#earthood

A potential investor analysing two companies that disclose identical emissions would place greater trust in the company with third-party verification of its emissions data versus self-reporting. That’s not a theoretical assumption. It reflects how capital markets assess information quality in 2026.

The information disparity between third-party verified and self-declared GHG data has become much larger. Mandatory assurance expectations are increasing under CSRD, UK SRS, and BRSR Core. Rating agencies such as Sylvera and BeZero give quality assessments to carbon data. The origin and verifiability of data are increasingly being incorporated into investment decisions by institutional investors.

It is now a question of when, rather than if, organisations relying on self-declared data will need to adopt GHG verification services.

Why Self-Declaration No Longer Works

There are three key vulnerabilities associated with self-declared GHG emissions data that are increasingly evident to investors. Firstly, inconsistent methodologies. Without independent verification, organisations may apply different calculation approaches, which limits comparability across time periods and between companies.

Secondly, data quality uncertainty. Investors are often unable to determine whether the reported figures are based on actual measurements or broad estimations, reducing confidence in the reliability of disclosures. Thirdly, unclear boundaries. In the absence of independent validation, it becomes difficult to assess which entities, operations, or emission sources are included within the reporting scope.

In addition to reducing investors' confidence, this type of data makes investors charge you a risk premium for investing in your company. According to PwC, in 2024, only 40% of investors thought that companies disclosed ESG risks adequately [1]. The remaining 60% charged a discount on investments or asked for additional data.

What Third-Party Verification Delivers

GHG verification services provide independent assurance across four key dimensions. Accuracy ensures that reported emission figures are reliable and supported by evidence. Completeness confirms that the full scope of relevant emissions has been captured. Consistency assesses whether methodologies have been applied uniformly across reporting periods. Conformity evaluates whether the GHG inventory aligns with recognised standards such as the GHG Protocol, ISO 14064, or BRSR Core requirements.

Verification involves a detailed review of source data, calculation methodologies, internal controls, and supporting documentation. The outcome of this process is a formal verification statement that provides credible and independent assurance on the quality of reported data, something that cannot be achieved through self-declaration alone.

This shift is driving the global move toward mandatory ESG assurance. Under CSRD, organisations are required to begin with limited assurance, with a transition toward reasonable assurance over time. In the UK, ISSA (UK) 5000 will become effective from 2026, further strengthening the framework for sustainability assurance and reinforcing the need for robust, audit-ready data systems.

The Cost of Delay

Organisations that delay verification are faced with two compound challenges. The first one is that they lose out on the existing opportunity for getting a credibility advantage on self-declared data when verified data comes into the picture for the first time. This premium eventually turns into a minimum expectation with increased adoption rates of verification by other organisations.

Secondly, getting data ready for verification requires effort. Organisations that begin verifying their data now create an internal capacity that ensures smoother and less expensive subsequent processes. For organisations that delay until verification becomes mandatory, there will be last-minute efforts to adjust systems for compliance.

The amount required for verification is relatively small compared to the potential benefit in the capital market environment. Verification of a company's full range of GHG emissions costs less than one hundredth of a percentage point of the cost of capital.

Conclusion

GHG verification plays a critical role in strengthening ESG reporting by enhancing investor confidence and stakeholder trust. Organisations that adopt structured verification processes demonstrate a clear commitment to transparency, data integrity, and accountability. The shift from self-reported to independently verified emissions data is no longer optional, but a necessary step toward credible sustainability performance.

As ESG reporting frameworks evolve, organisations must embed verification into their reporting processes from the outset. Independent verification aligned with recognised standards ensures that disclosures are not only compliant but also decision-useful for investors.

Looking ahead, sustainability assurance is increasingly aligning with global standards such as ISSA 5000, reinforcing the need for consistent, verifiable, and audit-ready ESG data systems. Organisations that build verification-ready frameworks early will be better positioned to meet regulatory expectations and gain a competitive advantage in capital markets.

The UK sustainability regulation framework made a notable breakthrough at the beginning of 2026. The final UK Sustainability Reporting Standards were released on 25 February. The FCA initiated its consultation regarding the mandatory adoption of UK SRS for public companies on 30 January. The consultation deadline was 20 March. It is expected that final regulations will come by autumn 2026, followed by the requirement of mandatory climate disclosures from 1 January 2027 [1].

