A thoughtful and interesting article from Clarity AI - Guest Post - Hitting Reset: Sustainable Finance Faces a Defining Second Half in 2025 - ESG Today
Summary of some key points and recognisable themes:
- Regulatory Fragmentation and Uncertainty: Global sustainable finance is facing increasing regulatory divergence. The U.S. is experiencing volatile policy swings, while Europe is simplifying frameworks like CSRD and the EU Taxonomy, raising concerns about reduced disclosure. Global coordination is weakening, with many countries missing climate commitments ahead of COP30.
- Return to Financial Materiality: "Gone is the era of blanket claims that ESG always enhances returns. In its place: a renewed focus on financial materiality. The question now is: "Does this matter to performance?" Investors are shifting away from broad ESG claims and refocusing on financial materiality-prioritizing ESG issues that clearly impact performance. This marks a move toward evidence-based stewardship and long-term value creation over superficial ESG labeling.
- Climate Strategy Evolution: The climate narrative is transitioning from setting ambitious targets to implementing practical tactics. Investors and companies are focusing more on measurable, actionable strategies rather than aspirational goals.
- Opportunity for Reinvention: Despite challenges, the second half of 2025 is seen as a chance to reset and refine sustainable finance. With sharper tools, better data, and a focus on long-term value, the sector can evolve into a more resilient and impactful force.
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James Doyle
Director, Green Finance, Investment Management
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