2025 marks a turning point for ESG (Environmental, Social, and Governance) funds worldwide. With new regulations, unified standards, and rising scrutiny, asset managers must transform their reporting frameworks to meet the demands of investors, regulators, and society. This article explores the evolving landscape and offers practical guidance to chart a course toward transparent, credible ESG disclosures.

Regulatory Shifts Driving Change

New mandates and harmonized frameworks are reshaping the way ESG funds report their performance. From global standard-setters to regional authorities, market participants face a complex mosaic of requirements designed to ensure clarity and comparability.

• Global alignment under the global sustainability disclosure standards of IFRS S1 and S2, championed by the International Sustainability Standards Board (ISSB).
• European reforms including the Corporate Sustainability Reporting Directive (CSRD), Sustainable Finance Disclosure Regulation (SFDR), and the Omnibus package aligning the EU Taxonomy with due diligence rules.
• United States federal and state regulations, notably SEC guidance alongside California’s AB 1305 and SB 253 on carbon and climate risk disclosures.
• Investor-driven and third-party requests that often extend beyond statutory demands, requiring side-letter disclosures and bespoke transparency measures.

The convergence of these rules aims to reduce duplication while enforcing a “double materiality” lens—requiring funds to report both how sustainability factors affect their business and how their activities impact society and the environment.

Preparing for Compliance: Practical Steps for Asset Managers

Translating regulatory requirements into actionable processes is essential. Asset managers must build robust systems that align data collection, analysis, and reporting with emerging standards.

• Implement a comprehensive double materiality assessment process to identify and prioritize key sustainability risks and impacts.
• Develop a tailored definitions and concepts bank to ensure consistent terminology across jurisdictions and investor requests.
• Establish robust tracking of disclosures—historic and current—to maintain an audit trail and demonstrate alignment between claims and practices.
• Invest in technology platforms that automate data gathering, validation, and reporting to meet multiple frameworks with minimal redundancy.

By embedding these steps into governance frameworks, firms can mitigate the risk of non-compliance and enhance the credibility of their ESG claims.

Focus on Transparency: Materiality and Disclosure Depth

Under the CSRD and ISSB standards, funds must provide nuanced insights into both risks and impacts. This requires granular data on greenhouse gas emissions, social performance metrics, and governance practices.

IFRS S2 specifically demands detailed greenhouse gas reporting across scopes 1, 2, and material scope 3 emissions. While phased adoption is permitted, funds should plan for comprehensive coverage to avoid future restatements.

Similarly, the EU’s “double materiality” approach means that the narrative must weave together financial risks posed by climate change alongside the fund’s own environmental footprint. Clear metrics, case studies, and policy descriptions are essential to meet stakeholder expectations.

Managing Risk: Greenwashing and Enforcement

Heightened scrutiny means that any mismatch between ESG claims and actual practices carries significant reputational and financial consequences. Regulators in both the EU and the US are expanding enforcement tools to detect greenwashing.

To avoid greenwashing penalties, managers must conduct regular internal audits, ensure alignment between marketing materials and underlying data, and maintain clear documentation of processes and outcomes.

Challenges and Opportunities

• Data complexity and collection burdens across multiple jurisdictions.
• Higher compliance costs balanced by long-term efficiency gains from standardization.
• Risk of reputational damage versus enhanced investor confidence through transparency.
• Potential for streamlined reporting as ISSB and EU directives harmonize overlapping requirements.

Embracing these changes early can position funds as leaders in sustainability. Those that adapt successfully will benefit from stronger stakeholder trust and competitive differentiation.

Conclusion: Charting a Sustainable Future

The ESG reporting landscape in 2025 is defined by a wave of new regulations, harmonization efforts, and intensified scrutiny. Asset managers that proactively build integrated reporting systems, embed double materiality thinking, and maintain rigorous documentation will not only comply with evolving mandates but also enhance their market reputation.

By viewing compliance as an opportunity to demonstrate leadership in responsible investing, ESG funds can create value for investors, society, and the planet. The journey may be demanding, but with thoughtful planning and robust processes, the path forward leads to greater transparency, accountability, and sustainable success.