The timetable outlined above may look too aggressive, but it reflects the pace of regulatory change. In terms of readiness, everything will be counted in months, not in years anymore. Discussions about tougher sustainability reporting requirements in the UK have long passed. What matters now is how ready your organisation will be when new regulations take effect.

Following the previous article about the three major regulations proposed by the FCA in March, it is important to assess the progress made since the end of the UK SRS consultation period.

UK SRS: From Consultation to Implementation

The UK SRS, released in its final form on 25 February 2026, incorporates targeted amendments to IFRS S2 proposed by the ISSB in December 2025. These include clarification that financial institutions can constrain Scope 3 Category 15 disclosures to just financed emissions (not including derivatives), choice around the industry classification framework for financed emissions disaggregation, and making industry-based performance metrics optional rather than mandatory.

The FCA’s proposed reporting timeline includes mandatory UK SRS S2 (climate) reporting from 2027, scope 3 reporting on a comply-or-explain basis from 2028, and UK SRS S1 (general sustainability) reporting on a comply-or-explain basis from 2029 [2]. Consultations by the government are anticipated in the first half of 2026 regarding extending mandatory reporting to large non-listed companies.

The Assurance Regime Taking Shape

By mid-2026, the FRC is expected to be established. An interim register for sustainability assurance professionals. The assurance framework, ISSA (UK) 5000, will become effective from 15 December 2026 for sustainability information in respect of periods starting on or after that date. Thus, a new market arises for the assurance of sustainability-related information, which did not exist in the UK one year ago.

Financial institutions must assess whether their current sustainability information could withstand any independent assurance process. The move from self-assessed TCFD information to assurance-ready UK SRS requires more robust infrastructure, processes, and governance related to sustainability reporting at the level of the board.

What Financial Institutions Should Prioritise

Three priority actions need to be implemented urgently. Firstly, assess the gaps in your TCFD-compliant reports compared to UK SRS S2 requirements. While based on the same framework, the standards have additional provisions concerning scenario analysis and transition plans, as well as quantifiable metrics.

Secondly, be ready for stricter enforcement of the greenwashing prohibition. In February 2026, the FCA issued a statement highlighting examples of good and bad practice. Sustainability claims about financial products must be truthful, precise, and justified by facts. General terms such as sustainable and green are likely to attract regulatory scrutiny.

Third, engage ESG advisory services that understand the relationship between UK SRS, the SDR fund labelling regime, the imminent ESG ratings regulation, and the reporting of transition plans. These regulatory threads are coming together, and organisations that fail to address them collectively may face gaps and inconsistencies that auditors and regulators will identify quickly.

The UK is rapidly establishing one of the most sophisticated sustainability regulatory regimes globally. Financial institutions that move early to align with these requirements stand to gain a clear competitive advantage in terms of investor confidence and market positioning. Those that delay, however, will face increasing pressure competing for limited assurance provider capacity while rushing to build data systems and governance structures that should already be in place. The direction is clear: organisations must decide whether they are leading this transition or struggling to keep pace.

Conclusion

Given the rapidly evolving sustainability reporting landscape, there is a need for immediate action by financial institutions. ESG reporting advisory services can support organisations in navigating the regulatory system while gaining the trust of stakeholders. Through filling any data gaps and enhancing governance, financial institutions can position themselves as industry leaders.

Effective implementation of ESG reporting advisory approaches requires investment in robust systems, processes, and governance. Earthood could assist organisations in achieving regulatory compliance and communicating effectively with all investors and other regulatory bodies. There is an increasing convergence between the UK SRS and SDR and other similar frameworks.

UK regulators are moving decisively beyond voluntary ESG disclosures toward a more structured and enforceable sustainability framework. The FCA has developed a fa comprehensive regulatory framework covering sustainable finance, including product classification, ESG ratings, and sustainability disclosures. If your business has exposure to the UK financial market, 2026 marks a critical transition point for sustainability disclosures. Investors increasingly rely on FCA-aligned, transparent, and verifiable ESG disclosures to assess risk, allocate capital, and evaluate long-term financial resilience.

A consultation process initiated by the FCA in January 2026 concerning the adoption of UK Sustainability Reporting Standards (UK SRS) for listed companies based on ISSB's S1 and S2 standards. The idea is to issue the respective regulations in 2026 and make them effective starting January 2027 [1]. 

Companies are expected to publish their first UK SRS-compliant reports in early 2028. However, preparations should begin now, as the new regulation encompasses much more than one might think.

