Trend watch: Corporate climate disclosures in 2026 — signals, winners, and red flags

The first 250+ CSRD reports published by March 2025 revealed that Climate Change (E1) was almost universally material—yet report lengths ranged from 30 to 340+ pages, signaling vast dispersion in reporting maturity and disclosure depth (PwC Analysis, 2025). For investors evaluating emerging market exposures, this quality variance creates both risk and opportunity: companies with robust disclosure capabilities command valuation premiums while those failing to meet evolving standards face capital access constraints and potential regulatory enforcement.

Why It Matters

The global corporate climate disclosure landscape has fractured into a multi-speed regulatory environment. The EU's Corporate Sustainability Reporting Directive (CSRD) is actively reshaping reporting requirements for approximately 50,000 companies (narrowed to those with >1,000 employees and >€450M turnover under December 2025's Omnibus I package). Meanwhile, the US SEC's climate disclosure rule—adopted March 2024—was voluntarily stayed in April 2024 and effectively withdrawn when the SEC ended its defense of the rule in March 2025.

For investors with emerging market portfolios, this divergence creates assessment complexity. Companies with EU operations face mandatory CSRD compliance regardless of headquarters location, while purely domestic emerging market firms operate under less prescriptive—but rapidly evolving—local frameworks. The International Sustainability Standards Board (ISSB) provides a convergence pathway, with IFRS S2 (Climate) now adopted or endorsed by 30+ jurisdictions including key emerging markets.

The investor thesis is clear: disclosure quality correlates with transition risk management capability. Companies demonstrating sophisticated materiality assessment, robust data controls, and credible transition planning attract preferential capital allocation. Conversely, disclosure laggards signal potential hidden liabilities—particularly Scope 3 emissions exposure—that markets will eventually price as transparency increases.

The stakes are substantial: US climate/weather disasters reached 27 billion-dollar events in 2024, more than double the prior decade's annual average. Companies unable to articulate physical and transition risk exposure face increasing scrutiny from insurers, lenders, and equity investors alike.

Key Concepts

Double Materiality Framework

CSRD requires "double materiality" assessment: reporting on both how climate change affects the company (financial materiality) AND how the company affects climate change (impact materiality). This bidirectional approach differs fundamentally from the SEC's financial-materiality-only framework and creates more comprehensive disclosure expectations.

Framework	Materiality Approach	Scope of Emissions	Status
CSRD/ESRS E1	Double materiality	Scope 1, 2, 3	Active (Wave 1 reporting 2025)
SEC Rule	Financial only	Scope 1, 2 (if material)	Stayed/Withdrawn
ISSB IFRS S2	Financial (with impact consideration)	Scope 1, 2, 3 (if material)	Adopted by 30+ jurisdictions
California SB 253/261	N/A	Scope 1, 2 by 2026; 3 by 2027	Active

For emerging market investors, the practical implication is extraterritorial reach: any company with material EU revenues or operations—or any company in the value chain of CSRD-reporting entities—faces data requests that effectively extend disclosure requirements globally.

Assurance Evolution

CSRD mandates limited assurance for sustainability disclosures, with expansion to reasonable assurance over time. The assurance market is rapidly developing capacity, though gaps persist in specialized climate verification expertise. Key assurance considerations include:

Emissions verification: Particularly challenging for Scope 3, where estimation methodologies introduce significant uncertainty
Scenario analysis validation: Assessing whether forward-looking statements meet "reasonable basis" standards
Data controls attestation: Evaluating whether internal controls over climate data match financial reporting standards
Transition plan credibility: Assessing alignment between stated targets and allocated capital

Data Architecture Requirements

CSRD's 1,100+ potential data points require enterprise-grade data infrastructure. First-wave reporters revealed significant maturation needs:

Entity-specific disclosures: Data governance, cybersecurity, and AI emerged as common additions beyond standard ESRS
Scope 3 methodology challenges: Novo Nordisk halved 2023 Scope 3 estimates in their 2024 CSRD report after methodology improvements—illustrating data quality volatility
Temporal alignment: Sustainability data collection cycles often misalign with financial reporting calendars, requiring process integration

What's Working

Integrated Reporting Operating Models

Companies achieving efficient disclosure build integrated operating models where sustainability data flows through financial reporting systems rather than parallel processes.

Example: Schneider Electric—The French industrial company's sustainability disclosure has been recognized as best-in-class for integration with financial reporting. Their "Schneider Sustainability Impact" metrics are embedded in quarterly earnings materials and executive compensation structures. For emerging market investors, their supplier sustainability program—covering 1,000+ suppliers across developing economies—demonstrates how disclosure requirements cascade through value chains. Their CSRD-aligned 2024 report achieved limited assurance across all material topics, setting a quality benchmark.

