ESG Insights - October 2026

Welcome to the latest ESG Insights – our newsletter highlighting a selection of key legal developments in the EU, UK and US.

This month’s edition, covering September and early October, includes:

• EmpCo directive becomes applicable across EU
• Simplified ESRS finalised for CSRD reporters alongside a voluntary standard
• EP finalises its SFDR 2.0 position
• Milieudefensie deemed admissible in the ING case
• EU Commission adopts A-to-G grades for energy and water for data centres
• UK sustainability reporting for listed companies: an update
• FCA updated disclosure rules for asset managers and asset owners
• SEC proposes to rescind Rule 14a-8
• EPA moves to repeal Biden-era power plant GHG rules
• California governor approves regulatory framework for data centres

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Highlights

Updates from the European Union

EmpCo Directive becomes applicable across the EU
On 27 September 2026, the rules introduced by Directive (EU) 2024/825 (the EmpCo Directive) became applicable throughout the European Union, despite many Member States not having completed transposition in time. The EmpCo Directive introduced maximum-harmonised restrictions on environmental, climate-related and sustainability claims and labels in business-to-consumer marketing. Businesses making insufficiently substantiated generic environmental claims may now face enforcement risks, particularly in light of the Commission’s position that products already placed on the market are not generally exempt from the new rules. Instead, its September 2026 Q&A and the CPC Network's Common Understanding on old stock outline practical remediation options. National approaches nevertheless differ, with Austria excluding certain civil claims for three years and Germany introducing a good-faith and proportionality test for EmpCo-related injunctions under the Act Against Unfair Competition, while the Netherlands allows for proportionality arguments. To read more, especially on what the enforcement might look like, consider visiting our blog.

To help businesses monitor national implementation of the EmpCo Directive across Europe, we have developed an interactive transposition tracker covering EU Member States and EEA countries. The tool provides an overview of the status of implementation in each jurisdiction, the relevant national law, key dates and any notable national deviations from the Directive on key issues.

Simplified ESRS finalised for CSRD reporters, alongside a voluntary standard
The simplified European Sustainability Reporting Standards (ESRS), setting out the datapoints for Corporate Sustainability Reporting Directive (CSRD) reporting, are confirmed as final and were published on 21 September 2026. On the same day, a separate CSRD-related Delegated Regulation was published to establish the voluntary standard, based on the Commission's 2025 Recommendation, for undertakings outside mandatory reporting that have no more than 1,000 employees on average.

In line with the Omnibus I sustainability simplification package, the revised ESRS lighten reporting under CSRD and, according to the Commission, cut mandatory datapoints by over 60%, with a simpler double materiality assessment. The revised ESRS enter into force on 10 November 2026 and apply only to in-scope undertakings, for financial years beginning on or after 1 January 2027, with early adoption possible.

From financial years beginning on or after 1 January 2027, the voluntary standard sets the content of the binding "value chain cap", under which CSRD reporters may not require undertakings in their value chain with up to 1,000 employees on average to provide more than the essential datapoints it lists.

In short, undertakings in scope of CSRD will report against a shorter set of standards from 2027, and their smaller value chain partners gain a defined limit on the data they can be required to provide.

EP finalises its SFDR 2.0 position ahead of the trilogues
On 5 October 2026, the European Parliament’s ECON committee announced its decision to enter into interinstitutional negotiations based on the committee mandate from 10 September 2026 on revising the Sustainable Finance Disclosure Regulation (SFDR). While removing an outright fossil fuel ban from the proposed transition fund category, lawmakers introduced rigorous capex conditions. Energy companies must allocate at least 20 per cent of their capital expenditure to EU taxonomy-aligned activities and invest more capital in green projects than in expanding fossil fuel production. This dual requirement threatens to disqualify major hydrocarbon producers whose expansion spending still outpaces sustainable investment. Additionally, lawmakers proposed a key opt-out for alternative investment funds offered solely to per se professional investors, exempting them from core disclosure regimes provided they adhere to robust anti-greenwashing marketing rules. The interinstitutional negotiations (trilogues) are set to begin towards the end of October. For a file like this, the expectation is to see another political trilogue in November, and a final trilogue, where political agreement is reached, in December. The Irish Presidency has reconfirmed its ambition to reach a political agreement during its mandate (i.e., before the end of 2026).

