Global Sustainability & ESG Insights - May 2026

Cross-Border

EU, Brazil and China launch Open Coalition on carbon markets

On May 7, the EU, Brazil and China launched the Open Coalition on Compliance Carbon Markets to strengthen global cooperation on carbon pricing. The initiative aims to improve the effectiveness, transparency and integrity of domestic carbon markets. It will provide a platform for countries to align and develop carbon pricing systems, with a focus on monitoring, reporting and verification, carbon accounting methodologies and high‑integrity offsets. The Coalition is open to countries with nationwide carbon pricing regimes. A workplan is expected by September 2026.

Asia

China

Regulations for the Implementation of the Mineral Resources Law

On May 15, China issued the Regulations for the Implementation of the Mineral Resources Law. The new Regulations provide a comprehensive framework governing exploration, extraction, management, and protection of mineral resources in China, replacing multiple prior rules and strengthening state control over strategic resources. They promote efficient and sustainable resource use, while strengthening ecological protection and enhancing national resource security and supply chain resilience. The Regulations specify the factors to be considered by the Chinese authorities in determining and adjusting the scope of the strategic minerals catalogue, including the minerals’ importance to the economy and national security, their level of scarcity and degree of import dependence, as well as associated supply chain risks. They also further specify the ecological restoration obligations, alongside measures to promote green mining practices and improve resource recovery efficiency nationwide. This will take effect from June 15, 2026.

Singapore

World Bank Carbon Markets Programme

On May 20, Singapore’s National Climate Change Secretariat, in collaboration with the World Bank Group, launched the Singapore Carbon Markets Programme to scale high-integrity carbon markets. It aims to target key barriers to market development by improving market infrastructure, supporting digital monitoring systems, and developing interoperable carbon registries. The Programme features three key components of (i) strengthening carbon market infrastructure and technology, (ii) facilitating the monetisation of carbon credits and (iii) supporting host countries’ capacity building and market readiness. It will pilot new approaches to aggregate carbon credit supply and demand, reducing costs and risks for project developers in underserved markets. It further supports countries in building policies, institutions, and capacity to participate effectively in global markets. Overall, the Programme aims to expand access to climate finance and strengthen confidence in international carbon markets.

Europe

EU ETS Allowances to be placed in Market Stability Reserve

On May 29, the European Commission announced that 190.5 million EU Emissions Trading System (EU ETS) allowances will be placed into the Market Stability Reserve (MSR) for the period from September 1, 2026 to August 31, 2027. This follows the publication of the 2025 total number of allowances in circulation (TNAC), which stood at 1,023,494,202. The TNAC is the key metric used to determine how the MSR operates, including whether allowances are withdrawn from auction volumes or released to the market. Consistent with the MSR framework, this adjustment will reduce the volume of allowances available for auction. Updated auction calendars reflecting this reduction are expected to be published around July 2026. As of January 1, 2026, the MSR held 400 million allowances. Under current rules, allowances held in the reserve above this level are no longer valid. The Commission has proposed amending the MSR to remove this invalidation mechanism, however the existing rules will continue to apply unless and until that amendment is adopted. The next update is expected by June 1, 2027.

Guidance to Streamline EU Water Law Implementation Published

On May 22, the European Commission issued guidance to simplify and harmonise the application of EU water laws. The guidance provides clarity on the Water Framework Directive, the Groundwater Directive and the Environmental Quality Standards Directive. It introduces flexibilities and exemptions for projects causing only short-term deterioration or no net pollution increase, supporting faster permitting, particularly for critical raw materials projects. The measures align with the RESourceEU Action Plan and broader efforts to enhance resilience, accelerate permitting, and support strategic sectors such as renewables, semiconductors and net zero industries.

Consultation Launched on CBAM Carbon Price Adjustment Rules

On May 13, the European Commission launched a consultation on a draft Implementing Regulation setting out how carbon prices paid outside the EU should be reflected in Carbon Border Adjustment Mechanism (CBAM) obligations. CBAM requires importers of certain carbon‑intensive goods to purchase certificates linked to embedded emissions, with adjustments permitted where a carbon price has already been applied in a third country. The draft rules establish how to determine the carbon price effectively paid, including the use of default values, the type of evidence required, and how to account for rebates or other financial adjustments. It also sets out how foreign currency payments should be converted into euros and how any reduction in the number of CBAM certificates should be calculated.

Draft Delegated Acts Published on Sustainability Reporting Standards

On May 6, the European Commission published two draft delegated acts for consultation relating to sustainability reporting standards. The first draft delegated regulation revises and simplifies the European Sustainability Reporting Standards (ESRS) applicable to entities within the scope of the Corporate Sustainability Reporting Directive (CSRD). It sets out to introduce a streamlined materiality assessment and targeted flexibilities. This revised ESRS framework is intended to apply for financial years starting on or after January 1, 2027, with optional early application for entities reporting from 2026.

The second draft delegated regulation introduces voluntary sustainability reporting standards for companies with up to 1,000 employees, facilitating standardized voluntary reporting and reducing information demands on smaller value chain partners under the CSRD value chain cap.

Report and Consultation on Simplifying the Deforestation-free Products Regulation Published

On May 4, the European Commission published a report on the simplification of the Deforestation‑free Products Regulation, alongside a related consultation and updated publications. The Regulation prohibits companies from placing certain commodities and related products on the EU market unless they are deforestation‑free, legally produced, and covered by a due diligence statement. Covered commodities include cattle, cocoa, coffee, oil palm, rubber, soya, and wood. Further measures include a consultation on amending Annex I to clarify product scope, updated guidance and FAQs reflecting the 2025 amendments, and confirmation of postponed application dates to December 30, 2026, for large and medium‑sized undertakings and June 30, 2027, for micro and small undertakings.