Technology-Enabled Data Collection

Platforms automating Scope 3 data collection from supply chain partners reduce the manual burden that undermines data quality and timeliness.

Example: Unilever—The consumer goods company deployed supplier engagement technology across their 60,000+ supplier network, achieving 72% primary data coverage for Scope 3 emissions by 2024 (up from 35% in 2021). This data infrastructure investment enables reliable disclosure while simultaneously identifying decarbonization opportunities. For emerging market suppliers, Unilever's requirements effectively mandate carbon accounting capability development—creating both compliance burden and capacity-building outcomes.

Scenario Analysis as Strategic Tool

Leading companies transform disclosure requirements into strategic planning assets, using scenario analysis to inform capital allocation and risk management beyond compliance documentation.

Example: Enel—The Italian utility's integrated strategic planning embeds climate scenario analysis in investment decisions across their emerging market operations (Brazil, Chile, Colombia, India). Their 2024 disclosure demonstrated capital expenditure alignment with 1.5°C pathways, with specific project-level commitments in renewable energy expansion. This strategic integration—rather than disclosure-as-compliance—represents the maturity level that attracts ESG-focused capital allocation.

What's Not Working

Greenwashing Risk from Immature Disclosures

The quality variance in first-wave CSRD reports creates information asymmetry that sophisticated investors must navigate. Common deficiencies include:

Superficial materiality assessments: Checkbox approaches without documented stakeholder engagement
Aspirational targets without transition plans: Net-zero commitments lacking capital allocation or operational pathway detail
Scope 3 estimation opacity: Reliance on spend-based proxies without acknowledged uncertainty ranges
Governance theater: Board oversight claims without demonstrated competency or decision integration

Investors relying on disclosure headlines without assessing underlying quality face greenwashing exposure—particularly in emerging markets where verification infrastructure is less developed.

Regulatory Fragmentation Creating Compliance Arbitrage

The divergence between EU mandates, SEC withdrawal, and varying emerging market adoption creates reporting burden without standardization benefit. Companies operating across jurisdictions face:

Multiple reporting formats with overlapping but inconsistent requirements
Investor confusion from non-comparable disclosures
Competitive distortions between jurisdictions with different requirements

For emerging market companies, the fragmentation creates strategic choices about which standards to adopt, with ISSB providing a potential bridging framework.

Emerging Market Capacity Gaps

Many emerging market companies lack the internal capabilities—data systems, technical expertise, governance structures—to meet disclosure expectations cascading from developed market counterparties and investors. This capacity gap creates:

Supply chain bottleneck risks as CSRD-reporting companies demand supplier data
Capital access constraints as ESG-integrated investors apply disclosure screens
Transition planning delays as companies prioritize compliance over decarbonization action

Key Players

Established Leaders

IFRS Foundation / ISSB: Sets global baseline sustainability disclosure standards. IFRS S1 (General) and S2 (Climate) now adopted by 30+ jurisdictions. Key convergence pathway for emerging markets.
European Financial Reporting Advisory Group (EFRAG): Develops European Sustainability Reporting Standards (ESRS) underpinning CSRD. Technical standard-setter for the most comprehensive disclosure regime globally.
CDP: Runs global disclosure platform used by 23,000+ companies. Alignment with ISSB creates seamless reporting pathway. Strong emerging market penetration through supply chain program.
Big Four Accounting Firms: Deloitte, EY, KPMG, and PwC dominate assurance market for climate disclosure. Capacity constraints emerging as demand surges.

Emerging Startups

Persefoni: Carbon accounting and disclosure platform achieving significant enterprise traction. Raised $100M+ in funding with particular focus on CSRD/ISSB alignment. API-first architecture supports integration with ERP systems.
Watershed: Climate platform focused on emissions measurement and disclosure. Enterprise customers include Stripe, Airbnb, and major financial institutions. Expansion into supply chain data collection.
Normative: Swedish sustainability accounting platform with strong EU market presence. Recent expansion into emerging market operations through partnership network.
Greenly: French carbon accounting platform focused on SME market. Enables supply chain disclosure capability for smaller companies responding to enterprise customer requests.

