Are companies—and the financial institutions that support them—ready to transform sustainability from a regulatory burden into a competitive advantage? The latest data shows a clear trend: Environmental, Social, and Governance (ESG) performance is improving across the board, with banks increasingly prioritizing lending to businesses with strong ESG credentials. But sustaining this momentum requires clear rules, robust data, and the right partners.
The transition to a sustainable economy is guiding collective efforts not only toward financially viable models, but also models that incorporate ESG principles. In recent years, the European Union has intensified its efforts to create a robust ESG framework, encouraging companies and financial institutions to increase transparency and integrate sustainability into their core strategies.
According to the latest CRIF ESG Outlook report, which focuses on Italy, the number of companies achieving high or very high ESG compliance is steadily increasing, reflecting a widespread improvement in sustainability practices. Below, we highlight some of the most recent developments in the EU’s evolving ESG regulatory framework, from European Commission directives to European Central Bank (ECB) initiatives.
Regulatory and Market Context
In 2025, the EU took decisive steps to embed ESG principles into the core of corporate and financial activities. What began as a fragmented set of sustainability disclosures has evolved into a comprehensive regulatory framework designed to transform how businesses operate, report, and engage within the market. The main EU-level ESG elements developed over the past year can be summarized as follows:
1) Corporate Sustainability Reporting Directive (CSRD)
2) New requirements for ESG rating providers
3) ECB initiatives
European ESG Legislation
The EU has put several processes and structures in place through the following legislation:
- Regulation (EU) 2020/852 (Taxonomy Regulation): Introduced a common taxonomy to classify economic activities from an environmental and social perspective, enhancing public disclosure on sustainability.
- Directive (EU) 2022/2464 (Corporate Sustainability Reporting Directive – CSRD): Requires companies to provide more detailed and transparent information on the environmental, social, and governance (ESG) impact of their operations.
- Directive (EU) 2024/1760 (Corporate Sustainability Due Diligence Directive – CSDDD): Aims to ensure that large companies integrate sustainability into their corporate policies and across their value chains.
- Delegated (EU) Regulation 2022/2453: Extended mandatory ESG-related disclosures for banks under the Pillar 3 framework, requiring the public reporting of ESG risks and performance.
The EU has significantly advanced its ESG regulatory framework through the CSRD, marking a pivotal shift. It expands sustainability reporting obligations to all large companies—including banks, insurers, and listed SMEs—replacing the earlier Non-Financial Reporting Directive. To ease the burden on smaller firms, simplified standards have been introduced: a voluntary disclosure framework for non-listed SMEs, enabling them to meet ESG data requests from banks and large corporate partners.
To reduce administrative complexity, the European Commission launched the Omnibus Package in February 2025. It aims to streamline ESG disclosure, enhance competitiveness, and mobilize investment in strategic green technologies. Key measures include:
- Raising CSRD thresholds to firms with over 1,000 employees and €50M turnover
- Limiting CSDDD obligations to direct business partners
- Delaying CSRD deadlines for large non-listed firms and listed SMEs by up to two years
- Introducing voluntary ESG reporting for SMEs
In essence, the EU is refining its ESG framework to balance ambition with proportionality.
New Requirements for ESG Rating Providers
Regulation (EU) 2024/3005 introduces a unified framework for ESG rating providers across the EU, aiming to enhance transparency and integrity, as well as avoid conflicts of interest.
It requires entities that produce and distribute ESG ratings to be authorized and supervised by the European Securities and Markets Authority (ESMA), and to disclose their methodologies and sources. These measures are designed to prevent greenwashing and misinformation, ensuring that ESG ratings are independent and reliable. Ultimately, the regulation strengthens investor confidence and supports the development of a more sustainable financial market.
Finally, between 2025 and 2027, European banking supervision will intensify its focus on ESG factors, particularly climate and environmental risks.
ECB Initiatives: What’s New
The ECB has included these issues in its Supervisory Priority 2, urging banks to strengthen their strategic planning and risk management mechanisms.
This regulatory momentum is further supported by the European Banking Authority (EBA), which in 2025 issued three key updates:
- Final Guidelines on ESG Risk Management: These require banks to integrate ESG risks—especially environmental and social factors—into their strategic, decision-making, and credit risk processes. The guidelines also define the structure and content of transition plans, in line with the Capital Requirements Directive VI (CRD6 - Directive (EU) 2024/1619).
- Draft Guidelines on ESG Scenario Analysis: Aimed at helping institutions develop structured frameworks to assess financial and liquidity resilience against ESG-related shocks, with a particular focus on climate risk and the EU’s 2050 climate neutrality targets.
- Draft Joint Guidelines on ESG Stress Testing: Developed in collaboration with other European Supervisory Authorities, these propose a harmonized approach to ESG stress tests for both banks and insurance companies.
These significant regulatory developments and new supervisory priorities are already translating into tangible changes in the market. Companies and financial institutions are rapidly adapting their strategies and operational practices, with measurable impacts on key ESG metrics and transition risks. Recent outlooks underline that companies publishing sustainability disclosures consistently achieve better ESG scores and are increasingly channeling investments toward sustainable growth.
CRIF’s Role
At CRIF, we are proud to be at the forefront of this transformation. Our ESG Data Lake is powered by a broad set of academic, institutional, and proprietary sources, and enriched by direct business self-assessment, enabling a detailed and up-to-date evaluation of companies of any size or sector across Europe. Our proprietary analytics enable financial institutions and companies to assess sustainability performance, manage regulatory complexity, and unlock new growth opportunities. By providing advanced, actionable insights, we help financial institutions steer capital toward companies that are not only compliant but truly committed to the sustainable transition.
To further support our clients in the ESG transition process, we have launched CRIF Synesgy Ratings—a technology-driven spin-off designed to meet changing market needs and the new EU Regulation 3005/2024 on ESG rating activities. What makes Synesgy Ratings unique is its ability to bring together a wide variety of data sources—from business information to public and private ESG information to insights from climate and macroeconomic scenarios projected over multiple years. This approach ensures comprehensive ESG coverage, including SMEs and sole proprietorships .
