February 2026

BANKS SECTOR – KEY ESG RISKS, OPPORTUNITIES & MACRO TRENDS

• Governance and social risks remain the main source of scrutiny, while climate‑related risks are becoming financially material, increasing supervisory and stakeholder pressure on banks.
• Banks face diverging ESG dynamics: political pushback and softer public commitments (“greenhushing”) coexist with stronger regulatory scrutiny, particularly in Europe, where supervisors increasingly require the integration of climate and nature risks into credit risk assessments.
• Regulatory fragmentation is rising. EU banks face higher compliance burdens and data gaps, especially due to CSRD implementation challenges, while US and UK banks face lower regulatory pressure but higher reputational risk driven by investor scrutiny.
• Despite headwinds, ESG remains a strategic lever. Growth in sustainable finance, climate adaptation infrastructure, biodiversity‑linked lending, and digitalization continues to offer long‑term value creation opportunities, with green and sustainability bond issuance expected to remain close to $1 trillion globally

ESG NEWS MONITORING

• TotalEnergies (Integrated O&G | FR) - France filed a major climate lawsuit against TotalEnergies, alleging the company has not met environmental and human rights standards required by the 2017 duty of vigilance law. Plaintiffs demand halting new O&G projects, production cuts, and that Scope 3 emissions be included in risk assessments, actions that could set a precedent for limiting fossil fuel growth. AFP
• Enel (Utilities | IT) - Enel presented its 2026–2028 Strategic Plan, increasing planned investments to €53 billion, ca. €10 billion more than in the prior plan, with focus on renewables, grid modernization, and accelerated electrification initiatives. ESG Today
• Bayer (Pharmaceuticals | DE) - Bayer proposed a $7.25 billion settlement to resolve U.S. lawsuits over Roundup’s alleged cancer risk, aiming for long-term payouts and cost certainty, final approval depends on court and claimant acceptance. Reuters
• BP (Integrated Oil & Gas | GB) – ACCR, alongside asset owners managing €219 billion, has submitted a resolution for BP’s AGM requesting clear justification for the company’s increased investment in oil and gas projects. The proposal asks BP to provide strong evidence that these investments will yield greater shareholder value than expanding renewable energy initiatives. Reuters

SOVEREIGN

World

• The Net Zero Asset Managers (NZAM) initiative has been relaunched after a year-long suspension with over 250 signatories but under a weakened governance framework. Despite the weaker rules and pressure from 42 asset owners urging managers to recommit to NZAM, just 12 U.S. firms re-signed compared with 44 U.S. members at the time of the suspension. Reuters; Brunel Pension Partnership

EU

• Experts warn that the EU is not ready for increasing climate impacts such as floods, wildfires, and heat waves, which now threaten people and infrastructure. Though Europe has ambitious emission goals, adaptation remains underfunded and disorganized, with annual climate damages reaching €45 billion—five times more than in the 1980s. Reuters 

US

• The Trump administration repealed the EPA’s 2009 “endangerment finding,” the scientific determination that greenhouse gases pose a threat to public health and welfare and the legal foundation of nearly all U.S. federal climate regulations. Reuters
• A federal judge has struck down Texas’s 2021 anti-ESG law, ruling that the state cannot penalize companies for reducing reliance on fossil fuels or for associating with groups that support climate action. Reuters

REGULATION

• EU Omnibus I – The European Council approved the simplification of the the directives on corporate sustainability reporting (CSRD) and corporate sustainability due diligence (CS3D) by reducing the reporting burden and limiting the trickle-down effect of obligations on smaller companies. The Omnibus I simplification package reduces complexity and unnecessary barriers, cuts red tape, enhances efficiency and introduces more flexibility for companies that remain subject to its scope with the aim to boost EU competitiveness, especially in a constantly changing geopolitical framework. European Council
• EU Climate Law – The EU has amended its climate policy to aim for a 90% net reduction in GHG emissions by 2040 from 1990 levels. Member states may use international carbon credits after 2036 for up to 5%, but only high-quality units from Paris-aligned countries, outside the ETS, with safeguards against undermining EU interests, are allowed. Every two years, the European Commission will assess progress and, depending on the findings, it can propose further policy changes. ESG News

 EXTERNAL REPORTS

• Morningstar - Global sustainable funds recorded an estimated $27billion in net outflows in Q4 2025, compared with restated outflows of nearly $55 billion in the previous quarter. Redemptions by large UK institutional investors—reallocating from pooled ESG funds into bespoke ESG mandates—accounted for much of the outflow in both quarters. For the whole of 2025, global sustainable funds saw $84 billion in net outflows, in contrast to the $38 billion in inflows recorded in 2024. Despite the outflows, global sustainable fund assets rose by about 4% in the fourth quarter to $3.9 trillion, supported by stock market appreciation.  Q4’25 and FY 2025 global sustainable fund flow
• MainStreet Partners - Global GSS bond issuance reached $1 trillion in 2025 and a historic reinvestment cycle emerging as more than €250 billion matured. Green Bonds continued to dominate, increasing their share to 58%, while Social Bonds declined to 13%. Sustainability Bonds grew to 26% of total issuance, whereas Sustainability-Linked Bonds fell to just 3%. Europe’s share of global issuance declined from 52% in 2021 to 39% in 2025, while Asia’s share more than doubled to 31%. The proposed SFDR 2.0 framework introduces 5% Taxonomy Alignment “safe harbor,” allowing products to qualify as Sustainable or Transition products. This change is expected to benefit GSS Bonds, particularly Green Bonds, which offer a clear and efficient path to compliance. Green, Social and Sustainability Bonds Market Trends