The ESG regulatory landscape is evolving faster than ever, with governments and regulatory bodies around the globe rolling out new frameworks to drive sustainability, enhance transparency, and ensure accountability.

In Part 1 of this series, we highlighted regulations in EU and UK countries. In this Part 2, we’ll cover latest ESG regulatory developments across United States (U.S.) and Asia Pacific (APAC).

Let's dive in to see how these changes will influence the future of business and investment globally.

United States (U.S.)

As the U.S. navigates a shifting climate policy environment under new leadership, regulatory advancements at both federal and state levels highlight contrasting approaches to sustainability. While federal rollbacks signal a pivot towards fossil fuel development, key institutions like the SEC and progressive states such as California continue to push forward on ESG transparency and climate accountability.

Federal Advancements: SEC’s Climate-Disclosure Rule

The U.S. Securities and Exchange Commission (SEC) has finalized rules requiring companies to disclose detailed information on greenhouse gas emissions and climate-related financial risks. The rule became effective from May 28, 2024. Companies must integrate disclosures into annual reports for fiscal years ending on or after December 31, 2025.

State-Level Leadership: California’s Climate Disclosure Laws
California continues to lead the charge in climate action with two landmark laws:

- SB 253 (Climate Corporate Data Accountability Act): Requires companies with revenues exceeding $1 billion to disclose their 2025 Scope 1, 2 emissions in 2026 and 2026 Scope 3 emissions in 2027.

- SB 261 (Climate-Related Financial Risk Act): Mandates businesses with revenues over $500 million to report on climate-related risks by January 1, 2026.

SEC’s Fund Naming Rule

To ensure transparency in investment strategies, the SEC has updated its “Fund Names Rule.” Funds must allocate at least 80% of their assets to align with the strategy suggested by their name.

Compliance Deadlines:

i) December 10, 2025, for fund groups with assets over $1 billion.

ii) June 10, 2026, for smaller fund groups.

As the ESG regulatory landscape evolves, these measures reflect the interplay between federal dynamics and localized progress, shaping the future of sustainability governance in the U.S.

Contrasting Paths in U.S. Climate Policy

Recent federal actions, including the rollback of Biden-era initiatives and a renewed focus on fossil fuel development, have sparked concerns about the nation’s ESG trajectory. Moves such as exiting the Paris Agreement and suspending renewable energy programs highlight the federal pivot.

However, state-level initiatives like California’s ambitious climate investments reveal a persistent drive for progress. Such efforts, combined with the SEC’s regulatory advancements, emphasize the resilience of ESG momentum in the face of policy divergence.

Asia Pacific (APAC)

The Singapore-Asia (Green and Transition) Taxonomy

The Singapore-Asia Taxonomy, launched by Monetary Authority of Singapore (MAS) on December 3, 2023, is a pioneering initiative designed to guide financial and non-financial companies in their transition to sustainable practices. It stands out as the world's first multi-sector transition taxonomy, offering clear criteria for evaluating sustainable economic activities. It includes a framework for the phased elimination of coal-fired power, underscoring its commitment to decarbonization.

1. Implementation Timeline: The taxonomy is set to be implemented progressively, with MAS providing detailed guidelines to facilitate adoption. Organizations across various sectors are encouraged to begin aligning their operations and reporting with the taxonomy's criteria.

2. Significance: This taxonomy is expected to harmonize sustainability efforts across the Asia-Pacific region, facilitating investments in green and transition projects while promoting transparency.

Australia's Sustainable Finance Regulations

On 19 June 2024, the Australian Government unveiled its Sustainable Finance Roadmap, outlining a strategic vision to mobilize private investment for Australia's transition to net zero emissions. This initiative is part of the broader Sustainable Finance Strategy, aiming to integrate environmental, social, and governance (ESG) considerations into financial flows, thereby enabling Australian entities to access capital aligned with sustainability objectives. 

