The EU Green Deal is under political pressure. But for ESG investments in 2026, this does not mean a departure from sustainable strategies, but rather the beginning of a new phase of proving their worth. The European Commission is sticking to its long-term climate goals, while at the same time calls for less bureaucracy, practical rules, and more realistic implementation are growing louder.
The tensions are clearly palpable. Companies are struggling with high energy costs and complex reporting requirements. Governments are concerned about competitiveness and growth. Parts of the economy are pushing for relief. At the same time, the EU is postponing deadlines, simplifying regulatory packages, and revising key regulations such as the Green Claims Directive.
At the same time, ESG products are coming under increasing criticism. Greenwashing cases, stricter supervision by ESMA, and new requirements for fund designations show how closely sustainable investment is now being monitored. Whether the combination of political compromises, new guidelines, and tighter controls will lead to a more robust form of sustainable investment will become clear in the coming years.
For many investors, this raises a fundamental question: What will remain of the EU Green Deal and what will actually change?
1. What is an ESG investment, explained simply?
ESG investments follow a simple principle. In addition to traditional financial indicators, environmental, social, and corporate strategy factors are also included in the assessment. The idea behind this is not morality, but risk management. Companies that disregard environmental regulations, fail to control their supply chains, or are poorly managed carry higher financial risks in the long term.
To help investors better understand ESG, it is worth taking a look at the three dimensions:
Environmental (E)
Climate footprint, energy consumption, emissions, resources, biodiversity.
Social (S)
Working conditions, human rights, diversity, supply chain responsibility.
Governance (G)
Corporate governance, compensation systems, internal controls, shareholder rights.
ESG thus complements traditional financial analysis. It does not replace return targets, but helps to identify whether business models are sustainable in the long term.
2. What is the EU Green Deal in simple terms?
The EU Green Deal is the European Union’s central transformation strategy. It aims to make the European economy climate neutral while also creating new growth momentum. It is not a single piece of legislation, but rather a comprehensive framework of measures, programs, and targets relating to energy, industry, transport, buildings, and agriculture.
The goal is to reduce greenhouse gas emissions by at least 55 percent by 2030, achieve a 90 percent reduction by 2040, and make Europe climate neutral by 2050. This goes hand in hand with the aim of using resources more efficiently, reducing dependencies, and building new industrial value creation. In this context, the Green Deal is not only a climate program but also a European growth strategy.
The building blocks range from EU climate legislation and emissions trading to REPowerEU and initiatives for the circular economy, biodiversity, and sustainable industrial policy. For companies, this means a profound restructuring of production processes; for governments, it means significant investments; and for investors, it means a clear regulatory framework for evaluating sustainable business models.
Why is the Green Deal coming under political pressure in 2026?
The implementation of the Green Deal is facing an economically challenging environment. High energy prices, stagnant growth, and international competition issues are leading many member states to call for relief for businesses. Small and medium-sized enterprises in particular find the multitude of reporting requirements burdensome, tying up their resources and making investment difficult.
Protests, particularly from the agricultural sector, are directed against rising costs and complex requirements.
Election results and political debates in several member states show that skepticism toward ESG and climate policy is growing.
Companies and industry associations are calling for relief and more pragmatic rules.
The EU is responding:
- Negotiations on the Green Claims Directive have been suspended.
- Reporting requirements and deadlines have been postponed.
- Simplification packages are intended to reduce bureaucracy.
However, this headwind does not mean a departure from the basic direction. Rather, it is about a more pragmatic implementation that takes greater account of economic reality and competitiveness.
Does political pressure spell the end of climate targets?
The climate targets themselves are not up for debate. They are enshrined in law and continue to form the long-term framework for European policy. What is changing is the path to achieving them. Instead of constantly introducing new detailed requirements, the focus is shifting to how the targets can be achieved efficiently and at a reasonable cost.
This is precisely where the tension arises. Political obstacles are coming up against legal obligations. The EU is striving for more flexibility in implementation without abandoning its fundamental ambition. For investors, this means that sustainability remains a strategic factor, but under changed, more realistic conditions.
