out the process for calculating direct embodied emissions in CBAM goods, requirements for monitoring and verification of emissions data including conditions for verifiers and accreditation bodies, and record-keeping requirements. This follows a February 2026 consultation on three other sets of draft CBAM regulations covering administrative requirements, the CBAM rate and carbon price relief, and transitional period modifications to 30 June 2028. Final secondary legislation is expected to be laid later in 2026. 

The consultation closes on 21 May 2026 and those importing CBAM goods may wish to engage with the process as the regulatory framework takes shape ahead of the January 2027 commencement date. 

Investment Association responds to FCA consultation on ESG ratings 

The Investment Association (IA) has responded to the Financial Conduct Authority (FCA)'s consultation on ESG ratings (CP25/34), expressing support for its proposed framework for regulating ESG ratings providers.

The IA welcomed the framework's basis on existing rules, its alignment with international standards and its focus on strengthening transparency and governance, while also confirming its view that asset managers producing proprietary ESG ratings as part of FCA-regulated activities fall outside the scope of the proposed regime, as existing regulatory frameworks sufficiently address any associated disclosure risks. 

The IA nonetheless sought further clarity on a number of points, including which firms and activities will be subject to regulation, the treatment of proprietary or internal ratings when shared externally, and the implications of the proposed narrowing of the UK Benchmarks Regulation. It also called on the FCA to avoid duplicating the regulatory burden created by parallel EU legislation on ESG ratings, given that many providers operate on a cross-border basis, and to draw on lessons from the EU regime to minimise divergence costs and support international operability.

Additionally, the IA emphasised the importance of ensuring that ESG ratings disclosures support retail investors' understanding where ratings are used in consumer-facing communications, and stressed that any guidance developed should remain proportionate for smaller and specialist providers while maintaining the UK's competitiveness as a global centre for sustainable finance. 

UK Emissions Trading System Authority consults on future treatment of sustainable aviation fuels 

The UK Emissions Trading System (UK ETS) Authority is consulting on the future treatment of sustainable aviation fuels (SAF) in the UK ETS given the introduction of the SAF mandate from 1 January 2025 which places an obligation on aviation fuel suppliers in the UK to provide an annually increasing amount of SAF within the overall UK aviation fuel mix.

Proposals include whether the types of SAF eligible under the UK ETS should extend beyond biofuels, whether SAF eligibility under the UK ETS should align with the SAF mandate sustainability criteria and how the UK ETS should recognise and account for SAF.

SAF production in the UK is to be supported by a revenue certainty mechanism based on a guaranteed strike price, similar to contracts for difference mechanisms in other low-carbon and renewable energy sectors. 

Interested businesses have until 15 June 2026 to respond to the consultation. 

Government rejects transition period for UK-EU SPS Agreement 

See food law section. 

EU 

EU sets binding 2040 climate target 

The EU has amended the EU Climate Law to set a binding 2040 target of a 90% reduction in net greenhouse gas emissions compared to 1990 levels. 

Regulation (EU) 2026/667 also requires the Commission to review relevant EU legislation to enable both the new 2040 target and the existing 2050 climate neutrality targets to be achieved. The review must address the use of international carbon credits under Article 6 of the Paris Agreement, capped at 5% of 1990 EU net emissions from 2036, the role of domestic carbon removals under the EU ETS, and broader social and economic impacts including energy security and the need for a just transition.

The regulation additionally introduces a biennial review of the EU Climate Law and postpones the extension of emissions trading to buildings, road transport and additional sectors under EU ETS II until 2028. 

In response to the coming in force of the regulation, on 19 and 20 March, the European Commission published consultations to revise the Renewable Energy Directive II and the Energy Efficiency Directive. The Commission plans to adopt legislative proposals to amend the two directives in Q4 of 2026. 

ISSB proposes amendments to sustainability reporting standards 

On 26 March 2026, the International Sustainability Standards Board (ISSB) published proposed amendments to the Sustainability Accounting Standards Board (SASB) standards in three priority sectors: agricultural products; meat, poultry and dairy; and electric utilities and power generators.

SASB standards are an important source of guidance for entities reporting under IFRS S1, also published by the ISSB, which sets out general requirements for the disclosure of sustainability-related financial information. This follows the publication of amendments in July 2025 to the SASB standards in nine other priority sectors, in the extractive and minerals processing and processed foods industries.

The ISSB is also consulting on whether to make consequential amendments to its industry-based guidance on implementing IFRS S2 which covers climate-related disclosures.

As previously reported, the UK government has published final UK Sustainability Reporting Standards (UK SRS), based on the ISSB's standards, in preparation for voluntary and mandatory adoption.

Businesses operating in any of the priority sectors preparing to report under UK SRS or ISSB standards should ensure that they have familiarised themselves with the new SASB standards. 

EU Commission consults on revising Taxonomy and Environmental Delegated Acts 

The EU Taxonomy is a science-based classification system established by the European Union to define which economic activities are considered environmentally sustainable and aid investors in their portfolio decisions.

The European Commission published a consultation on revising the EU Taxonomy criteria. It centres on revising the technical screening criteria (TSC) under the Taxonomy Regulation (Regulation (EU) 2020/852). The cited aims of the amendments are to boost taxonomy adoption, improve access to green finance across the EU and enhance market transparency. 

The consultation was accompanied by two draft texts – the "Delegated Regulation amending the Taxonomy Climate Delegated Act ((EU) 2021/2139) as regards enhancing the usability of the TSC" and the "Delegated Regulation amending the Taxonomy Environmental Delegated Act ((EU) 2023/2486) as regards enhancing the usability of the TSC".

The feedback period was open until 14 April 2026, with the input to be used to shape the forthcoming revision of the criteria by the Commission, which is planned for summer adoption.

European Commission publishes guidance on Packaging and Packaging Waste Regulation implementation 

See sustainable products section.