Harmonisation of Sustainability Standards to Accelerate Investment Into the Real Economy Transition

Caitlin Pallett Sustainability Strategy, Mizuho EMEA

Marina Marecos Head of Sustainability Strategy, Mizuho EMEA

Investment into the energy transition has been a significant opportunity and focal point for banks for many years now, particularly for global banks with client-centric strategies who can offer sector and geographic expertise to support long-term clients in their decarbonisation pathways.

We have seen significant developments in banks’ sustainability strategies as renewables and low-carbon technology deployment has reached new heights and data availability has improved, underpinned by transition-focused client engagement and disclosure.

Whilst global banks are well placed to offer unique sector- and geography-specific expertise, they are also faced with hurdles arising from the changing geopolitical environment and evolving policy and regulation which is fragmented globally.

Inconsistent reporting requirements and policy signalling across regions can disrupt the execution of a harmonised global sustainability strategy at parent level. Ensuring compliance may require diverting resources away from implementation of sustainability initiatives, ultimately affecting the support that global banks can offer their clients, and slowing the rate of investment into the transition.

Harmonisation of Global Regulations

However, 2025 has been a pivotal year for harmonisation of global regulation with the introduction of the “EU Competitiveness Compass”. Designed to revitalize Europe’s economic dynamism and position the EU as a global leader in innovation, sustainability, and resilience, this is a call for action in Europe to demonstrate that sustainability and competitiveness go hand in hand. The compass aims to simplify the core elements of the EU sustainability disclosure regime (CRSD, CSDDD, and the EU Taxonomy).

The UK PRA has also updated its supervisory statement on the management of climate and environmental risks. Though still in the consultation phase (CP10/25), the final iteration is likely to broaden the current expectations to ensure financial institutions have the governance in place to embed sustainability practices throughout the organisation, including within strategy and business planning.

Interoperability with ISSB Standards

Both the EU competitiveness compass and PRA consultation focus on interoperability with the ISSB standards. These standards set a global baseline for sustainability reporting, providing consistent, comparable and decision-useful data to help navigate the sustainability transition. As of June 2025, the ISSB standards have been adopted or utilised to varying degrees by thirty-six jurisdictions, including Japan in the form of the SSBJ.

By prioritising alignment with these global standards, the UK and EU regulators are laying the groundwork for a robust energy transition by enabling entities to focus on the crux of sustainability regulatory and disclosure regimes: to embed sustainability into the business strategy to ensure robust business planning and long-term resilience. A transition plan is, after all, a business plan.

Redefining the Role of Global Banks

With improved interoperability now on the horizon, global banks are able to redefine their role in the real economy transition. Harmonisation of global reporting regimes allows them to shape their sustainability strategies around their portfolios, investing a larger proportion of resources in providing tailored support for clients’ transitions through research, advisory and investment into innovative technologies.

Reduced fragmentation in disclosure regimes also enables banks to obtain better, more consistent and more comparable data from clients, helping to guide engagement discussions surrounding the challenges that each client faces in their sector and geography. This improvement in data availability presents an opportunity for banks to build data systems, integrate AI tools, and establish ESG data governance that allow for effective reporting across jurisdictions.

Upcoming Developments

Whilst progress has been evident over the last few years, achieving 2030 and 2050 objectives still requires a rapid increase in sustainable investment and stronger global co-ordination. The upcoming launch of the LMA’s newly developed Transition Loan Guidance (to be published in Q4) will help to make headway by providing clarity, transparency and credibility to the transition-labelled finance market.

The development of guidance on a Use of Proceeds label to support transition loans will support capital flows into climate-aligned transition activities and unlock liquidity, particularly for the hard-to-abate sectors.

Mizuho’s Approach to Transition and Climate Change

At Mizuho, our approach to transition and climate change is based on 3 perspectives: promoting transitions in real economy, capturing business opportunities and appropriately managing risks.

Since our first TCFD report in 2017, we have steadily transformed our reporting from a regulatory compliance driven exercise to a comprehensive and forward-looking approach that integrates climate, nature, and social impact into our core business strategy. Sustainable finance targets play a key role in monitoring execution of our strategy.

Harmonising sustainability disclosures is not just a regulatory exercise but a strategic enabler of the energy transition. It is important for corporates and financial institutions to move beyond disclosures and integrate sustainability and climate risks and opportunities into business strategy.

The LMA Guidance will be a welcome addition to the LMA’s existing set of principles and guidelines which establish product labelling best practice, and will further harmonise and accelerate investment into the energy transition.