Our global Sustainability + Corporate Responsibility Leadership Team, which includes more than 35 partners from across the firm, contributed to the writing of this alert.
The shift away from using “ESG” as a standalone or organizing concept continues. We see continued fragmentation of ESG into distinct areas of sustainability and corporate responsibility, as well as heightened enforcement, regulatory divergence, and cross-border tension. Here are the key trends and takeaways shaping sustainability and corporate responsibility today.
The Big Picture: Fragmentation, Enforcement, and a Tale of Two Worlds
Key takeaway: ESG continues to splinter into distinct, mature disciplines, while geopolitical divergence creates compliance friction for global companies.
- In the United States, federal policy and enforcement trends continue to move sharply away from ESG‑branded initiatives, with heightened scrutiny of DEI-, climate-, and sustainability‑related statements.
- Outside the U.S., regulatory momentum continues. More than 30 jurisdictions—including major markets in Asia—are advancing mandatory disclosure regimes across climate, human capital, and governance.
- Europe sits in the middle: slowing and recalibrating, but not abandoning, its sustainability regulatory agenda.
- For multinationals, this creates a familiar but intensifying challenge: how to meet mandatory disclosure and due diligence obligations in one jurisdiction without triggering regulatory, litigation, or political risk in another.
- A premium rewards those corporations and investors that can tie sustainability initiatives with shareholder value.
Anti‑bias Strategy + Defense
Key takeaway: This year will see enforcement accelerate.
- Federal agencies are moving from rhetoric to action, with DOJ, EEOC, and State AGs increasingly testing legal theories targeting DEI programs.
- Companies receiving federal funds, serving as contractors, or operating in regulated industries face particular exposure.
- State activity remains uneven and politically polarized, with some jurisdictions advancing anti‑DEI enforcement while others consider mandates moving in the opposite direction.
- Many companies have already completed DEI audits and reframed internal programs; the challenge in 2026 will be managing competing legal pressures while maintaining workforce stability and culture.
Disclosure Standards, Guidance, and Regulations
Key takeaway: “Staying the course” dominates—quietly.
- SEC‑driven ESG disclosure initiatives have largely stalled or reversed, and investor pressure has diminished significantly.
- Companies fall into two camps: those that historically disclosed very little and continue to do so, and those that are cautiously reassessing or qualifying prior commitments.
- Climate disclosure is increasingly being pared back in public filings, though materiality principles still apply and wholesale elimination poses risks of its own.
- Refraining from using the terms ESG and DEI, and retreating from disclosing DEI statistics in public filings, which started in 2024, continued in 2025.
- Proxy advisors and institutional investors—once a counterweight—are themselves under political and regulatory pressure, further chilling ESG advocacy in U.S. capital markets.
- Shareholder proposals advocating ESG agendas have diminished.
Environmental & Climate
Key takeaway: Climate disclosure is evolving, not disappearing.
- While traditional climate reporting is being scaled back in the U.S., global requirements continue to drive disclosure through value chains, including customers and suppliers.
- A notable emerging trend is balance‑sheet‑based carbon accounting and “e‑ledger” frameworks, led by traditional energy companies, which accounting can be viewed as a compliment to GHG Protocol measuring and reporting of Scopes 1, 2, and 3 emissions.
- This shift may reshape both disclosure expectations and financial products, even as it avoids ESG branding.
Securities Litigation/Investigations + White Collar Defense
Key takeaway: Politically disfavored sectors face economic stress and heightened litigation risk.
- Economic stress—particularly in alternative energy and sustainability‑focused sectors—continues to be a leading indicator of litigation and investigations.
- Companies perceived as political or regulatory “losers” face heightened risk of stock drops, enforcement attention, and follow‑on civil litigation.
- Sustainability narratives, past disclosures, and public commitments remain fertile ground for claims when business performance falters.
Congressional Investigations and Consumer Protection
Key takeaway: ESG initiatives are being analyzed under an anti-competition legal framework.
- Congressional and state‑level scrutiny is increasingly focused on environmental NGOs, foreign funding, and advocacy activities.
- The FTC is expected to become more active in examining sustainability‑related representations, potentially triggering parallel consumer class actions.
- Sustainability claims are increasingly evaluated through traditional misrepresentation and unfair‑competition frameworks rather than ESG‑specific rules.
Sustainable Finance
Key takeaway: Demand hasn’t disappeared—but it’s being rebranded.
- U.S. sustainability‑linked finance has slowed significantly, reinforced by regulatory retrenchment from financial regulators.
- Growth continues in Europe and Asia, partially offsetting U.S. contraction.
- New climate accounting frameworks are likely to drive demand for novel financial instruments—without ESG or sustainability labels.
Impact Investing and Private Capital
Key takeaway: Private markets are filling the gap.
- Impact strategies remain active, particularly among private investors, family offices, and those driving blended‑finance structures to de-risk opportunities and/or absorb any green premium.
- Deal activity slowed early in the year but rebounded as investors adapted to new political and regulatory realities.
- Many companies are shifting how they frame their value propositions, emphasizing industry solutions rather than climate or ESG outcomes.
Emerging Companies
Key takeaway: Structural commitments are gaining traction.
- Startups are talking less about ESG, but sustainability and responsibility remain embedded in sectors like energy, agtech, food, and advanced materials.
- Public Benefit Corporations are becoming more common and more accepted by investors, signaling a shift toward structural, long‑term commitments over public messaging.
- Responsible AI is increasingly central in diligence, fundraising, and M&A, even at early stages.
Data, Cyber + Privacy and Responsible Technology
Key takeaway: Responsible tech, data, privacy and security practices remain mission‑critical.
- Companies globally are increasingly cautious about government requests to access data and cooperation with law enforcement, reflecting political and reputational concerns.
- Companies are increasingly mindful of how data can and cannot be used and are ensuring their programs meet their commitments.
- Data minimization strategies are being revisited to ensure a proactive approach is taken to reduce risk.
- Emerging technologies raise new questions about data and tech weaponization, especially with AI-enabled attacks on the rise.
Investment Management
Key takeaway: ESG is fragmenting into targeted strategies.
- Mandatory ESG‑focused fund regulation continues to be rolled back, particularly in the U.S., or materially modified to more accurately reflect marketing strategies, such as in the EU.
- Managers are shifting toward narrowly defined strategies (e.g., climate infrastructure, energy transition assets) to avoid ESG‑related backlash.
- Proxy voting and stewardship approaches are becoming more case‑specific, reflecting regulatory and political pressure.
Business and Human Rights
Key takeaway: Human rights are the next major risk frontier.
- Mandatory human rights due diligence regimes continue to expand globally, particularly in Asia, despite recently slowed momentum in the U.S. and EU.
- Landmark U.S. jury verdicts against corporations and financial institutions for overseas human rights abuses signal growing litigation risk.
- Technology companies remain at the center of human rights scrutiny, especially regarding AI use, conflict‑affected regions, and supply chains.
- Advisory work today likely helps to minimize risk associated with expected investigations and litigation tomorrow.
Looking Ahead
This year will reward pragmatic problem-solving over sloganeering. As ESG branding fades, companies that focus on substance—clear governance, defensible disclosures, disciplined compliance, and integrated risk management—will be best positioned to navigate enforcement, litigation, and cross‑border complexity.
For boards, executives, and investors alike, sustainability and corporate responsibility are not about signaling values; they are about managing risk and creating value in a fragmented, high‑stakes global environment.