ESG regulation and litigation in 2026: what to expect for UK financial institutions

ESG and sustainable finance matters will be the subject of renewed focus this year for UK financial institutions. This focus will be driven in part by the financial regulators’ desire to increase growth, including adjusting the burden of regulation where appropriate, but also to ensure that sustainability initiatives are meaningful and manage risk. It will also be driven by the way in which firms are reconsidering their sustainability objectives, and in some cases refining or adjusting them, and by the continued and increasing threat of climate-related litigation, even if much of that litigation is both outside the UK and the financial services sector.   

This post provides an update on the trends in our 2025 post, outlines key recent developments and considers what is likely to shape 2026.

Regulatory developments

There have been less regulatory developments overall in the UK in the past year than in previous years. Instead of increasing levels of regulation further, the FCA has indicated that its forward-looking focus is on unlocking green growth. Towards the end of last year, FCA chair Ashley Alder explained the FCA’s plans to work with firms to do this, including by initiating a pilot to identify barriers to scaling finance for climate solutions, and commented that overall in a sustainable finance context the FCA is committed to “clear, proportionate rules, global cooperation, and fostering innovation” to position the UK as the world’s sustainable finance centre. 

Recent regulatory changes have been focused on increasing the consistency and reliability of information provided by financial institutions, with the aim of enhancing decision-making and overall market confidence.  

The FCA last year welcomed the UK Government’s plans to implement the UK Sustainability Reporting Standards (UK SRSs) which are intended to align with the International Sustainability Standards Board’s general sustainability and climate standards. The Government is aiming to make the UK SRSs available in Q1 2026. The FCA are now consulting on changes to the UK Listing Rules to reflect the new standards. The consultation closes on 20 March 2026. In relation to transition planning, the FCA expressly noted that, given the Government’s consultation on climate-related transition plans between June and September last year, it would not be appropriate to set requirements for listed companies to have transition plans. Instead, the FCA are simply proposing that at this stage listed companies either disclose a transition plan or explain why they have not done so.

The FCA has also introduced a new climate disclosure rule, effective from 19 January this year, as part of the Public Offers and Admissions to Trading Regulations (POATRs) regime (see our post covering this here), which (among other things) will allow companies to publish information more freely in relation to their transition plans and net-zero targets under a new category of Protected Forward-Looking Statements, with the aim of increasing transparency. Together with the introduction of the new POATRs regime, the FCA has published its updated Technical Notices on (i) “Disclosures in relation to sustainability matters, including climate change” and (ii) on “TCFD aligned climate-related disclosure requirements for listed companies”, both designed to help issuers and practitioners interpret UK disclosure regulations.

It has also taken steps towards bringing ESG rating providers within its regulatory remit with the aim of making ESG ratings more transparent and reliable. Following its announcement on this, the FCA is currently consulting on proposed regulatory updates and the consultation will close on 31 March 2026.

Alongside regulatory changes, the FCA has issued guidance on the insights gained from ongoing market engagement following its 2023 review of the sustainability-linked loans market. This guidance notes that while it has seen the improvements with better practices and more robust product structures in the past two years, there is still a way to go which will require continued cooperation from financial institutions. 

Elsewhere, the PRA has updated its approach to the management of climate-related risks. Last December, the PRA set out its increased expectations in Supervisory Statement SS5/25. Impacted firms have six months to review their current position and identify gaps to meet the new expectations. Broadly speaking, the Supervisory Statement aims to ensure firms build the capabilities to effectively manage climate-related risks. Firms are expected to define their risk appetite by reference to analysis of climate stress scenarios. Regular assessments should be carried out to identify material climate risks and their impact.

Given all of the focus on growth and helping sustainable markets to operate well, it is perhaps not surprising that there were no published ESG-related enforcement decisions from UK financial regulators in 2025. This is consistent with other centres – there were no published ESG regulatory enforcement decisions against financial institutions in Europe last year either. 

Litigation and regulatory enforcement

ESG-related litigation continues to be brought globally, with claimants and NGOs in the UK and Europe focussing on holding companies to account for their contributions to climate change, on challenging companies’ policies and handling of climate change matters and risk, and on the accuracy of their statements about these matters.  Significantly, over the past year the courts in Europe have tentatively begun to recognise that companies do bear a degree of responsibility in theory for their contributions to climate change, without making any financial awards or other findings against alleged contributors.  New and potentially significant cases have been commenced against Shell in the Netherlands and in the English courts, in relation to its investments in new oil and gas projects, and in connection to the way its contribution to climate change impacted on the Philippines in the form of Typhoon Odette, respectively.

Overall there was less new ESG-related litigation last year directed at financial institutions, and no new cases filed against financial institutions at all in the English courts.  However, as foreshadowed in our update last year, Dutch NGO Milieudefensie did proceed with its case against ING Bank, alleging in its writ that it has breached its societal duty of care under the Dutch Civil Code to curb “dangerous climate change”, and that ING must take steps to ensure that this danger is mitigated. The case focuses on the way that ING tracks and reports its climate impact across all of its portfolios, and its future plans, as well as the way that it engages with its clients in carbon-intensive industries.  ING Bank is yet to serve its initial defence, which is due on 18 February 2026. 

There were fewer new OECD complaints against financial institutions in the last year also, and no new ones brought - although decisions are awaited on several key complaints against financial institutions in different global centres, primarily focused on institutions’ investment policies. 

In the US, on the other hand, anti-ESG sentiment continues, as demonstrated by ESG-related breach of fiduciary duty lawsuits. In a January 2025 ruling in Spence v American Airlines, Inc., a Texas federal court determined that American Airlines Inc. and its employee benefits committee breached their fiduciary duty of loyalty under the Employee Retirement Income Security Act 1974. The court ruled that American Airlines failed to act solely in their retirement plans’ best financial interests by investing in funds managed by BlackRock, who the Court determined had engaged with companies on ESG-related issues and occasionally supported ESG-driven proxy proposals.  It is in theory possible for anti-ESG claims like this to be brought in the UK too, despite the relatively widespread support for sustainability. 

Conclusion

In the year ahead it will be important for financial institutions in the UK to monitor the risk landscape carefully.  Despite the changes in regulatory appetite, it will still be important for firms to monitor and assess their climate-related risks, and think through how any changes to their commitments and strategies impact policies, clients and investors. It will also be important to monitor developments on the litigation front (even in other jurisdictions) which might impact the types of claims likely to be brought in the UK, including potentially, as novel case theories are tested and claimants try to extend them to cover financial institutions.  For a broader explanation of key trends in ESG this year outside the context of financial institutions, see here.