Travers Smith's Sustainability Insights: Reporting requirements still shifting

EU and UK rules still shifting: The EU's omnibus rollback has narrowed the scope of corporate sustainability reporting, but the standards themselves remain unfinished and last-minute changes to improve alignment with international frameworks could prove contentious.SFDR reform sidelines private markets: Member states are divided on key aspects of the Commission's proposed SFDR overhaul, with engagement as an investment approach, grandfathering and category criteria all contested — and private markets concerns still largely unaddressed.Time to engage is now: Some positive signals are emerging, including Sweden's push to adapt the framework for unlisted assets and calls to extend transition periods, but private markets participants need to act quickly to shape the final rules.Links:https://www.traverssmith.com/knowledge/knowledge-container/the-omnibus-reaches-its-destination-csrd-and-cs3d-20/https://www.responsible-investor.com/eu-weighing-last-minute-move-to-adopt-issb-sustainability-standards/https://www.traverssmith.com/knowledge/knowledge-container/ready-set-report-the-fca-fires-the-starting-gun-on-uk-sustainability-reporting/https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-the-uks-cautious-roll-out/https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-six-fixes-for-sfdr-20/https://data.consilium.europa.eu/doc/document/WK-3931-2026-INIT/en/pdfhttps://www.investeurope.eu/publications-policy/publications/2026/invest-europe-position-paper-on-sfdr-20/https://doi.org/10.1093/jfr/fjac001

In this week's issue of Travers Smith's Alternative Insights, we are looking at non-financial misconduct, and how accountability drives culture.FCA sharpens oversight: The UK regulator is finalising new rules on non-financial misconduct, extending its scrutiny beyond the office and setting clearer standards for personal and workplace behaviour.Manager accountability grows: Managers must actively prevent bullying and harassment, or risk personal liability under the Conduct Rules if they fail to act.Culture change expected: Firms can no longer dismiss poor behaviour as business as usual, with the FCA aiming to shift the conversation from 'Sexism in the City' to 'Accountability in the Office'.Links: https://www.ft.com/content/2e4df2fe-d2ae-46aa-bd00-d031a037bb44https://www.traverssmith.com/knowledge/knowledge-container/new-fca-guidance-on-non-financial-misconduct/

In this week's issue of Travers Smith's Sustainability Insights, we are looking at the UK's rollout of sustainability disclosure standards.The EU's sustainability omnibus is finally passed: The European Union has finalised its dramatic reforms to sustainability reporting rules, hitting fewer private companies and relaxing several related obligations.The UK confirms a cautious roll out: The UK’s sustainability reporting standards have been finalised, but mandatory rules are being developed that focus on proportionality and cost-benefit analysis – with more news for large private companies expected later in 2026.Sustainability remains a priority for rule makers: Both the EU and UK remain committed to sustainability as a policy priority, but now openly discuss burdens for companies as well as benefits for society.Links:https://www.consilium.europa.eu/en/press/press-releases/2026/02/24/council-signs-off-simplification-of-sustainability-reporting-and-due-diligence-requirements-to-boost-eu-competitiveness/https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-sustainability-reforms-lack-a-convincing-theory-of-change/https://www.gov.uk/government/publications/uk-sustainability-reporting-standards-uk-srs-s1-and-uk-srs-s2https://www.fmg.ac.uk/isf/publications/special-papers/do-climate-disclosure-mandates-help-decarbonise-economyhttps://www.traverssmith.com/people/simon-witney/https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-why-less-might-be-more/https://www.gov.uk/government/consultations/exposure-drafts-uk-sustainability-reporting-standards/outcome/government-response-to-the-consultation-on-uk-sustainability-reporting-standards-web-version#:~:text=a%20world%20leader%20for%20sustainable%20finance

In this week's issue of Travers Smith's Alternative Insights, we are looking at UK regulator's client categorisation rules and their effect on firms looking to access individual investors.Wealthy individuals targeted: In Europe, policymakers and larger private fund managers are adapting rules and processes to attract more high-net-worth investors, while acknowledging that managing investor protection rules is essential.FCA aims to simplify categorisation: The UK's regulator is proposing a more flexible, judgment-based approach to opting up retail clients, replacing rigid thresholds but stressing the need for robust assessments and proper due diligence.Firms must maintain standards: As individual investors become more prevalent in private markets, compliance processes are essential – requiring significant investment but promising lasting value.Links:https://www.traverssmith.com/knowledge/knowledge-container/eu-retail-investment-directive-and-regulation/https://url.uk.m.mimecastprotect.com/s/LnL0CQY4irXQXQFGHLIGkFHp?domain=sites-traverssmith.vuturevx.comhttps://www.ukprivatecapital.co.uk/static/dd01a037-6196-4184-87b43369579f1f87/260119-UK-Private-Capital-reponse-to-CP2536-Client-Cat-and-CoI-FINAL.pdf