Milieudefensie deemed admissible in the ING case
On 9 September 2026, the Amsterdam District Court issued an interim judgment declaring Milieudefensie admissible in its collective climate action against ING. Acting on behalf of current and future generations of Dutch residents, the environmental group argues that ING, as a large systemic bank, shares responsibility for limiting global warming to 1.5°C, including through the emissions of the clients it finances (Scope 3), and seeks orders requiring ING to take measures to that end. The court rejected ING's arguments that Milieudefensie is not representative because it misinforms its supporters and because those it represents would not benefit from the claims, as these would only reduce ING's reported rather than actual emissions. Whether the claims can in fact contribute to the 1.5°C goal is, according to the court, a matter for the merits rather than admissibility. The case now proceeds to a further written round, with Milieudefensie's reply, limited to eight themes it has identified, due on 2 December 2026 and ING's rejoinder on 3 March 2027, ahead of a two-day oral hearing in the second half of the second quarter of 2027.

EU data centre rating: Commission adopts A-to-G grades for energy and water
Data centres above 500kW that report under the EU's data centre reporting rules under the Energy Efficiency Directive will receive an automatically generated label grading their energy and water performance from A to G. The European Commission adopted the Delegated Regulation establishing the rating scheme on 21 September 2026. Parliament and Council cannot amend a delegated act and may only object to it, within a period of two months that can be extended by a further two. If neither object, it will be published in the Official Journal and enter into force 20 days later. However, on 6 October, the European Parliament requested the extension to the scrutiny period, moving the deadline to object to 21 January 2027. This signals that the EU bodies expect a lengthier discussion on substance.

Apart from sites used exclusively for defence and civil protection, which are exempt, every in-scope facility will be graded for energy on Power Usage Effectiveness and for water on Water Usage Effectiveness. Because both are calculated from data that operators already report, the scheme adds no new reporting obligations; what changes is that those disclosures become a public grade. The label also looks behind the energy mix, distinguishing renewable and nuclear supply from plants commissioned or refurbished within the last 10 years, so the age of the generation behind a site's clean power will be visible for the first time.

The Commission intends to use the ratings to assess sustainability under the proposed Cloud and AI Development Act. It is also consulting on binding minimum performance standards for new and retrofitted data centres until 14 December 2026 – these would be set by a Regulation of Parliament and Council, with an impact assessment due by the end of 2026 and a legislative proposal expected in Q2 2027. For further detail on the rating scheme see our blog.

Updates from the United Kingdom

UK sustainability reporting for listed companies: regulator opts for "comply or explain" across the board
Commercial companies listed in the UK, including overseas companies, will have to report against the UK Sustainability Reporting Standards (UK SRS, aligned with the ISSB Standards) or explain why they have not done so. The final rules, published by the UK Financial Conduct Authority (FCA) on 30 September 2026, replace the current TCFD-based disclosures and apply to accounting periods beginning on or after 1 January 2027 (first reports in 2028).

Key points in Policy Statement PS26/19 include:

• Disclosures under both UK SRS S1 (general sustainability) and UK SRS S2 (climate) apply on a "comply or explain" basis. The FCA had consulted on making climate disclosures mandatory but decided against it on grounds of proportionality, market readiness, UK competitiveness and the burden on smaller companies.
• Transitional reliefs defer Scope 3 greenhouse gas emissions by one year and non-climate disclosures under UK SRS S1 by two years.
• Climate transition plans remain voluntary, but companies must state whether they have published one and, if not, explain why.
• As under the TCFD-based rules, companies with a secondary listing or depositary receipts remain in scope, despite the lighter approach proposed at consultation. They may rely on aligned home-jurisdiction reporting, but must explain any gaps, and are exempt from the transition plan statement.

