Sustainable Finance regulations at a crossroads: progress in climate risk rules, but gaps remain on biodiversity and ecosystems.

Deloitte Switzerland is proud to have contributed to the WWF Greening Financial Regulation Initiative's fifth edition of its annual Sustainable Financial Regulations and Central Bank Activities report (SUSREG).

The 2025 SUSREG assessment evaluates progress on the integration of climate, environmental and social risks into central banking, financial regulation and supervision. It covers 50 jurisdictions for banking supervision, 46 for insurance supervision, 12 for capital markets, representing over 89% of global GDP, 75% of global greenhouse gas emissions, and 13 of the 17 most biodiversity-rich countries.

In total the assessment covers 65 indicators for banking supervision, 15 for central banking, 76 for insurance supervision, and 25 for capital markets.

Key Highlights
 

1. Nature-related risks remain underdeveloped in supervisory frameworks. Although biodiversity, water, and ecosystem impacts are acknowledged, detailed guidance on governance, risk metrics, and location-based assessments is limited. Integration into core risk processes is inconsistent and largely exploratory.
2. Macroprudential tools, essential for managing system-wide climate and nature risks, are rarely used. While microprudential supervision has progressed, instruments like the Systemic Risk Buffer (SyRB) and exposure limits remain largely inactive, despite their importance in controlling financial system risks.
3. Enforcement across jurisdictions is weak, with limited follow-up on non-compliance and low transparency around sanctions, reducing their deterrent effect.
4. Social risks linked to climate and nature receive little attention in supervisory frameworks. Focusing on material social risks, such as just transition impacts, could improve risk management.
5. Central banks have begun addressing these risks, but integration into monetary policy is minimal, often due to a misinterpreted “market neutrality” that supports harmful activities.
6. Green taxonomies are growing, but their impact is constrained without mandatory, decision-useful disclosures.

Banking Supervision

Supervisory approaches to climate, environmental, and social risks are moving in different directions. Some authorities are tightening expectations and adding forward-looking tools, others are stepping back. The result is greater divergence in how risks are priced, disclosed, and planned for across borders.

As in previous years, Europe shows solid fulfilment of indicators under the current regulatory framework and expectations. It is followed by APAC where countries such as Singapore, Hong Kong, and Australia have increased their supervision by, for example, defining environmental risk guidelines.

Meanwhile, regulatory and supervisory gaps persist in sector-policy expectations, capital-ratio calibration and supervisory follow-through, as shown by limited transparency on monitoring of enforcement actions, with only half of supervisors publishing progress reports, mostly on climate.

Central Banking

Progress in adjusting central banking operations has been stagnant over the years, despite the significant size of central banks’ balance sheets, as shown by the average fulfilment of SUSREG Central Banking indicators by topic and region in 2025.

Central banks are improving the management of their own portfolios – for example the Eurosystem is tilting bond reinvestments toward better climate performers, and improving their portfolio disclosures on nature risks. Some authorities, such as the Banque de France, also embed climate risk in collateral frameworks.

Most monetary policy tools remain blind to climate and nature priorities. Scores for climate integration in collateral frameworks, portfolio disclosure, foreign exchange reserves, and reserve requirements are low, and nature-related risks are hardly integrated into monetary operations.

Insurance Supervision

Insurance supervision lags behind banking, with climate and environment indicators receiving higher fulfilment scores than social indicators.

The supervisory floor in insurance is gradually rising. Insurers are increasingly expected not only to disclose exposures but also to demonstrate how climate and environmental risks shape their strategies. However, the depth and consistency of this integration varies widely between countries. More advanced jurisdictions are pushing toward embedding climate priorities in supervision and emerging markets are experimenting with first steps.

Capital Markets

The 2025 capital markets assessment shows that sustainability regulations across capital markets continue to vary widely by region and country.

Momentum is building around disclosure, fund-naming rules, and anti-greenwashing measures, but taxonomy alignment and transition-planning requirements are still at an early stage.

Conclusion

The 2025 SUSREG assessment shows a financial system in transition. Progress is notable in Europe and parts of Asia Pacific, but significant gaps remain, especially in nature risk, enforcement, and central bank integration of climate and environmental risks.

With the 2030 deadline for the UN climate goals fast approaching, decisive and coordinated regulatory action is essential to accelerate the financial sector’s shift toward a net-zero, nature-positive, and socially equitable future.

Top Priority Actions for Regulators and Supervisors:

• Enhance nature-risk supervision with a systemic approach.
• Activate macroprudential tools and improve systemic risk surveillance.
• Begin calibrating Pillar 1 capital requirements for environmentally harmful exposures.
• Mobilise green and transition finance strategically.
• Establish stable disclosure and transition-planning regimes for financial institutions and corporates.
• Strengthen national and international inter-agency coordination.
   

Discover the executive summary of the findings and the full report. The full country-by-country and indicator-by-indicator results are available in the WWF SUSREG Interactive Tracker.

Contribution

We are grateful to Greta Cenotti, Manager, Sustainability for her contributions to this topic.