SFDR 2.0: Six fixes for private marketsCurrent SFDR 2.0 proposals risk sidelining private funds—imposing impractical rules, stifling innovation, and missing the unique strengths of private capital. Is the EU about to bake greenhushing into law?What’s at stake for private funds?Proposals that overlook private markets: The draft framework applies retail-focused logic to all, missing how private markets operate. Ill-fitting rules could disrupt strategies and burden sponsors with unintended consequences.Limits on communication with professional investors: Preventing tailored ESG disclosure does more harm than good. Professional LPs want detail, transparency, and meaningful engagement on ESG strategy—yet current rules encourage silence instead.A missed opportunity for genuine engagement: Private equity influences sustainability through stewardship and direct ownership. Engagement should be central—not sidelined—to all fund categories.Operational impracticalities: Rules on exclusions and portfolio alignment don’t match the realities of investing in illiquid assets. Holding managers liable for market events out of their control is unworkable. Similarly, one-year compliance for funds-of-funds is unrealistic.What Needs to Change?Permit open ESG dialogue with professional investors—exempting such communications from the tightest restrictions.Recognise engagement as a core component of private fund ESG.Give managers practical leeway on exclusions and portfolio reporting, including time to adjust in fund-of-funds.Rethink fund labels. “ESG Basics” risks confusion and is, quite simply, not fit for purpose.Practical Takeaways:Now is the moment for asset managers to shape the rules: engage with policymakers, highlight the operational realities of the industry, and push for changes that reflect how private markets actually deliver sustainable impact.Start preparing for late 2027, but focus on influencing the detail today.How will you use your stakeholder voice as SFDR 2.0 moves forward?Links:https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-alternative-insights-the-commissions-sfdr-proposal-fails-to-deliver-clarity/https://www.traverssmith.com/knowledge/knowledge-container/finalised-sfdr-20-proposals/

This week we are taking a special look at the issues that will shape private capital in the year ahead. You can read our full analysis of those legal, regulatory and tax headwinds in our new publication Insights 26.Links:PEI Group datapartner for growthInsights '26the Corporate Sustainability Due Diligence Directivethe Corporate Sustainability Due Diligence Directivesecuritisation regimeharmonise trade reportingAIFMD IIUK AIFMDclient categorisation rulesnational security deal notificationmerger controlsstart, scale, and stay in the UKcontroversial proposal401(k) investment into alternative assetsEU AI ActInsights ’26

In his week's issue of Travers Smith's Sustainability Insights, we are looking at the agreed reforms to the EU's sustainability disclosure rules.Links:our detailed briefing2021 impact assessment

In this week's issue of Travers Smith's Alternative Insights, we are looking at the Commission's SFDR proposal fails to deliver clarity.Links:https://www.traverssmith.com/knowledge/knowledge-container/finalised-sfdr-20-proposals/https://www.traverssmith.com/knowledge/knowledge-container/possible-changes-to-the-eu-sfdr-the-european-commission-seeks-views/https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-sustainability-insights-what-will-sfdr-20-look-like/

In this week's issue of Travers Smith's Alternative Insights, we are looking at the UK's strategy for private capital in the wake of the latest budget.Links:https://www.traverssmith.com/knowledge/knowledge-container/travers-smiths-alternative-insights-the-impact-of-uk-tax-policy/https://www.traverssmith.com/knowledge/knowledge-container/autumn-budget-2025/https://www.traverssmith.com/knowledge/knowledge-container/autumn-budget-2025-private-capital/https://www.fnlondon.com/articles/rachel-reeves-private-equity-will-be-key-to-growth-push-95c10a9ahttps://assets.publishing.service.gov.uk/media/68595e56db8e139f95652dc6/industrial_strategy_policy_paper.pdfhttps://www.bvca.co.uk/static/e07847be-bbcc-4b7e-a201d5d182700aca/BVCA-Response-to-Invest-2035-The-UKs-Modern-Industrial-Strategy.pdf

In this week's issue of Travers Smith's Alternative Insights, we are looking at European fund labels.Links:https://www.traverssmith.com/knowledge/knowledge-container/draft-sfdr-20-proposals/https://www.traverssmith.com/knowledge/knowledge-container/sustainability-exchange-podcast/https://uksif.org/uksif-pwc-report-uk-sdr-and-investment-labels-implementation-lessons-and-the-road-ahead/