For more information, view our flash update.

Middle East

UAE

Reduction of Climate Change Effects law

From May 30, all UAE based entities whose activities generate greenhouse gas (GHG) emissions, including businesses operating in free zones must be fully compliant with the Reduction of Climate Change Effects law. The law creates a nationwide framework for managing emissions and supporting climate neutrality. In-scope businesses must measure, report and verify emissions, disclose mitigation plans and retain records for five years. It embeds emissions reduction into operational decisions, requiring energy efficiency, clean energy use and carbon offsetting. The regime also supports carbon credit use through a national registry and promotes sector-specific decarbonisation aligned with national targets. Entities not compliant by May 30 may be granted an extension by Cabinet resolution on the Ministry’s proposal, in line with Article 18 of the law.

For more information, view our flash update.

UK

Government Response to Consultation on Low Carbon Industrial Products Framework

On May 28, published its response to a June 2025 consultation on a framework to grow the market for low‑carbon industrial products. This focused on steel, cement and concrete. It confirms plans for an embodied emissions reporting framework, using a prescriptive, life cycle assessment‑based approach to measure and verify emissions. The framework proposes guidance, tools, and policy levers to help buyers compare products based on carbon content. Public procurement is expected to play a key role by using purchasing power to favour lower‑carbon options. Increased demand is intended to stimulate green investment and reduce greenhouse gas emissions.

The framework will initially be voluntary. It will also issue voluntary best‑practice guidance for buyers and producers on green procurement and reporting, with full guidance expected in 2027. Voluntary low‑carbon procurement requirements are already being incorporated into Government Buying Standards. A future move to mandatory reporting remains under review.

King’s Speech 2026 Sets Out Environmental and Energy Bills

On May 13, the King’s Speech outlined a series of proposed bills relevant to environmental and energy regulation in the UK. Key sustainability-related proposals include:

• a Clean Water Bill, which aims to establish a single, integrated water regulator, bringing together existing bodies to improve oversight, address pollution at source, and support long-term water planning and efficiency
• a Regulating for Growth Bill, aiming to strengthen the statutory growth duty for regulators, requiring bodies such as the Environment Agency to support economic growth alongside their core functions, with ministers given powers to issue strategic guidance
• an Energy Independence Bill, which proposes to introduce reforms to accelerate renewable energy deployment, streamline grid infrastructure development, and support a transition away from new oil and gas licensing while maintaining existing assets through transitional measures
• a Nuclear Regulation Bill, which proposes to update the regulatory framework for nuclear energy, aiming to improve coordination and speed of decision-making while supporting expansion of the sector

Biodiversity Gain Site Register Amended to Cover NSIPs

On May 5, the Biodiversity Gain Site Register (Amendment) Regulations 2026 were made. They take effect from May 29, 2026, amending the Biodiversity Gain Site Register Regulations 2024. The Regulations extend the scope of the Biodiversity Gain Site Register to include the registration of offsite biodiversity units used to meet mandatory biodiversity net gain (BNG) requirements for nationally significant infrastructure projects (NSIPs) in England. Previously, registration was limited to developments subject to mandatory BNG under the Town and Country Planning Act 1990.

US

SEC Formally Proposes Rescission of Climate-Related Disclosure Rules

On May 29, the Securities and Exchange Commission (SEC) proposed the rescission of rules that require companies to provide certain climate-related information in their registration statements and annual reports. The rules required certain public companies to disclose scope 1 and scope 2 greenhouse gas emissions to the extent material to the company, climate-related risks, and governance structures related to climate risk. The rules have been stayed while legal challenges to them are pending. The proposed revision itself could be the subject of legal challenges. Companies as to whom climate risk is material under the standard definition under SEC rules must continue to disclose such risk notwithstanding any recission of the SEC’s climate related rules.

EPA Funds PFAS Water Cleanup in California

On May 27, the Environmental Protection Agency (EPA) announced $15.7 million in funding for seven PFAS treatment projects across Southern California. Projects include groundwater treatment systems, plant upgrades, and sewer repairs to address contamination. Funding supports local water agencies to remove PFAS and improve drinking water safety. It builds on wider federal efforts, including over $77 million recently allocated in California.

EPA advances PFAS strategy

On May 18, the Environmental Protection Agency (EPA) announced a lifecycle‑based strategy to address PFAS, combining regulation, funding and technology deployment. The plan includes nearly $1 billion in grants to help states tackle contamination in drinking water and proposes two rules the status purpose of which is to strengthen protections while improving legal robustness and implementation feasibility. The EPA will maintain federal limits for certain PFAS while allowing some water systems to request additional time to comply, potentially until 2031. The EPA also proposes revisiting rules for other PFAS to address legal concerns under the Safe Drinking Water Act.

California and other States Implement EPR Laws

On May 1, the Californian Office of Administrative Law approved the Plastic Pollution Prevention and Packaging Producer Responsibility Act. The regulations became effective upon filing. The Act establishes a new extended producer responsibility (EPR) program to manage packaging and single-use plastic food service ware products across every sector of the economy. On the same day, a guidance website was also published. EPR laws have passed in six other states thus far, and five of them (as well as California) had a deadline of May 31, 2026 for reporting relevant materials sent into the given states during 2025. Fees are due this year in three of the seven states.

Co-authored by Nathan Handoll (ESG Researcher in Knowledge).

Further reading and listening

Executive Compliance Guide: Critical Raw Materials Act & Updates | Navigating EU Law

EU Legislation Roundup: April 2026

FS+ Country Updates – April 2026