The Anti-Greenwashing Rule Is Already Live

All authorised FCA firms will need to adhere to the anti-greenwashing regulation from May 2024 onwards. In relation to sustainability claims made about financial products or services offered, they should be fair, accurate, and not misleading. This was followed by more guidelines issued by the FCA in February 2026 on best practices and what to avoid.

If firms offer ESG reporting services for financial companies, then their sustainability data reporting will fall under this rule. Broad claims such as “sustainable” or “green” without supporting evidence and methodology are increasingly subject to regulatory scrutiny.

ESG Ratings Are Coming Under Regulation

The FCA consultation on ESG ratings regulation, held in December 2025, identified that 55% of ESG rating users have concerns regarding the methodologies used to generate ratings due to concerns related to outdated data, lack of transparency, and weak methodological consistency. With the introduction of this new regime, which is due to come into force in June 2028, there will be a requirement for ESG ratings providers to adhere to certain criteria relating to transparency, governance, and conflicts of interest.

This is not only relevant to ESG ratings providers. Asset managers, banks, and insurance companies that use ESG ratings in decision-making processes, risk management, and reporting must ensure that the providers of such ratings are compliant with the above criteria. Organisations using ESG ratings in investment decisions, reporting, or client communication must ensure that these ratings meet FCA transparency and governance expectations. 

UK Sustainability Reporting Standards: The ISSB Foundation

The draft UK Sustainability Reporting Standards (SRS), which will incorporate aspects of IFRS S1 and S2, will establish a binding set of sustainability disclosure standards for listed entities. Climate disclosures aligned with IFRS S2 are expected to be prioritised initially, followed by broader sustainability disclosures under IFRS S1. 

According to the FCA, entities that disclose in accordance with TCFD currently have an appropriate starting point; however, making the switch to UK SRS entails changes to governance frameworks, information management, and assurance. Over time, UK SRS-aligned disclosures are also expected to move toward independent assurance, making data accuracy, governance, and audit readiness critical from the outset.

FCA is now consulting on how transition plan disclosures can be incorporated into the new system. Financial institutions are required to move beyond their current emission levels to explain how they plan to make the transition to a low-carbon economy.

What This Means for Financial Institutions

In terms of the interaction between anti-greenwashing requirements, ESG ratings regulation, and UK SRS, there is a complex landscape of regulatory compliance. Financial institutions require ESG advisory support that understands the interconnections between these regulatory pillars and enables integrated compliance. Failure to do so results in a duplication of effort and potential conflicts and contradictions that the authorities will pick up.

Organisations that prepare early are better positioned with investors and regulators. Those who choose to delay their actions are in danger of facing compliance risks and enforcement action once the regulations become obligatory and enforcement activities start generating precedents. The emergence of the three regulatory pillars implies the need to comply with them at the same time. And this requires taking action now, ahead of any enforcement proceedings.

Conclusion

The regulation of ESG in finance continues to evolve rapidly. The current challenges for financial companies in managing the anti-greenwashing legislation, ESG rating regulations, and sustainability reporting requirements introduce an unprecedented level of regulatory complexity. 

Companies aiming to create an advanced and effective ESG reporting advisory function should take into consideration their legal compliance obligations, together with the interests of stakeholders regarding disclosure and reporting quality. At the same time, sustainability assurance is converging globally toward standards such as ISSA 5000, signalling a shift toward more consistent, investor-grade verification of ESG disclosures.

Developing effective ESG reporting advisory means focusing on the needs of investors, customers, and society, not just meeting regulatory requirements. Establishing a robust framework covering governance, assurance, and disclosure can provide a significant strategic advantage both from the standpoint of regulators and stakeholders.

Property portfolio regulations have become actual requirements for companies to follow. The current situation includes stricter disclosure requirements, which capital providers use to investigate data while sustainability claims undergo official evaluation processes. The meaning of real estate ESG assurance now functions as a risk management system instead of its previous position as a reputation-building tool.

Investors and lenders now expect evidence that climate data is complete, defensible, and decision-ready. The requirement for ESG assurance has evolved from a reporting activity to a security measure used in governance. 

The essential issue for asset managers who work in multiple regions is not whether they should verify ESG data. The speed of implementing assurance procedures will determine when organizations face regulatory violations and funding restrictions.

