Regulatory uncertainty defined 2025 and will continue to do so this year. In the US, a reversal of ESG-related policies and enforcement priorities sent a strong signal to markets. In other countries, policymakers recalibrated their regulatory approach, while ESG-focused litigation rose as stakeholders increasingly turned to the courts.
For portfolio advisers and private wealth firms, the challenge is operational as much as strategic. That means determining which rules apply across markets and products, understanding their impact on product selection, suitability and disclosures and ensuring sustainability claims are robustly governed and evidenced. It’s complex and takes time and resources, especially for cross-border businesses.
Trend 1: Regulatory recalibration
In Europe – historically at the forefront of sustainability – policymakers have delayed, narrowed or revisited earlier proposals. “Europe remains committed to sustainability, although not at any cost. The EU’s regulatory ambitions have been tempered by economic and geopolitical headwinds,” said Thomas Voland, a Clifford Chance Partner based in Düsseldorf.
In the US, regulatory regimes are in flux. Some states are advancing ESG-related measures, while others are seeking to roll them back. Jeff LeMaster, a New York-based partner, said: “This highlights a broader risk for investors and global firms – regulatory whiplash and the possibility of abrupt reversals between administrations.
See also: Regulation and political polarisation: Why one step back could mean two steps forward
“For organisations operating globally, flexibility is critical. Firms should closely monitor state-level developments and litigation risk. In this environment managing inconsistency is just as important as managing compliance.”
Trend 2: ESG-related litigation is rising
As regulation slows or fragments, legal claims are increasing across multiple jurisdictions, driven by pro- and anti ESG motivations, often challenging climate policies or corporate ESG commitments. This year, companies will face pressure from all quarters – shareholders, investors, customers and employees – to align their conduct with an array of values and expectations.
NGOs are increasingly willing to push companies to deliver on commitments where they have made them or to change their behaviour where they have not, including through the use of litigation.
In response, some companies are taking a more cautious approach to their public ESG commitments, such as withdrawing from net zero alliances, revising DEI messaging, rebranding ESG strategies and adopting jurisdiction-specific policies to address differences across regulation.
What lies ahead?
ESG regulation will continue to shift and evolve as policymakers refine and recalibrate frameworks. It is crucial that firms stay up to date with the latest developments in order to identify their implications. Some key developments to look out for include:
Product disclosures: The European Parliament, the Council of the EU and the European Commission are expected to start negotiations on the Sustainable Finance Disclosure Regulation (SFDR) in Q3 this year. “Firms will need to keep a watching brief: if you distribute EU funds/mandates or advise cross-border clients, prepare for potential SFDR regime change,” says Paul Ellison, a Clifford Chance Partner based in London.
Data: Revision of the European Sustainability Reporting Standards (ESRS) is targeted for completion within the coming months, the Commission having just presented its proposal) and the UK Sustainability Reporting Standards (SRS), which were published in February 2026, have set the direction of travel for reporting by UK corporates. These affect the quality/availability of issuer sustainability information used in selection and will feed into SFDR/portfolio reporting.
See also: A tale of two SDRs: Defence and sustainable investing explored
ESG ratings reliance: UK and EU supervision/regimes for ESG rating providers are progressing through 2026, requiring firms to begin mapping where ESG scores/ratings sit in their advice process (screening, due diligence, suitability).
Claims governance: Outside of the US, ‘Greenwashing’ will continue to be a regulatory focus, requiring firms to tighten sign-off and evidence for any sustainability claims in factsheets, proposals, model portfolio notes, client reports, director/executive presentations and online content. “The question for companies is no longer if they will face greenwashing claims but when,” says Partner Naomi Griffin who is based in Sydney.
What should firms do?
Private wealth and advisory businesses should stay close to the regulatory debate and track the evolution of relevant regulations, especially those relating to disclosure and data regimes, and ensure any sustainability claim can be explained and evidenced in plain language and with supporting records.
If 2025 exposed uncertainty, 2026 will reward firms that can demonstrate they have a repeatable method for navigating it – one that is proportionate, consistent and ready to evolve.
