Across the Atlantic, the ESG narrative is splitting in two – as highlighted in the Harvard Law School Forum article “ESG Shifting Tides” – and it is reshaping the landscape in which companies operate.
In the U.S., ESG as a label is shrinking. Mentions in S&P 500 and Fortune 1000 proxies peaked in 2024, fell in 2025, and early 2026 filings have dropped below 2022 levels.
Companies are “greenhushing,” stripping out sustainability language to avoid political, regulatory, and litigation risk.
At the judicial level, new 2025-2026 cases challenge ESG mandates under the doctrine of “unconstitutional vagueness,” arguing that ESG criteria lack objective definition and cannot guide fiduciary duty.
Yet sustainability references in 10‑K risk factors continue to rise – because removing them could expose companies to liability if investors face losses.
Target’s 2021-2025 proxy evolution captures the shift:
▪️ 2021 – sustainability as risk oversight
▪️ 2022-2023 – ESG as a strategic brand asset
▪️ 2024-2025 – ESG nearly disappears, replaced by “resilience” and “long‑term value creation”
ESG isn’t dead, but it’s being rebranded to avoid risk.
Europe, however, is taking a longer‑term view, grounded in the understanding that a company’s negative impacts and dependencies are not abstract ESG issues but concrete financial risks.
The revised ESRS and SFDR 2.0 are not a retreat but a consolidation. While the U.S. backs away from ESG terminology, the EU is doubling down on clarity, comparability, and enforceability.
The ESRS revision simplifies reporting while preserving core objectives. It strengthens definitions, aligns with the Accounting Directive, and reinforces double materiality, preventing companies from reducing sustainability to a pure risk narrative.
SFDR 2.0 complements this by providing a clear financial product framework – clear categories, naming rules, exclusions, thresholds, PAIs – built on CSRD/ESRS data.
This is the opposite of “unconstitutional vagueness.” It is regulatory architecture designed to reduce ambiguity, prevent greenwashing, and support long‑term capital allocation.
ESG as branding is fading. ESG as evidence is rising ‼️ Regulators and investors expect structured, defensible data – not slogans.
Risk‑only framing won’t work in the EU. Double materiality requires addressing both impacts and financial risks.
Simplification is not dilution. ESRS and SFDR 2.0 streamline reporting but raise expectations on quality and comparability.
Capital follows clarity. While U.S. ESG funds face outflows, the EU is building conditions for stable, long‑term sustainable finance.
The EU is not following the U.S. retreat. It is professionalizing sustainability reporting.
Companies that prepare now – with robust data, clear governance, and integrated reporting processes – will be best positioned to benefit from regulatory stability and investor confidence.
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The Harvard Law School Forum article “ESG Shifting Tides” is available here: https://corpgov.law.harvard.edu/2026/05/07/esg-shifting-tides-an-analysis-of-the-changing-narrative-around-sustainability-and-esg-investment-contraction/
