Financing the ESG transition
In recent years, there has been a strong focus on green and sustainable products in financial markets offered to companies with green and sustainable business plans. In Europe and among regulators, the reality has now sunk in that companies facing major sustainability challenges also need access to financing that enables their transition towards a greener and more sustainable future. Also, various initiatives have followed from the recommendations of Mario Draghi in his 2024 report on “The future of European competitiveness” with a view to easing the legal and regulatory burdens that ESG initiatives in the EU brought for European corporates.
This month, Stibbe hosted another round table in its series of “Stibbe ESG Round Tables”, this time with a focus on the financial markets in respect of “Financing the ESG Transition”. Stibbe financial markets experts Marieke Driessen, Barbra Bulsing and Niek Groenendijk discussed with clients and contacts the latest developments in financing the ESG transition and opportunities these developments bring for both investors and lenders, as well as issuers and borrowers.
During the session the following themes were discussed:
1. Changing views on ESG.
The new (geo-)political reality has changed the approach to ESG. In the EU, the Sustainable Finance Disclosure Regulation (SFDR) is under review and the proposed EU Omnibus Directive (published in February 2025) and the EU Stop-the-Clock Directive (2025/794) propose a significant reduction in regulatory burdens, including by simplifying, delaying and de-scoping EU corporate sustainability reporting rules under the CSRD.
At the same time, the EU is committed to mobilising extensive cash flow and financial investments into the EU’s policy priority areas, including sustainable energy, defence and security and innovation and technology, as well as to “hard-to-abate” sectors that will need extensive financial resources to make the transition to ESG. The EU is expected to publish proposals for its Savings and Investments Union following conclusion of its recent call for evidence to identify which steps would matter most to achieve this.
Although existing ESG legislative initiatives in respect of corporate sustainability reporting are being scaled back, it is clear that for EU supervisory authorities a policy of scrutiny of, and enforcement against, “greenwashing” remains a priority. Also, it is expected that climate and ESG litigation will remain a risk that needs to be managed.
2. Greenwashing and risk management
Since the supervisory authorities ESMA, EBA and EIOPA published their reports on the risk of greenwashing (as to which see our blog: ESG risk management: developments in the Dutch and EU financial sector), ESMA published its Thematic Note (Thematic notes on clear, fair & not misleading sustainability-related claims, 1 July 2025), in which ESMA provides more guidance on sustainability-related claims, with do's and don'ts when it comes to sustainability-related claims. This is the first of a series of notes to be issued by ESMA which addresses greenwashing risk to support sustainable investments.
ESMA’s Thematic Note provides four principles for non-misleading sustainability-related claims:
1. Accuracy: The claim should fairly and accurately represent the entity's sustainability profile or that of the financial product. Omission and cherry-picking should be avoided. ESG terminology and non-textual imagery or sounds used are consistent with the sustainability profile of the company or product.
2. Accessibility: Sustainability claims should be based on information that is easy to access and should be understandable for the reader.
3. Substantiation: Sustainability claims should be substantiated with clear and credible reasoning and facts. For instance, any data or metrics used in a claim should be made available.
4. Up-to-date: Sustainability claims should be based on information that is up-to-date and any material change should be disclosed in a timely manner.
3. Transition finance
Following publication of guidance, handbooks and guidelines on transition finance by the OECD and ICMA, the Transition Finance Council published its draft Transition Finance Guidelines for consultation in August 2025. The Guidelines include four principles on which transition finance should be based:
1. Credible ambition: the ambition should include substantial emissions reduction consistent with Paris Agreement-aligned pathways and a company’s own transition ambition. Targets should be clear and achievable, measured with quantitative metrics, supported by the company’s funding strategy. Carbon lock-in should be avoided (i.e. investments in new or extensions to existing high emitting assets or activities with no abatement plans are to be avoided).
2. Action into progress: For actions to result in progress, they must be (financially) deliverable. Capital should be allocated away from high-emitting activities and there should be demonstrated capability to implement planned actions (budgeting, planning, etc). Progress should be measured and reasonable with interim targets and transparency around handling of implementation challenges.
3. Transparent accountability: Transition plans should be integrated into core business planning and governance and regular reporting, clear roles and responsibilities for delivery should be organised.
4. Addressing dependencies: Dependencies, such as policy incentives, (assumed) technology costs, should be identified, and material external factors affecting transition should be analysed. Furthermore, management strategies for controllable dependencies and realistic assessments of uncontrollable constraints should be laid out.
If you have any questions, please contact any of Marieke Driessen, Barbra Bulsing and/or Niek Groenendijk from Stibbe’s Financial Markets team.