Key Investors & Funders

Climate Action 100+: Investor coalition with $68+ trillion AUM engaging companies on climate disclosure and transition planning.
BlackRock: Largest asset manager integrating climate disclosure into engagement priorities. Their voting guidelines increasingly penalize inadequate disclosure.
Principles for Responsible Investment (PRI): Coordinates investor expectations on disclosure standards. 5,000+ signatories representing $120+ trillion AUM.
International Finance Corporation (IFC): Development finance institution requiring climate disclosure from emerging market investees. Sets standards that influence broader DFI community.

Sector-Specific KPI Benchmarks

Metric	Poor	Adequate	Good	Excellent
Scope 1+2 disclosure	Estimates only	Reported, not verified	Limited assurance	Reasonable assurance
Scope 3 coverage	<25% of categories	25-50%	50-80%	>80% with primary data
Materiality assessment	Internal only	Single stakeholder input	Multi-stakeholder documented	Annual refresh with evidence
Scenario analysis	Qualitative only	Single scenario	2-3 scenarios	Multi-scenario with financials
Transition plan	Targets only	High-level roadmap	Milestones with capital	Annual progress metrics
Governance integration	Sustainability silo	Board reporting	Committee oversight	Compensation linkage

Action Checklist

Map portfolio company disclosure requirements across CSRD, ISSB, and relevant local frameworks
Develop disclosure quality assessment criteria beyond compliance checkboxes
Engage portfolio companies on Scope 3 data collection capabilities and methodology transparency
Evaluate assurance provider credentials and capacity for climate-specific verification
Monitor emerging market regulatory adoption of ISSB standards and local enforcement patterns
Integrate disclosure quality metrics into investment due diligence and stewardship frameworks
Build internal capacity for scenario analysis assessment and transition plan evaluation

FAQ

Q: How should investors evaluate disclosure quality beyond surface-level compliance? A: Focus on five dimensions: (1) materiality assessment rigor—documented stakeholder engagement and topic selection rationale, (2) Scope 3 methodology transparency—acknowledged limitations and uncertainty ranges, (3) scenario analysis depth—quantified financial impacts across multiple pathways, (4) transition plan credibility—capital allocation alignment with stated targets, and (5) governance integration—evidence of board competency and decision-making influence. Compare disclosures across peer groups to identify outliers.

Q: What are the implications of SEC rule withdrawal for emerging market investments? A: The SEC withdrawal does not eliminate US climate disclosure expectations—California mandates (SB 253, 261) apply to large companies doing business in the state regardless of incorporation, and voluntary disclosure expectations persist from investors. For emerging market companies, the key implication is reduced convergence pressure: ISSB provides the bridging framework for global standardization, but adoption timelines vary by jurisdiction. Investors should assess individual market trajectories rather than assuming universal requirements.

Q: How does CSRD's extraterritorial reach affect emerging market supply chains? A: CSRD-reporting companies must disclose value chain emissions (Scope 3), creating data requests flowing to emerging market suppliers. Companies failing to provide requested data face commercial relationship risks—not from regulators directly, but from customers unable to complete their own disclosures. This creates de facto disclosure requirements for export-oriented emerging market companies even absent local mandates.

Q: What assurance standards should investors expect? A: CSRD mandates limited assurance initially, expanding toward reasonable assurance. ISAE 3000 (revised) and ISAE 3410 provide the relevant international standards. Investors should assess: (1) assurance scope—which metrics are covered, (2) assurance provider qualifications—Big Four vs. specialized, (3) findings and exceptions—qualified opinions indicate data quality issues, and (4) management response—how identified issues are being addressed. Expect assurance maturity to evolve rapidly through 2027.

Sources

PwC Global. "Insights from the first 100 CSRD reports." (2025). https://www.pwc.com/gx/en/issues/esg/sustainability-compliance-to-reinvention/corporate-sustainability-reporting-directive/initial-csrd-insights.html
European Commission. "Corporate sustainability reporting." (2024). https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en
SEC. "The Enhancement and Standardization of Climate-Related Disclosures for Investors." (2024). https://www.sec.gov/rules-regulations/2024/03/s7-10-22
Harvard Law School Forum on Corporate Governance. "Corporate Climate Disclosures and Practices: Risk, Emissions, and Targets." (2025). https://corpgov.law.harvard.edu/2025/05/03/corporate-climate-disclosures-and-practices-risk-emissions-and-targets/
Jones Day. "Understanding the Corporate Sustainability Reporting Directive (CSRD) and its Climate Disclosure Requirements." (2025). https://www.jonesday.com/en/insights/2025/01/understanding-the-corporate-sustainability-reporting-directive-csrd-and-its-climate-disclosure-requirements
Normative. "Corporate Sustainability Reporting Directive (CSRD), explained." (2024). https://normative.io/insight/csrd-explained/