As we look ahead for 2026, sustainability remains a central theme for investors, but there has been a noticeable shift in narrative across the financial industry. After years dominated by ambitious targets and the rapid expansion of Environment, Social, Governance (ESG)-labelled products, investors are welcoming a new phase of modest, but sustained, progress and consolidation – one where credibility and pragmatism go hand-in-hand.
If one word was used to describe the sustainability landscape in 2025, it would be: fragmented. Against an increasingly climate-sceptic geopolitical backdrop, global consensus continued to fracture over the course of 2025, exposing the limits of voluntary, coalition-based approaches to net zero. Following a continued wave of departures from the Net Zero Banking Alliance (NZBA), the initiative officially ceased operations and shut down in October 2025.
Meanwhile, the Net Zero Asset Managers initiative (NZAM) underwent a shakeup of its commitment statement, putting its initiative on hold for several months, whilst reassessing new ‘fit for purpose’ targets and removing the explicit requirement for signatories to bring all assets within scope of net zero.
At the 30th annual Conference of the Parties (COP30), efforts to agree a shared roadmap to move away from fossil fuels failed to gain consensus, highlighting the political and economic constraints that still dominate energy transition discussions. For investors, this reinforces an uncomfortable truth: the transition is unlikely to be linear, uniform or frictionless.
However, the start of this year appears to have brought glimmers of hope for a more stable and refined approach to sustainability.
Here, Jupiter’s Corporate Sustainability Team explore their perspective on five key developments to expect over the course of 2026:
1. Net Zero and NZAM: A reality check
Initiatives such as NZAM have played an important role in establishing shared language and intent across the industry. That influence should not be understated. At the same time, the gap between ambition and delivery has become more visible. Energy security, affordability and political feasibility are reasserting themselves as binding constraints. Some sectors will decarbonise more slowly than originally anticipated, and transition risk increasingly sits alongside the risk of underinvestment in essential energy and infrastructure.
This tension is visible in domestic policy and law-making as well. The UK Government’s revised net zero plan contained relatively few new measures and relied heavily on optimistic assumptions around grid expansion, planning reform and skills availability. In the US, the U.S. Securities and Exchange Commission’s (SEC) enhanced climate disclosure rule was paused in 2025 amid litigation and political realignment.
For investors, net zero remains a necessary organising framework, but one that is now approached with greater caution around scope, timelines and reliance on external policy delivery. 2026 will see NZAM signatories either re-committing to the initiative or withdrawing following its refresh, with those remaining likely to revisit their net-zero targets in light of the revised framework.
2. Repackaged reporting standards
The Task Force on Climate-related Financial Disclosures has been folded into the International Sustainability Standards Board’s (ISSB) International Financial Reporting Standards (IFRS) S1 and S2 standards, which set a global, investor-focused baseline for sustainability and climate disclosures. In February 2026 the UK Government published the final UK Sustainability Reporting Standards (UK SRS S1 and S2), which largely mirror the ISSB standards with limited UK-specific amendments and are available for voluntary use ahead of potential regulatory adoption.
Although presented as improving consistency, the standards largely repackage existing requirements and do not resolve ongoing issues with data quality, particularly around Scope 3 emissions, transition plans and scenario analysis. The UK SRS also raises expectations on controls and audit readiness, increasing costs at a time when sustainability assurance remains immature and of limited value for capital allocation.
3. ESG Data and Ratings: Welcome oversight, limited certainty
The UK’s decision to bring ESG rating agencies under Financial Conduct Authority supervision reflects growing recognition that ESG data has become systemically important yet remains inconsistent and opaque. However, the underlying models, assumptions and value judgments that drive rating outcomes will remain untouched, meaning divergence between providers will persist and data gaps and estimates will continue to underpin many ESG scores.
In this context, our view is that ESG ratings should be treated as inputs rather than conclusions, and the key test for investors will not be which rating is “right”, but whether managers can clearly demonstrate how ESG information is interpreted, challenged and integrated alongside financial analysis rather than used as a substitute for it.
4. SFDR & SDR: Time for simplification?
Both the UK’s Sustainability Disclosure Requirements (SDR) and the EU’s Sustainable Finance Disclosure Regulation (SFDR) are expected to move further away from expansion and towards consolidation in 2026.
In the UK, SDR is likely to settle into a more supervisory-driven regime, with regulators focusing less on new labels or concepts and more on whether firms can evidence consistent application, governance and consumer-facing clarity, particularly around anti-greenwashing.
In the EU, SFDR remains widely acknowledged as a disclosure regime that has been stretched beyond its original design, with ongoing discussions pointing towards simplification rather than wholesale reform. Any recalibration is likely to clarify product categorisation and reduce reliance on implied “tiers” of sustainability, without removing the underlying complexity of data gaps, estimates and inconsistent corporate reporting.
For investors, neither SDR nor SFDR is expected to deliver a step-change in sustainability outcomes; instead, both regimes are converging on a more pragmatic role as transparency frameworks that test internal discipline and credibility, rather than acting as definitive signals of sustainability quality.
5. Biodiversity: Gaining traction, but still in its nascency
Biodiversity is likely to gain prominence in 2026, but more as an extension of existing sustainability frameworks than as a fully mature investment theme. Regulatory and policy attention is increasing, driven by initiatives such as the Taskforce on Nature-related Financial Disclosures and emerging national nature strategies, yet translation into decision-useful, investable metrics remains limited. As with climate, expectations are running ahead of data, with biodiversity risk assessments relying heavily on location-based proxies, modelled dependencies and high-level indicators that struggle to capture real-world impacts.
For investors, biodiversity is therefore more likely to be treated as a risk lens rather than a source of near-term opportunity, influencing engagement priorities, sector exposure and capital allocation at the margins rather than driving wholesale portfolio reallocation. In 2026, credible approaches to biodiversity will be those that focus on identifying material hotspots, integrating nature risks into existing risk frameworks, and exercising stewardship where influence is clearest, rather than over-promising measurable outcomes in a still-immature data and policy landscape.
Overall, 2026 looks less like a turning point and more like a period of consolidation after several years of rapid expansion, experimentation and, at times, over-reach in sustainable finance. The unravelling of voluntary net zero alliances, the repackaging of disclosure standards, the challenging political backdrop and the tightening of regulatory scrutiny all point to a more sober phase in which credibility, delivery and governance matter more than ambition alone. For investors, sustainability in 2026 is less about chasing new labels or targets and more about demonstrating disciplined integration, realistic assumptions and effective stewardship in a fragmented and politically constrained transition.
The calm after the storm is therefore conditional: progress will continue, but it is likely to be slower, more uneven and more contested, rewarding those able to navigate complexity without over-promising outcomes that markets, data and policy are not yet equipped to deliver.
The value of active minds: independent thinking
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