Louder Than the Backlash: Investors Want More Disclosure, Not Less

By: Ignacio Fernandez

 

Policy is wavering. Capital is not.

If you followed only this year’s policy headlines, you might conclude that sustainable finance is in retreat. The capital markets are telling a different story.

In 2026, the federal government in Washington has been unwinding climate and ESG policy. In May, the SEC sent the White House a proposal to rescind its 2024 climate disclosure rule, which never took effect. On June 30, the Department of Labor submitted a proposed rule restricting retirement plan fiduciaries from prioritizing ESG factors, reversing the Biden-era approach. Earlier in the year, the EPA repealed the 2009 greenhouse gas endangerment finding.

Europe has eased up as well. The European Commission finalized the streamlined European Sustainability Reporting Standards (ESRS) in June, and a draft standard for non-EU companies, which many U.S. multinationals will report under, would let them disclose less than their European peers.

For a U.S. company, it would be easy to read all of this as permission to step back from climate reporting. That would be a mistake. Over the same months, investors have pushed back against weaker rules, capital has continued to flow into sustainable and transition finance, including in the United States, and California’s disclosure program has moved from statute to enforceable regulation.

Investors are asking for more disclosure, not less

The first story comes from Brussels, but it lands squarely on U.S. multinationals. Under the EU’s Corporate Sustainability Reporting Directive (CSRD), large non-EU companies with significant EU operations, including many U.S. companies, are scheduled to begin reporting on their 2028 financial year in 2029. In July, the European Financial Reporting Advisory Group (EFRAG) released a draft standard, ESRS-40a, for these companies. The draft narrows reporting to impacts only, drops the broader treatment of sustainability risks and opportunities, and omits EU Taxonomy disclosures.

The most contested piece is a “mixed approach” that EFRAG says it included at the European Commission’s explicit request. Outside of climate, it would allow non-EU companies to report their impacts either globally or only in relation to the EU. EFRAG members flagged the risk that this would tilt the playing field, confuse users, and let material information slip through the cracks.

This week, two important voices urged EFRAG to drop it. The EU Platform on Sustainable Finance, the Commission’s own expert advisory group, warned that the mixed approach would undermine comparability, increase costs, and obscure serious environmental and human rights impacts occurring outside the EU. EUROSIF, which represents Europe’s sustainable investment community, made similar points and added that investors would bear the cost of filling the resulting data gaps. Both groups also asked that non-EU companies be allowed to report Taxonomy information voluntarily, since financial firms need it for their own disclosures.

This is not an isolated case. Just days earlier, 15 financial institutions, including Federated Hermes, Nordea Asset Management, and Rabobank, wrote to the International Sustainability Standards Board (ISSB) requesting a mandatory, standalone nature standard rather than the voluntary Practice Statement currently under consultation. Their concern was the same: voluntary and uneven rules produce fragmented, less comparable information.

The pattern is clear, and it matters to U.S. reporting entities. When policymakers give companies a lighter reporting burden, the investors who rely on that information object. A U.S. company that discloses less in Europe than its European competitors should expect its investors to request the missing data anyway.

The money keeps moving

The U.S. market itself offers the clearest evidence. In the second quarter of 2026, U.S. sustainable funds took in nearly $3 billion in net new money, marking their first positive quarter after 14 straight quarters of outflows. U.S. sustainable fund assets reached a record $398 billion. Demand centered on the grid and energy infrastructure needed to power AI and data centers.

Debt markets tell a similar story. North American green bond volumes dipped in Q2 as agencies and municipalities issued less, but issuance by North American corporates and financial institutions rose about 8% and 12% year over year, respectively. Globally, green bond issuance set a quarterly record of $193 billion.

The banks financing U.S. and global companies are seeing the same demand. Deutsche Bank reported a record €32 billion (about US$35.6 billion) in sustainable transition financing in Q3 2026, up 42% year over year. Cumulative financing has reached €555 billion toward a €900 billion 2030 target. Its sustainability chief attributed the growth to companies seeking financing to manage energy costs, stay competitive, and build resilience (ESG Today). That is a business case, not a regulatory one.

Surveys of the investors allocating this capital point the same way

In a survey Morgan Stanley conducted between August and October 2026, 900 institutional investors said their share worry about negative media or public views of sustainable investing fell from 34% in 2025 to 8% in 2026. However, more than 80% expect to increase sustainable allocations over the next two years. A 2026 Robeco survey of 300 investors with over $35 trillion in assets found that 64% of investors with net zero goals say reduced government support has not changed their goal or approach, and only 4% are reconsidering. This survey also showed that climate’s importance to investment policy rose for the first time since 2022, led by North American investors.

This suggests that political noise from Washington is registering less, not more, with capital allocators, and North American investors are leading the return of climate as a priority.

To be fair, the picture is not uniformly rosy. Morgan Stanley found that growth expectations are more modest than last year’s, and Robeco found that climate remains less central to North American investment policy than elsewhere. But slower growth is still growth, and it is occurring even as U.S. federal policy points the other way.

California is moving forward

While federal disclosure rules are being rolled back, California’s rules are now enforceable. On October 12, 2026, the state’s Office of Administrative Law (OAL) approved California Air Resources Board’s (CARB) Initial Regulation implementing SB 253 and SB 261, which took effect the same day.

As you know well, SB 253 applies to U.S. companies, public and private, with more than $1 billion in annual revenue that do business in California, and Scope 1 and Scope 2 reports are due Nov 10, 2026. SB 261, however, remains paused. The Ninth Circuit enjoined its enforcement in November 2025 while the legal challenge proceeds. CARB has said it will set a new reporting date once the appeal is resolved, but in the meantime, it has implemented a docket for companies that choose to disclose their TCFD-like reports voluntarily. So far, close to 200 reporting entities have done so.

Companies should treat that pause as temporary. Obligations could resume quickly once the court rules, and the climate risk analysis SB 261 calls for matches what investors are already requesting. With thousands of companies in scope, California is effectively setting the U.S. baseline for corporate climate disclosure while federal rules stand down.

What this means for reporting organizations

The common thread is data. Investors are not asking companies to stop reporting; they are asking for information that is complete, comparable, and reliable. 

Meeting that expectation takes more than filling a report. It takes an inventory your stakeholders can trust and trace back to its source. That’s the work TCR members do with us. TCR is directly involved in supporting the implementation of SB 253, so members receive guidance and information grounded in how the program works, not in secondhand interpretation. It helps them establish and strengthen the credibility, transparency, and traceability of their emissions reports with their stakeholders, and it helps membership pay for itself. 

Join the TCR community. Whether you are finalizing your first SB 253 report or planning for Scope 3 assurance, members get member-only information and support from the TCR team, with membership levels to fit your organization’s reporting needs. We invite you to join a community committed to credible, transparent emissions reporting. Explore membership levels →  

The conversation goes global next month. TCR is organizing The Climate Registry: USA Climate Pavilion at COP31 in Antalya, Türkiye, November 9–20, 2026. Stay tuned to TCR’s channels for news, announcements, and highlights from the Pavilion.

Policy will continue to shift. The investor case for credible climate data has held steady, and this quarter’s market evidence suggests it is getting stronger, not weaker.