The roadmap is structured around three key pillars:

Pillar 1: Improve Transparency on Climate and Sustainability

i. Legislation is being introduced to require large businesses and financial institutions to disclose climate-related financial risks and opportunities. This move is intended to provide investors with greater transparency and comparable information regarding entities' climate exposures and strategies.

ii.  In collaboration with the Australian Sustainable Finance Institute (ASFI), the government is developing a taxonomy to define economic activities and assets that contribute to key sustainability objectives. This framework aims to mobilize private capital towards sustainable activities.

iii. Recognizing the importance of clear transition strategies, the government will develop best practice guidance for the disclosure of transition plans by entities. This guidance will assist companies in articulating their pathways towards a lower-emission economy.

Pillar 2: Strengthen Sustainable Finance Practices

i. The government plans to improve the availability and quality of ESG data, enabling better assessment and management of sustainability risks and opportunities.

ii. Initiatives will be introduced to encourage the development and uptake of financial products that support sustainable economic activities.

Pillar 3: Build Capacity and Capability

i. Programs will be established to enhance the understanding and skills of professionals in integrating sustainability considerations into financial decision-making.

ii. Australia will engage with global partners to align its sustainable finance practices with international standards and best practices.

India’s Leadership in ESG: Pioneering Rating Regulations and Sustainability Reporting

India has taken a bold step in shaping the global ESG landscape with the introduction of robust ESG Rating Provider Regulations and the Business Responsibility and Sustainability Reporting (BRSR) framework. These initiatives underscore India's commitment to promoting transparency, accountability, and sustainable practices, setting benchmarks that stand out internationally.

ESG Rating Provider Regulations

Effective from July 3, 2023, SEBI's ESG Rating Provider (ERP) Regulations position India as a leader in standardizing ESG ratings, a move that few countries have implemented at this level of rigor.

What Sets India Apart?

1) Comprehensive Oversight: India requires ESG rating providers to register with SEBI, adhere to a strict code of conduct, and ensure methodologies are transparent, data-driven, and conflict-free.

2) Global Comparison: While ESG regulations in the EU and the US primarily target corporate disclosures, India goes a step further by regulating the ESG rating ecosystem itself, ensuring the reliability and independence of ratings that investors and stakeholders rely on.

3) Investor Confidence: By promoting accuracy and objectivity in ESG ratings, India strengthens investor trust and reinforces its position as a responsible global player in sustainable finance.

Business Responsibility and Sustainability Reporting (BRSR)

Complementing the ESG Rating Regulation, BRSR framework, by SEBI, mandates responsible business and sustainability reporting for India’s top 1,000 listed entities (by market capitalization), from FY 2022-23. 

BRSR Framework facilitates the businesses in:

1) Comprehensive Scope: Focusing on ethical business conduct, employee welfare, environmental responsibility, and stakeholder engagement.

2) Global Alignment: Providing a standardized reporting framework that integrates ESG into business strategies while aligning with international norms.

3) Business Impact: Enhancing brand reputation, operational efficiency, and access to capital while driving innovation and sustainable growth.

BRSR Core

SEBI has now introduced new guidelines mandating ESG disclosures under the BRSR Core framework w.e.f. F.Y 23-24 for the top 1000 listed companies by market capitalization. BRSR Core is a focused subset of Business Responsibility and Sustainability Reporting (BRSR) framework, based on nine key ESG attributes, and specifies the requirement for the assurance of data. 

The implementation of mandatory assurance or assessment for these disclosures will follow a phased approach. 

1. From FY 2024-25, the top 250 listed companies as per market capitalization will be required to ensure reasonable assurance or assessment for BRSR Core metrics.

2. From FY 2025-26 (Previously FY 2024-25), ESG disclosures for value chains will be applicable for the top 250 companies on voluntary basis (earlier comply-or-explain basis), with limited assurance or assessment becoming compulsory from FY 2026-27 (Previously FY 25-26).

3. Under the new guidelines, companies are required to disclose ESG information encompassing their value chains, including their top upstream and downstream partners, individually representing 2% of their purchases and sales by value.

India’s Global Standing

India’s regulatory framework for ESG ratings is among the most robust globally, offering a level of oversight that surpasses similar efforts in many regions. By addressing both corporate ESG disclosures and the integrity of ESG ratings, India demonstrates leadership in fostering a transparent and credible ESG ecosystem.

As other nations grapple with fragmented approaches to ESG oversight, India’s cohesive strategy positions it as a pioneer in aligning sustainable finance with global standards, paving the way for responsible and resilient economic growth.