EIMF: From Boom to Scrutiny: The Future of ESG

Last month, we hosted an insightful webinar titled “From Boom to Scrutiny: The Future of ESG” , bringing together professionals, academics, and industry leaders to explore the evolving landscape of Environmental, Social, and Governance (ESG) practices. Led by Adonis Pegasiou, EIMF Academic Director, and Despina Christofi, Lecturer in Law and Regulatory Compliance, the session offered a comprehensive overview of how ESG has transitioned from a voluntary ethical stance to a legally binding framework—and what lies ahead in this increasingly complex terrain.

The Ethical Origins of ESG

The journey began decades ago with Corporate Social Responsibility (CSR), which emerged as a response to growing societal expectations for businesses to act ethically and responsibly. Unlike legal compliance, CSR was initially rooted in ethics—companies choosing to go beyond profit-making to address environmental concerns, social inequality, and governance issues.

As Adonis Pegasiou explained, there are important distinctions between law and ethics. While laws set mandatory boundaries, ethics often lead the way, creating social pressure that eventually shapes legislation.

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From CSR to ESG: Measuring What Matters

One key evolution discussed was the shift from CSR to ESG. While CSR was largely qualitative and subjective—with companies reporting initiatives like building schools or planting trees—ESG introduces measurable metrics. These standards allow investors, regulators, and stakeholders to compare performance across organisations and industries.

The three pillars of ESG—Environmental, Social, and Governance—offer a structured approach:

• Environmental: Carbon emissions, renewable energy use, biodiversity impact, and waste management.
• Social: Labour rights, employee well-being, stakeholder engagement, and community development.
• Governance: Board diversity, transparency in financial reporting, anti-corruption measures, and sustainable remuneration policies.

This shift enables investors—for example those managing pension funds—to make informed decisions based on quantifiable sustainability data.

Legal Developments in the EU: Leading the Way

Despina Christofi provided a detailed look at the European Union’s pioneering role in embedding ESG into law. Key milestones include:

1. 2014 Non-Financial Reporting Directive (NFRD): Required large public interest companies with more than 500 employees to disclose information on environmental, social, and governance matters.
2. 2022 Corporate Sustainability Reporting Directive (CSRD): Replaced the NFRD, significantly expanding its scope to cover around 50,000 companies—both within and outside the EU.

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A notable feature of the CSRD is the concept of double materiality , requiring companies to report on:

• Impact Materiality: How their operations affect people and the environment.
• Financial Materiality: How ESG risks and opportunities influence financial performance.

This dual perspective ensures a holistic understanding of a company’s ESG footprint.

Additionally, the European Sustainability Reporting Standards (ESRS) were introduced to standardise disclosures across sectors, covering areas such as climate change, pollution, human rights, and business conduct.

Recent Changes and Delays

In early 2025, the European Commission proposed amendments to the CSRD, including:

• Delaying reporting deadlines by two years for certain groups of companies.
• Reducing the scope of application to exclude firms with fewer than 1,000 employees or below €50 million turnover.
• Making EU Taxonomy reporting voluntary for smaller companies.

While these changes aim to ease compliance burdens, they also raise questions about whether Europe will maintain its leadership position in global ESG regulation.

Global Shifts and Political Tensions

Adonis highlighted how the political landscape—especially in the United States—is influencing ESG adoption. With Donald Trump’s re-election and his administration’s focus on deregulation and short-term growth, ESG has become a partisan issue. Republican politicians are actively challenging ESG-aligned investment strategies, while Democrats, overall, have a positive stance over ESG.

This polarisation is beginning to echo in European politics, where centre-right parties are showing increasing scepticism toward ESG mandates. Meanwhile, Asian countries are emerging as strong contenders in ESG innovation, particularly in green finance and gender diversity initiatives.

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Is ESG Worth It?

Despite the challenges and debates, the long-term benefits of ESG remain compelling:

• Resilience: Companies embracing ESG principles tend to be more adaptable and future-proof.

• Investor Confidence: ESG-compliant firms attract capital from socially conscious investors.

• Sustainability: Forward-thinking strategies reduce operational risks and promote long-term profitability.

As Adonis Pegasiou concluded, companies that adopt ESG for the right reasons—ethical commitment and long-term value creation—will likely thrive regardless of regulatory shifts.

Looking Ahead

Whether ESG continues to grow or faces a retreat will depend on how governments, corporations, and civil society respond to global challenges—from climate change to rising inequality. One thing is clear: the conversation around ESG is far from over.

Interested?

If you’re interested in deepening your knowledge of governance, risk, and compliance—including the latest developments in ESG—we invite you to explore our Master Programme in Government Risk and Compliance. You can find out more here.