Danesmead Advisory’s 2025 Round-Up

Summary

In 2025, sustainability and responsible investment were defined by both rearticulation and recalibration. The year was bookended by notable EU sustainability regulatory shakeups, with the EU Omnibus announcement in February and SFDR 2.0 proposal in November. ESG underwent a makeover, restyling itself as responsible investment and sustainability, reflecting both the maturity of the sector, but also ongoing political polarisation in the US.

And despite all this noise, corporates and investors maintained strong commitments to sustainability, responsible investment, reporting, and net-zero ambitions.  

We started the year in the wake of the US election with measured expectations and some trepidation, but our reflection on the past 12 months is characterised by progress and promise.

Key Themes

Regulation

2025 was a pivotal year in the evolution of sustainability regulation.

• SFDR 2.0: in November, the European Commission proposed the long awaited overhaul of SFDR, replacing the disclosure structure with four clearer product category labels. Article 8 and 9 disclosures will become categories: Article 7 (Transition), Article 8 (ESG Basics), and Article 9 (Sustainable Features), each requiring 70% alignment and mandatory exclusions. The definition of “sustainable investments” will also be scrapped, and disclosure templates simplified with the aim of reducing complexity and improving comparability, while still demanding robust disclosures on taxonomy alignment and GHG emissions. Read more here.

• PRI Framework Update: in November the PRI also unveiled its 2026 reporting framework, promising a leaner structure that maintains signatory input but reduces duplication and consolidates questions into around 40 indicators. Reporting will become mandatory for all signatories, removing the option for partial reporting in 2026. Asset class-specific modules have been removed, with content integrated into broader areas such as governance, investment analysis, decision-making, and stewardship. New priorities include mandatory human rights due diligence, nature-related risk assessment, and collaboration. Read more here.

• CSRD and Omnibus Package: the first wave of CSRD reporting began in 2025, driving some large companies to grapple with double materiality and granular data requirements. However, the bigger story was the EU Omnibus simplification package which seeks to scale back the requirements of the original regulation while maintaining pragmatic ambition. Under the latest proposal CSRD would apply only to companies with over 1,000 employees and €450m turnover, removing over 90% of previously in-scope firms. Sector-specific reporting would also become voluntary under the proposed approach, listed SMEs would be removed from scope, and qualitative detail requirements would be reduced. Read more here.

Reporting

Investor pressure and regulatory requirement drove a surge in sustainability reporting in 2025.

• TCFD: this year we supported many more clients, both those in and out of scope of regulatory requirements, to produce TCFD reports, responding both to requirements under the FCA’s climate disclosure rules as well as increasing investor requests for climate risk transparency. Compliance remained the priority for most, though we also saw an increase in those seeking to use their reports for marketing purposes.

• California’s Climate Rule SB 261: California’s SB 261 requires companies with over $500 million in annual revenue doing business in the state to publish biennial reports on climate-related financial risks and mitigation strategies, aligned with TCFD recommendations. Though the regulation has been plagued by changes and delays, we’ve been impressed by clients’ capacity to gather data and comply at short notice, further confirming the growing level of maturity we’re seeing across the board. Find out more here and here.

• Annual Sustainability Reporting: this year we also supported many more clients to produce annual sustainability reports. For some this meant refining their approach to be more succinct, practical, and visually polished, reflecting a growing emphasis on investor engagement and real-world impact. However for many, 2025 marked firms’ first venture into sustainability reporting, with a focus on defining sustainability strategy and goals, and demonstrating commitment through varied actions, initiatives, frameworks as well as progress against targets and ambitions.

• Framework Trends: while PRI, GRI, SASB, and CDP remain foundational frameworks against which organisations continue to benchmark themselves, we noticed a shift in momentum toward more thematic and sector focused frameworks like SBTi, B-Corp, and EcoVadis, reflecting industry preferences and a growing trend towards external verification and certification. In parallel, ISSB gained wider adoption across several jurisdictions through 2025. In 2026, we expect to see further refinements to ISSB’s S1 and S2, as well as increasing pressure on companies to integrate climate and sustainability risks and develop scenario-based risk analysis as part of standard financial reporting.

• Greenwashing/Hushing: greenwashing remains a persistent issue, with multiple companies and financial institutions fined over the past 12 months for misleading sustainability claims. However, this last year we also saw a rise in greenhushing (where companies deliberately downplay or withhold information about their sustainability goals and initiatives, often to avoid scrutiny) particularly in response to the growing backlash in the U.S., where firms are increasingly reluctant to publicise their sustainability efforts for fear of anti-ESG litigation.

Reframing

In another signal of the ongoing evolution of the sector, 2025 saw a significant shift away from the use of the much-maligned term “ESG” in preference of more neutral and/or specific terminology. Enter broad terms like sustainability, responsible investment, and risk management, as well as more practical and specific terms like operational efficiency, resource management efficiency, or transition. Despite this shift in language, the underlying principles and commitments remain, i.e., long-term value creation, risk awareness, and responsible stewardship, and we only see these becoming more deeply embedded in investment decision-making and operational practices.

In our view, the reframing has resulted in enhanced focus on sustainability initiatives that align with value creation and business resilience, a move away from “tick box” exercises often associated with ESG in the past. We see this as a positive evolution, aligned with our longstanding philosophy that organizations will be more likely to succeed with sustainability if incentives are aligned and the drivers are commercial and financially motivated.

Investor and Corporate Commitment

Despite political headwinds, investors and corporates continue to demonstrate commitment to sustainability and responsible investment.

• Investment Resilience: the evidence suggests that investors remain firm in their commitments to sustainability and responsible investment. Reports published in the middle of the year emphasised both the scale of the sustainable investment opportunity ($11.7 trillion for European asset managers according to J. P. Morgan) as well as the continued commitment by investors. A BNP Paribas survey of 420 institutional investors representing $34 trillion in AUM found that despite the political backlash, 87% of institutional investors have maintained their sustainability goals and 74% are prioritizing portfolio decarbonization and social issues equally.

• Sustainability-Driven Reallocation: the prioritisation of climate and other sustainability factors continued in 2025, with several large pension funds highlighting their importance through their (re)allocations. These include the UK’s largest pension fund – The People’s Pension (TPP) which redirected $35.4 billion from State Street to Amundi and Invesco, stating a desire for a more progressive stance on responsible investment. Similarly, CalSTRS awarded $450 million to Nordea and $150 million to Ninety One, and Akademiker moved an estimated $400 million from State Street, both seeking stronger sustainability commitments from managers.

• Corporate Commitment: two major reports released in July 2025 confirmed a clear trend: corporations remain committed to sustainability. These revealed that 88% of global companies still view sustainability as a long-term value driver, and 87% maintained or increased investment in sustainability initiatives over the past year. Whether driven by regulation, investor expectations, or consumer demand, it seems for corporates, sustainability has evolved from a “nice-to-have” to a core strategic priority and a key factor in business resilience. This also reflects our experience this year, with ever more firms and companies seeking guidance on sustainability reporting and disclosure.

Looking Ahead

2025 was a year of progress and recalibration. Regulatory frameworks matured, reporting became sharper, and despite political turbulence, sustainability stayed firmly embedded in corporate and investor priorities. The stage is set for 2026 to bring greater clarity, deeper integration, and continued scrutiny.

We look forward to working with all of our fantastic clients in the New Year, and thank you for your continued support.

If you’d like to discuss any of these topics further, or find out how Danesmead Advisory can help you, please get in touch.