The Regulatory Reality Bearing Down on Real Estate in 2025

The process of normalizing net-zero commitments now progresses through various international investment portfolios. The percentage of real estate entities that implement net-zero policies increased to 81.5% in 2025, according to GRESB assessment after reaching 78.8% in 2024 and 72.4% in 2023. The organization achieved 66.4% of its net-zero reduction goals after making 16-percentage-point progress from its 2023 performance of 50.4% [1].

The increase in commitments has revealed a fundamental structural weakness. Policy adoption outpaces implementation requirements while regulators now assess evidence instead of assessing intentions. 

The CSRD and SFDR function as an active disclosure requirement. The EU Taxonomy establishes additional requirements through technical screening criteria that need exact, trackable information.

The space between ambitious goals and actual proof of those goals stands as the current gap for implementation. Organizations need structured real estate ESG assurance systems because their existing approach results in disclosure statements that both fail to meet regulatory standards and investor due diligence requirements.

How ESG Assurance Directly Protects Real Estate Asset Value

Stranded asset risk is often framed as an energy performance issue. The actual situation requires assessment of data validity. The valuation risk will increase when emissions baselines and retrofit claims remain unverified. 

Green financing markets define the boundaries of this financial discipline. Sustainability-linked loans and green bonds depend on assurance-grade metrics for their funding. Lenders increasingly require third-party validation before extending preferential terms.

Tenant demand adds commercial pressure. Corporate occupiers with science-based targets need reliable building-level data to meet their own reporting obligations. Verified ESG information becomes a leasing differentiator. 

The presence of ESG assurance certifies all three cases through its ability to reduce uncertainty. The process improves disclosure quality while boosting lender trust and maintaining asset liquidity for extended periods.

GRESB, TCFD, and the Frameworks Shaping ESG Assurance Expectations

The GRESB verification process establishes visible differentiation between organizations through its verification method. Public disclosure scoring explicitly rewards externally verified data, signaling that assurance quality influences benchmark performance. 

The TCFD framework requires organizations to assess climate risk through their regular financial reporting process. The governance disclosures, transition risk modeling, and scenario analysis process now requires organizations to authenticate their emissions and asset information.

Public disclosure scoring now differentiates between self-reported metrics and third-party verified data. The direction is clear. Markets today provide higher trustworthiness to verification systems that have been validated through testing.

Portfolio managers face a problem because they need to follow these frameworks while their actual performance remains unverified. Structured verification processes improve both external ratings and internal risk assessment systems.

What a Credible Real Estate ESG Assurance Process Covers

The real estate best assurance process evaluates environmental performance through more than its emission measurement. The assessment process evaluates all aspects, including the testing of boundaries, data sources, calculation methods, and internal control systems. 

Organizations must develop their net-zero pathways through standard procedures that define their scope and energy intensity measurements. Assurance providers test whether reported performance can be traced back to asset-level documentation.

The process also reviews governance structures. The implementation of clear accountability, together with documented methodologies and version-controlled data systems, results in decreased audit difficulties while maintaining regulatory compliance. 

The execution of assurance processes according to established standards transforms assurance into a tool that builds confidence instead of becoming a burden for compliance. 

Building an Assurance-Ready ESG Infrastructure

The market signals demonstrate that prepared organizations face essential capital requirements because of their operational readiness. In a survey of 180 real estate professionals by GRESB and MIPIM conducted in October to November 2025, 66% state sustainability remains core to their strategy, 49% cite investor or lender requirements as the top driver, and only 4% plan to reduce sustainability efforts in 2026, with 44% planning to do more [2].

Companies require their sustainability practices to receive an evaluation that proves their commitment to sustainability. Organizations that delay assurance readiness risk falling behind investor expectations. 

The process begins with collecting asset-level data. Assessment becomes expensive, and the organization will lose control over the valuation process when meter data, tenant consumption data, and emissions control systems are not maintained consistently.

The system design process improves when organizations work with certified providers from the start. The governance framework establishes organizational responsibilities and defines pathways for escalation and review processes, which ensure that all disclosures will withstand examination. 

The organization needs to maintain assurance readiness throughout the entire year because it operates as a fundamental process throughout all project stages.

Conclusion

The current phase of real estate markets requires property disclosure standards to determine asset value protection. The three parties of regulatory requirements, investor assessment needs, and tenant demands for demonstrable environmental, social, and governance performance standards have reached a common point of focus. The system established by 

Real estate ESG assurance delivers essential operational guidelines that help organizations accomplish their sustainability goals. The system turns environmental sustainability stories into proof that can withstand examination.