3. From ESG promises to regulation – SFDR, EU taxonomy, and Omnibus
How have ESG investments been regulated to date?
Before the current reforms could take effect, the EU had already created a dense set of rules designed to make ESG investments more transparent and comparable. The idea behind this was clear: to prevent greenwashing and offer investors uniform standards. Three building blocks in particular shaped the landscape:
SFDR (Sustainable Finance Disclosure Regulation)
- Disclosure requirements for financial products. Funds must explain how they take sustainability risks into account and what impact their investments have.
EU taxonomy
- Uniform criteria for determining when an economic activity is considered environmentally sustainable. Central guideline for banks, funds, and companies.
DNSH principle (Do No Significant Harm)
- An activity must not significantly harm any other environmental objective.
Fund classification: Articles 6, 8, and 9
- Article 6 funds without ESG claims
- Article 8 funds that take environmental or social characteristics into account
- Article 9 funds with sustainable investment objectives
This structure was intended to create order, but in practice it often led to uncertainty, room for interpretation, and high data collection costs.
What changes will the omnibus simplification package bring?
The omnibus package from February 2025 is the EU’s response to widespread criticism that the regulations are too complex. The aim is to significantly reduce the burden on businesses without abandoning the core principles of sustainability regulation. This will result in a number of key simplifications.
Reduction of administrative burdens
- The EU plans to reduce the burden by around 25 percent for large companies and up to 35 percent for SMEs.
Streamlined reporting data sets
- Less detail, focus on essential information.
Higher thresholds
- As a result, many smaller companies will only be subject to the reporting rules at a later stage or only partially.
Avoidance of double reporting
- Harmonization between CSRD, CSDDD, and taxonomy requirements.
The result is more pragmatic reporting. The basic approach remains the same, but the effort involved is reduced, as is the pressure on companies, especially in weak or, more accurately, “weaker” economic phases.
What does the stop-the-clock directive achieve?
The stop-the-clock directive postpones the application of various sustainability requirements by one to two years. It is a response to the excessive demands placed on many companies, which had to introduce new standards, IT systems, and data collection processes at the same time. What are the specific effects of this?
Deadlines for CSRD and CSDDD are extended
- Companies are given more time to set up and integrate their reporting processes.
Member states can implement the directives gradually
- The different national infrastructures are taken into account.
ESG fatigue is reduced
- Companies that have already invested are given some breathing space. The likelihood of errors and costly rework is reduced.
The postponement does not mean a change in strategy, but rather a realistic timetable. The regulatory framework remains in place.
How is ESMA tightening the rules for ESG fund names at the same time?
While the EU is easing restrictions in many areas, ESMA is significantly tightening the rules for fund names. Products that include ESG claims in their names must also clearly substantiate these claims in future.
What are the key requirements?
- At least 80 percent of the portfolio must comply with the specified ESG characteristics.
- Exclusion of controversial sectors, including certain fossil fuels.
- Transparent documentation of how the criteria are met.
- Adjustment of fund names or portfolios if the data available is insufficient.
This creates a new balance. On the one hand, there is less bureaucracy in reporting, but on the other hand, there is more substance in product promises. In the future, investors will be able to rely more on sustainability not just being a marketing label.
4. What opportunities do ESG investments offer?
ESG has proven to be an additional stability factor in many markets. Companies that take environmental, social, and governance issues seriously are often better prepared when market conditions tighten. This is less due to moral arguments than to tangible operational advantages. Significant effects are particularly evident in four areas.Risk management
Companies that keep an eye on climate risks, regulatory requirements, or supply chain dependencies at an early stage can react more quickly and avoid costly disruptions.
- Resilience
Sustainably managed companies often weather volatile phases more robustly. They adapt processes earlier, invest in a more targeted manner, and plan for the longer term.
- Access to growth areas
The major areas of transformation—renewable energies, circular economy, clean technologies, health sectors—offer structural growth opportunities that are strongly linked to ESG criteria.
- Reputation and access to capital
Institutional investors are increasingly evaluating transparent sustainability strategies positively. This can reduce financing costs and facilitate access to capital.
