December 2025

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Tracefi Current Review 15 December 2025

Omnibus, ISSB and China’s ESG Development

European sustainability regulation, global reporting standards and China’s ESG leap are currently closely intertwined. Below are the key observations from recent weeks.

Omnibus: searching for a last-minute compromise

The European Parliament’s centrist and left-wing parties are seeking to negotiate a new compromise before Thursday’s vote on the so-called sustainability Omnibus package (Responsible Investor, 17 January). The outcome of the negotiations remains uncertain, but there are signs of softening in the EPP’s position.

An earlier vote on launching negotiations failed, which strained relations between the EPP and von der Leyen’s majority (S&D, Renew, Greens). A compromise is now being sought that would ease the requirements for corporate climate transition plans and limit member states’ ability to tighten regulation nationally.

In return, the centrists want to demonstrate that rules are applied uniformly across the EU. At the same time, left-wing groups are seeking to preserve the core content of the transition plans.

An agreement may be reached at the very last moment. Without a compromise, the parliament would have to vote on hundreds of different amendment proposals, increasing the risk of a contradictory outcome and even a secret ballot. The aim is still to finalise the Omnibus agreement by the end of 2025 or early 2026.

Observations from the ISSB Symposium

I attended the recent ISSB Symposium. There were only two participants from Finland, the other from Nokia Oyj — surprisingly few considering the rapid global adoption of ISSB standards.

Currently, nearly 40 jurisdictions representing approximately 60% of global GDP are adopting ISSB standards or incorporating them into their own regulation. In the United States, over 70% of S&P companies already report in accordance with ISSB. The next growth phase is particularly focused on emerging markets.

Themes that particularly stood out

Scope 3 in practice

Jonathan Horrell, Chief Sustainability Officer at mining company Weir Group, gave a concrete description of the role of Scope 3 emissions in the company’s strategy. Weir Group has developed an action plan for reducing emissions across all 15 Scope 3 categories. The most challenging area is the use of sold products (category 11), which the company addresses through customer guidance and communication — with measurable results.

Human Capital returns to the agenda

ISSB’s Human Capital project has been relaunched. The work had previously been on hold while ISSB focused on implementing the general S1 standard and the climate standard (S2).

Industry-specific or universal metrics?

A panel (Nestle, Shell, CPP Investments, Neuberger Berman) debated whether sustainability indicators should be industry-agnostic or industry-specific. Common metrics support the development of global standards, but for active investors, value often arises from comparing companies specifically on financially material sustainability factors within their industry.

Investor perspective: reporting is a tool, not a goal

CPP Investments’ Chief Investment Officer Richard Manley emphasised that sustainability reporting is above all a means to assess whether management and the board understand the long-term risks and opportunities of the business — and whether they act accordingly.

Numbers alone are not enough. For example, low Scope 2 emissions may result from energy efficiency or simply from the operating environment. The value of reporting lies in how it supports the board’s ability to monitor strategy implementation relative to peers.

According to Manley, a lack of reporting is a clear signal to investors: if management and the board are not up to date on sustainability risks, the board is not fulfilling its fundamental duty. This directly affects investment decisions.

China in the “golden age” of ESG reporting

China is accelerating its transformation into one of the world’s most structured and comprehensive ESG reporting environments. In 2024–2025, new reporting requirements from stock exchanges and the record-setting reporting pace of state-owned enterprises (SOEs) have significantly expanded the ESG framework (ESG University).

Chinese companies’ ESG reporting largely relies on IFRS ISSB standards (SASB-based). Growth is driven particularly by the increasing prevalence of Scope 3 reporting requirements, partly through SBTi requirements. Coverage is still variable, but the direction is clear.

  • 99% of the financial sector reports ESG data.
  • In the energy sector, coverage is 94%; in industry and technology, 65%.
  • In 2024, 1,193 companies (52% of listed companies) on the Shanghai Stock Exchange published an ESG report.
  • ESG reporting for large companies will become mandatory by 2026 (approximately 500 companies).

National ESG framework under construction

China’s Ministry of Finance has published the first national sustainability reporting standards. The framework covers climate risks, governance structures, strategy, transition plans and environmental impacts, among other areas.

The aim is to prepare companies for international capital markets and support China’s carbon targets for 2030 and 2060.

State-owned enterprises are leading the way: 379 out of 409 listed SOEs published an ESG report, significantly more than the rest of the market. At the same time, the state is promoting the use of green bonds and climate reporting.

Conclusion

China’s ESG reporting framework is expanding rapidly in both scope and sophistication. Led by stock exchanges and the Ministry of Finance, China is building a national system that positions the country as one of the world’s most systematic ESG reporting regions.

  • This text is based on ESG University material. Verification of the data is not covered in the material.

Susanna Miekk-oja Managing Partner Tracefi