For large unlisted UK companies, the climate-related financial disclosure requirements in the Companies Act 2006 are unchanged for now, but the Government has said in its Modernising Corporate Reporting consultation that it will consider how UK SRS should be reflected in the act.

The FCA is consulting on draft guidance on the "comply or explain" approach (Technical Note 803.1) in Primary Market Bulletin 66 until 28 October 2026. 

For further detail, see our blog.

FCA updated rules on climate-related disclosure requirements for asset managers and asset owners
On 25 September 2026, the FCA released Handbook Notice 144, finalising rule changes that will simplify the climate-related disclosure requirements for asset managers, life insurers and FCA-regulated pension providers, introduced as a public consultation in CP26/17. Firms will no longer have to publish product-level climate reports that the FCA introduced in 2021 based on the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations, or include them in funds’ annual and half-yearly reports. Instead, firms should periodically consider whether climate-related risks could be materially relevant to a product's financial performance or return and, if so, explain this in the existing retail client communications on risk and return, such as the product summary. Following feedback, the FCA narrowed this disclosure requirement to climate-related risks only, rather than risks and opportunities, and firms will not need to explain why climate-related risks they have identified are not materially relevant to a product’s financial performance or return. For institutional clients with their own climate reporting duties, firms must provide, on request, Scope 1, 2 and 3 greenhouse gas emissions data once per product each calendar year. The rules shall apply from 30 June 2027.
 

Updates from the United States

SEC proposes to rescind Rule 14a-8 and fundamentally reallocate authority over shareholder proposals 
On 16 September 2026, the US Securities and Exchange Commission (SEC) proposed rescinding Rule 14a-8, which currently provides a uniform federal framework for including shareholder proposals in public company proxy materials. The proposal would shift disputes over shareholder proposal rights to state corporate law, company governing documents and judicial resolution, eliminating the SEC’s role and the federal standard. State corporate statutes generally contain few explicit provisions on shareholder ballot access, creating uncertainty and scope for divergent regimes. The SEC signalled that, following rescission, its enforcement focus would move away from proposal eligibility and toward disclosure accuracy, solicitation conduct, voting mechanics and governance process integrity. The proposal would not affect the 2027 proxy season and Rule 14a-8 would remain fully operative until any final rescission becomes effective, which may be subject to judicial review. For a more detailed analysis, have a look at our blog.

EPA moves to repeal Biden-era power plant GHG rules as 21 states push back
On 14 September 2026, the US Environmental Protection Agency (EPA) announced rescinding of the Biden-era legislation passed to curb the greenhouse gas (GHG) emissions emitted by fossil fuel-based power plants and to regulate the carbon capture and storage requirements. The decision is motivated by the ambition to lower energy prices, estimating savings of $310 billion. The repealed legislation came into force in 2024, conditioning license renewals directly to GHG emissions reduction. This being a costly process, the underlying aim was to gradually phase out coal dependency, shifting focus towards renewable energy. The EPA held a public hearing on the proposal at the end of September and the related 45-day public comment period is still active. 

Furthermore, on 1 October, 21 Attorneys General filed a petition against the EPA, challenging the repeal on account of the role fossil fuels take in climate crisis. The petition is currently in early procedural stage.

California governor approves regulatory framework for data centres 
On 21 September 2026, the Californian governor Newsom approved seven bills which establish California’s  framework for monitoring and regulating data centres operations. The bills, brought by a group of Democratic senators and members of the Assembly, oblige the data centre operators to report on the energy efficiency and consumption, and to provide a water assessment and water scarcity plan as part of the permitting process. Alongside the reporting prior to and during the operation of data centres, the operators will be required to pay all the costs associated with upgrading the infrastructure and cover the costs to satisfy their energy consumption. Last but not least, the bills are incentivising the operators to use clean and renewable energy for powering of the data centres. The signing of the bills was the last step in California's legislative process and the new laws will start applying from 1 January 2027.

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