December Global Regulatory Brief: Green finance

The Global Regulatory Brief provides monthly insights on the latest risk and regulatory developments. This brief was written by Bloomberg’s Regulatory Affairs Specialists.

The financial sector continues to face new rules and government expectations as part of the broader effort to aid the green transition. The following green finance policy developments represent a sample of wider regulatory and policy coverage available to Bloomberg Terminal customers. Run REGS <GO> to find out more or contact your Bloomberg representative to learn more:

• South Africa: Treasury proposes overhaul of carbon credit market
• EU: Commission proposes SFDR review
• UK: FCA consults on UK ESG ratings regime
• Brunei: Launches Sustainable Finance Roadmap to drive ESG integration

South Africa’s National Treasury proposes overhaul of carbon credit market

South Africa’s National Treasury is consulting public input on proposed reforms to unlock and scale its domestic carbon credit market. The initiative forms part of a broader strategy to support emissions reductions through market-based instruments, complementing the country’s carbon tax regime. The consultation outlines key barriers in market design, legal certainty, certification costs, and financial regulation, with a view to developing a robust carbon credit ecosystem that supports both compliance and voluntary demand.

Key Points / proposals

• Legal Clarification: Proposes classifying carbon credits as unlisted securities under the Financial Markets Act to support trading and market oversight.
• Infrastructure Reform: Recommends upgrading COAS and linking it with international systems, including a dedicated Article 6 registry for ITMOs.
• Domestic Capacity Building: Suggests enabling SANAS to accredit local validation and verification bodies and creating fit-for-purpose South African crediting standards.
• Capital and Market Access: Calls for easing capital requirements for financial institutions and allowing carbon credits to trade via existing financial infrastructure.

Implications / next steps

• Regulatory Amendments: Potential changes to tax, financial, and exchange control regulations are under review.
• Phased Implementation: Revised offset allowances (e.g. +5% from 2026) signal incremental reform aligned with the carbon tax roadmap.
• International Integration: Coordination with Article 6 frameworks and future linkage with global carbon markets is anticipated.

European Commission proposes simplified transparency rules for Sustainable Financial products

The European Commission has proposed a set of amendments to the Sustainable Finance Disclosure Regulation (SFDR) to make sustainability disclosure rules simpler, clearer, and more cost-efficient. The revisions aim to reduce reporting burdens for financial market participants (FMPs), make disclosures more understandable for retail investors, and introduce a clear categorisation system for sustainable financial products.

Context

The SFDR, in force since March 2021, established the EU’s transparency framework for sustainability-related financial products. However, the Commission’s recent review found the framework overly complex, costly to implement, and unintentionally used as a labelling regime, leading to investor confusion. The proposed changes are part of the Commission’s broader effort to streamline EU financial regulation, consistent with the February 2025 “Omnibus I” simplification package.

Key takeaways

• Streamlined Entity-Level Disclosures:
  • Entity-level reporting on “principal adverse impacts” will be deleted from SFDR to eliminate overlap with the Corporate Sustainability Reporting Directive (CSRD).
  • Only large FMPs covered under CSRD thresholds will be required to disclose their environmental and social impacts.
  • This reform significantly reduces duplication and compliance costs for smaller firms.
• Simplified Product-Level Disclosures:
  • Product disclosures will be limited to essential, comparable, and meaningful sustainability data.
  • The aim is to improve investor understanding and comparability while reducing complexity for product manufacturers.
  • Retail-oriented presentation standards will be introduced to improve clarity.
• Introduction of Three Product Categories:
  • Sustainable: Products investing in assets that already meet high sustainability standards.
  • Transition: Products supporting entities or projects on a credible path toward sustainability.
  • ESG Basics: Products applying general ESG integration or exclusion strategies without qualifying as sustainable or transition investments.
  • Categorized products must ensure at least 70% of investments align with their sustainability strategy and must exclude harmful sectors (e.g., human rights violators, tobacco, prohibited weapons, high fossil fuel exposure).
  • ESG-related product names and marketing claims will be restricted to products within these categories.

Next steps

The Commission’s proposal will now proceed to the European Parliament and EU Member States (Council) for consideration under the ordinary legislative procedure. At a future date, the Commission will issue implementing rules setting out the technical specifications for disclosures and category criteria.

Financial Conduct Authority (FCA) consults on UK ESG Ratings Regime

The FCA has launched a comprehensive consultation setting out the detailed regulatory framework for the UK’s new ESG ratings regime. The proposals combine baseline FCA rules with tailored requirements covering transparency, governance, conflicts of interest, and stakeholder engagement. The consultation is open until 31 March 2026 and final rules are expected in Q4 2026, with the regime going live on 29 June 2028.

Context

The consultation follows HM Treasury’s secondary legislation bringing ESG rating providers within the FCA perimeter. The FCA seeks to reduce harms arising from inconsistent or opaque ESG ratings and to align the regime with IOSCO recommendations.