ESG can therefore be a strategic advantage for those interested in investing, especially in sectors that are heavily dependent on global supply chains, energy prices, or regulatory developments.
What risks and criticisms do investors need to be aware of?
Despite the opportunities it offers, ESG is not a sure-fire success. Discussions in recent years show that sustainable investing has become more complex and that the quality of products varies greatly. Four points are particularly relevant for investors.
- Greenwashing
Sustainability promises have often been exaggerated in communications. The number of allegations against European companies shows that not every ESG label has substance.
- Stricter supervision
Regulatory authorities are cracking down harder. Cases such as the sanctions against DWS illustrate that unclear definitions and imprecise methodologies are increasingly having consequences.
- Regulatory complexity
There is room for interpretation between the SFDR, EU taxonomy, and national requirements. This makes it difficult to assess which products actually invest sustainably.
- Political polarization
Anti-ESG initiatives are forming in parts of the US, putting pressure on fund providers and further intensifying the social debate. Such counter-movements can influence capital flows.
This presents investors with a clear task. Selecting suitable ESG products requires greater care. The decisive factor is not the label, but the methodology behind it and the question of whether the promised impact can actually be verified.
5. What does regulatory change mean for companies?
Who benefits from the Omnibus Package and Stop the Clock?
For many companies, the latest regulatory push means a respite. The Omnibus Package simplifies reporting, reduces the level of detail, and raises thresholds. The Stop the Clock Directive postpones key CSRD and CSDDD obligations by one to two years. Together, this creates noticeable relief, especially for companies that have been operating at capacity limits.
The following will benefit in particular…
- Medium-sized companies and SMEs, which are exempt from the full CSRD requirements for the time being
- Energy-intensive industries, which are simultaneously shouldering investment pressure and reporting obligations
- Companies without mature ESG data structures that need more time for systems and processes
However, the relief does not mean a free pass. Demands for reliable sustainability data are coming back anyway from customers, banks, and investors. Those who start implementation earlier will have an advantage.
Why does ESG data remain strategic?
Despite postponed deadlines, sustainability remains a strategic issue. Investors expect reliable information, but they want it to be more reliable and consistent. That is why some aspects are becoming increasingly relevant.
Companies must clearly identify which ESG issues are relevant to their business and how they affect financial performance. Climate risks, investment needs, margins, capital structure, many key figures can only be interpreted collectively.
Investors also expect the CEO and CFO to be able to explain how sustainability is anchored in strategy, planning, and risk management.
ESG data therefore remains not only a reporting issue, but also a competitive factor. Companies that work cleanly from an early stage build trust and can raise capital more cheaply.
How can financial and sustainability reports be successfully integrated?
The trend is clearly moving toward integrated reporting. Instead of separate CSR chapters, financial and ESG information should tell a common story in the future. How do sustainability risks affect cash flow? Which investments serve the transformation? How does regulatory pressure affect profitability?
- Consistent key figures so that investors can compare developments over many years
- A clear, comprehensible narrative that links strategy and implementation
- Professional data infrastructure that prevents errors and enables rapid analysis
The current delays are therefore more of an opportunity. Companies that make use of the time factor are laying the foundation for more efficient reporting and avoiding the typical rush to catch up shortly before regulatory deadlines.
6. How are ESG investments changing and where is capital heading?
How did ESG evolve from a niche to the mainstream?
ESG began in the 1970s with ethical exclusion criteria and developed into an integral part of institutional investment through CSR initiatives in the 1990s. With the UN PRI, the Paris Climate Agreement, and the EU Green Deal, sustainability became a structural factor for markets and portfolios. Today, ESG is no longer considered an add-on, but an integral part of professional investment processes, even if the methods continue to vary widely.
What do current analyses of ESG strategies of PE and VC funds show?
Private equity and venture capital funds use ESG differently. VC investors focus more on future technologies with a potentially high sustainability impact, such as renewable energies, automation, or agricultural technology. PE funds, on the other hand, more often work on transforming existing business models. Their impact tends to be gradual, for example through efficiency programs or better governance structures.
The key finding?