Key takeaways

Given that this will be a newly regulated sector, the FCA are proposing to do the following:

• Apply many existing baseline rules to rating providers that apply to most other FCA-regulated firms, ensuring that there is a consistent approach. Some of the existing baseline standards include the following:

• Threshold Conditions (COND): The minimum conditions, set out in the Financial Services and Markets Act 2000 (FSMA), that a firm must satisfy, and continue to satisfy, to get and keep its permission. The TCs are not part of this consultation, but the FCA is open to feedback on applying COND to ESG rating providers.
• Principles for Business (PRIN): A general statement of the fundamental obligations that firms must comply with at all times. The FCA is further proposing that ESG rating providers must always comply with Principle 7 on “Communications with clients”, while also noting that ESG rating providers cannot treat their clients as ‘eligible counterparties’ for the purposes of PRIN 3.4.1R and PRIN 3.4.2R.
• Systems and Controls (SYSC): Sets out how firms must organize their businesses, manage risk and maintain effective internal systems and controls. One of its purposes is to underline Principle 3: ‘A firm must take reasonable care to organize and control its affairs responsibly and effectively, with adequate risk management systems’.
• Senior Managers and Certification Regime (SM&CR): How firms must allocate responsibilities, certify key staff and apply conduct rules to promote accountability and good governance. The proposal for SM&CR is to classify ESG rating providers as “Core Firms” under SM&CR, unless a regulated firm undertakes other activities and has been categorized as an Enhanced firm will keep this Enhanced status, even if it also provides ESG ratings.
• General Provisions (GEN): General rules that apply to all firms, including statutory disclosure statements and use of the FCA name or logo.
• Introduce tailored rules where existing baseline requirements (mentioned above) are not appropriate or not proportionate to address the risks of harm. It is important to note, is that these rules are building on the IOSCO recommendations. These rules focus on the following areas:
  • Transparency: Minimum disclosure requirements for methodologies, data sources and objectives, so users better understand the ratings and rated entities understand how they are assessed.
  • Systems and Controls: Requirements for robust arrangements to ensure the integrity of the ratings process, including quality control, data validation and methodology reviews.
  • Governance: Requirements to maintain operational responsibility over the ratings process, including any outsourcing, to ensure appropriate oversight and compliance with the regime.
  • Conflicts of interest: Requirements to identify, prevent, manage, and disclose conflicts of interest at the organizational and personnel level, to maintain the ratings’ independence and integrity.
  • Stakeholder engagement: Requirements to provide rated entities with the opportunity to correct factual errors, procedures to allow other stakeholders to provide feedback and a fair complaints-handling procedure

Source: FCA Consultation Paper (p.7), Overview of proposed regime

Next steps

The FCA is welcoming feedback on the draft rules and any questions. The deadline to respond to the consultation is 31 March 2026. The FCA expects to finalize the rules by Q4 2026. The FCA authorizations gateway intends to open in June 2027. The regime go-live is on 29 June 2028. An overview of the timeline can be found in the Consultation Paper on page 8.

Brunei launches Sustainable Finance Roadmap to drive ESG integration

The Brunei Darussalam Central Bank (BDCB) has introduced the Sustainable Finance Roadmap (SFR) to guide the financial sector in embedding environmental, social, and governance (ESG) considerations into financial practices. The roadmap aims to support the country’s transition to a low-carbon, climate-resilient economy and strengthen financial stability through sustainability integration.

Context

The SFR aligns with Brunei’s broader sustainability agenda outlined in three key policy documents:

• Brunei National Climate Change Policy (BNCCP) – strategies for a low-carbon, climate-resilient economy.
• Economic Blueprint for Brunei Darussalam – aspirations for a dynamic and sustainable economy under Wawasan Brunei 2035.
• Financial Sector Blueprint (FSBP) 2016–2025 – vision for a competitive and innovative financial sector.

Key takeaways

• Definition: Sustainable finance under the SFR integrates ESG factors into financial decision-making to promote sustainable growth and long-term social well-being.
• Vision: A sustainable and climate-resilient financial sector.
• Purpose: Provide strategic direction for ESG adoption across financial institutions.
• Time Horizon: 2025–2030 (6 years).
• Goals:

1. Increase readiness to manage sustainability-related risks.
2. Facilitate development of sustainable financial products and services.
3. Enhance adoption of ESG practices in business models and strategies.

• Four Pillars:

1. Robust Sustainability Risk Management Framework – strengthen capabilities and policies to manage ESG risks.
2. Innovative Sustainable Products and Services – promote financial products supporting national sustainability initiatives.
3. International Cooperation – boost Brunei’s role in regional and global sustainable finance efforts.
4. Knowledge, Skills, and Talent Development – build capacity among regulators, industry, and consumers for ESG integration.

Next steps

• Implementation of the roadmap begins in 2025, with milestones set through 2030.
• Financial institutions are expected to align strategies with the roadmap and develop ESG-compliant products.
• BDCB will issue supporting policies and frameworks to operationalize the roadmap’s pillars.