ESG does not automatically equate to impact. The actual impact depends heavily on the investment style.
Which is stricter, ESG, SRI, or impact?
The three approaches pursue different goals. ESG integrates sustainability factors into financial analysis without necessarily generating additional benefits for the environment or society. SRI is more value-based with clear exclusion criteria. Finally, impact investing aims to achieve a measurable, additional effect and is therefore the strictest approach.
Litigation financing as a transparent impact alternative
What is litigation financing and why does it have a real impact?
Litigation financing works according to a clear principle. An investor covers the costs of a lawsuit. If the plaintiff wins, the investor receives a share of the proceeds. If the case is lost, the investor bears the costs themselves.
However, the decisive point is not the model, but the impact. Many lawsuits today fail not because of a lack of evidence, but because of a lack of money. Litigation financing opens this door. Cases that would otherwise never go to court become possible.
This makes the impact directly visible:
A claim is enforced, a settlement is reached, a legal violation is corrected. No label, no abstract scores, but a real, observable outcome.
How does litigation financing differ from traditional ESG funds?
The difference is clear in the structure:
ESG funds work with ratings and criteria that are often complex and vary depending on the provider.
Litigation financing works with individual cases whose content and chances of success are clearly described.
Instead of broad categories, there is specific information:
What is the case about? How high is the amount in dispute? How are the chances of success assessed? What is a realistic timeframe?
This clarity significantly reduces the risk of greenwashing. Investors can see exactly what they are financing and what impact it can have. In addition, the outcome of a case does not depend on stock markets or interest rates, but on legal arguments. This makes litigation financing an alternative component that behaves differently from traditional sustainable funds.
How can investors sponsor a case through AEQUIFIN?
AEQUIFIN brings structure to this market. Each sponsorship opportunity is presented in a clear profile. Amount in dispute, area of law, costs, duration, risk-reward assessment. This allows investors to understand how a case is structured and what scenarios are possible.
The platform is fully digital. Tools such as the litigation cost calculator help investors assess the economic side of a case and make investment decisions. For many investors, this creates a form of impact investing that clearly shows the difference their capital can make.
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7. What can investors do now in concrete terms?
What questions should you ask about your ESG products?
Many funds today carry the label “sustainable,” but not all of them meet the same standards. A short list of questions helps to better classify products.
- How does the fund define ESG and based on what criteria?
- What data sources does the management use, and how reliable are they?
- How does the fund deal with the new ESMA rules, which impose stricter requirements on names and portfolio composition?
- What exclusions apply, and what impact targets are being pursued?
- Are there comprehensible key figures that go beyond pure ratings?
Asking these questions will help you quickly determine whether a product is merely advertising sustainability or actually pursuing a robust approach.
What does a robust, sustainable allocation look like?
A future-proof investment structure combines traditional assets with sustainable strategies and supplements them with building blocks that function independently of interest rates and market cycles. These include alternative sources of return that focus on concrete results rather than broad ESG ratings.
The principle?
Diversify broadly, define sustainability clearly, and look for impact where it is traceable.
How does AEQUIFIN support transparency and implementation?
AEQUIFIN provides access to impact investments that do not require complex ESG scores. Each process is clearly described. Investors can see opportunities, risks, dispute values, and possible scenarios. Instead of abstract sustainability indicators, they receive a directly measurable result: Will a claim be enforced or not?
This provides a supplement for investors who pursue sustainable strategies and at the same time are looking for alternatives that are transparent and results-oriented.
Conclusion
The EU Green Deal is under political pressure, but its guidelines remain in place. For investors, this means one thing: ESG is not changing fundamentally, but is becoming more precise, more transparent, and more regulated. The focus is shifting to the quality of products. Those who want to invest sustainably need a clear understanding of methods, data, and real impact.
Litigation financing offers a supplement here that does not require abstract assessments. The impact is direct in each individual case and is completely traceable, measurable, and independent of market cycles.
Discover how litigation financing can meaningfully complement your ESG strategy. Review verified cases, understand the opportunities and risks and invest where real impact is made.
Register now with AEQUIFIN and view current cases.
