PRI’s policy year in review - and what to look out for in 2026

Throughout the many new year commentaries on sustainable finance, we hear a common note – that the transition to net zero, sustainable economies holds the line, despite shifting geopolitics. From a policy perspective, this is very much what we witnessed in a turbulent, colourful 2025, that saw evidence of progress at the global level – and we expect this trend to continue into the new year. 

The focus on the transition remains, but priorities shift to implementation

Enabling the transition continued to be a key policy priority across most markets – although it was complicated by geopolitical turmoil, regulatory recalibrations and challenges to net zero targets. The huge costs of climate inaction are increasingly clear,^[1] and policy reforms continue to be seen as critical to enable the transition.^[2]

Worldwide, net zero policymaking continued steadily in 2025, especially in Asia-Pacific and Global South countries,^[3]  and policy makers’ commitment to the Paris agreement is overall intact – despite the retreat of the United States.

Notwithstanding heated debates on the inclusion of fossil fuel phase out in the summit outcome document, COP30 in Belem saw tangible progress on climate finance and the just transition. By the end of COP, 119 new nationally determined contributions (NDCs) had been submitted with more than 80 countries supporting work towards fossil fuel phase-out. As we move to an implementation phase with COP31, investor engagement with policy makers will be essential to address the widening implementation gap and support stabilising temperature rise at or below 1.5°C to avoid the most catastrophic climate outcomes and financial risks.^[4]

Industrial policy as a key lever

Industrial policy is now considered a key lever to enable a just, sustainable transition for national economies. Most of the world’s largest economies have now developed or started implementing industrial policies that embed climate and environmental action. Examples include:

• The EU Net Zero Industry Act which is backed by a target to achieve a 90% reduction in net GHG emissions by 2040, with some “flexibilities” to be finalised in trilogues
• The UK’s Modern Industrial Strategy which reaffirmed the country’s long-standing ambition to pursue net zero as a long-term goal
• Japan’s approval of the 7th Strategic Energy Plan and Green Transformation (GX) 2040 Vision, including an updated NDC, stronger 2035–2040 emission reduction goals and an expansion of renewable energy and clean industry pathways
• Brazil’s implementation of its Ecological Transformation Plan and use of its Nova Industria Brazil policy to pursue both economic development and emissions reductions
• Canada’s Climate Competitiveness Strategy which includes climate action as an economic lever in its industrial strategy.

Financial policies as a foundation for real economy outcomes

All rules-based capital markets need coherent, ambitious and effective financial policies to create an enabling environment for responsible investment. The PRI’s sustainable financepolicy toolkit, published in 2025, explores financial authorities’ role in building a stable, sustainable financial system that rewards long-term responsible investment, to the benefit of investors’ clients and beneficiaries, and the environment and society as a whole.

A key milestone in 2025 was the launch of the Principles for Taxonomy Interoperability at COP30, providing a common framework for making the world’s 50+ sustainable finance taxonomies comparable and credible across borders. The launch of the Australian taxonomy, together with work underway on a made-in-Canada taxonomy, show how jurisdictions can tailor transition-focused, economy-wide frameworks to domestic realities while providing investors with a stable signal for long-term capital allocation. Brazilian policy makers and regulators developed the innovative Brazilian sustainable finance taxonomy which focuses on interoperability and international recognition, and incentivises social equality alongside environmental mitigation and adaptation.

Nearly 40 jurisdictions have adopted or otherwise used the ISSB Standards in their regulatory frameworks – or are currently taking steps to do so – with the first company reports coming in 2026 in over 10 jurisdictions. Examples of disclosure standards based on ISSB include:

• China’s Ministry of Finance-led cross-ministerial disclosure standards, which also follow a double materiality approach (in China, listed companies are already expected to report against existing stock exchange guidelines in 2026);

• Japan’s Financial Services Agency’s plans for a phased implementation of local standards starting in 2027, including strengthened disclosure expectations on human capital driven by the New Form of Capitalism policy to address inequality.

In the EU, sustainable finance policies have been subject to heated debates where the ‘Omnibus I’ package  recalibrated key sustainability reporting and due diligence rules under the Corporate Sustainability Reporting Directive (CSRD), European Sustainability Reporting Standards (ESRS), Corporate Sustainability Due Diligence Directive (CSDDD) and EU Taxonomy. Improving framework usability is vital for investors, yet the changes made raise concerns about data availability and policy stability – both of which are required to shift capital toward the transition.

Geopolitics, multilateralism and trade

While climate ambition and industrial transformation remain steady overall, they have been affected by a highly disruptive international geopolitical context. Geopolitics has moved from background noise to a defining force shaping investment decisions. Key sources of instability include enduring wars, trade disputes and conflicts at key multilateral fora. 

Wars – including the invasion of Ukraine by Russia, the Israel–Hamas war and other ongoing armed conflicts and uprisals around the world, such as Sudan and Myanmar – have resulted in rising geopolitical tensions, humanitarian crises and evolving security needs, leading to the question of whether there is a case for responsible investment in defence.

Trade conflicts have been a major destabilising factor for markets – and yet, trade policy reforms have been increasingly connected to climate and environmental issues. New trade regulations such as carbon border adjustment mechanisms (CBAMs) are being used to incentivise climate action – with examples from the EU, UK, Canada and Australia. With its final ruling on the EU Renewable Energy Directive, the World Trade Organization confirmed that reducing greenhouse gas (GHG) emissions and fighting deforestation can justify trade restrictions. Trade has also formally made it into UN Framework Convention on Climate Change (UNFCCC) discussions after years of tension.

Multilateralism and the rules-based order are being challenged – for example, by the United States’ exit from key climate and environmental multilateral organisations – but global dialogue between most countries continues. From the Sevilla FFD4 conference to the G20 in South Africa, the majority of governments are emphasising the link between environmental action, just transition, economic resilience and financial stability.

What to look out for in 2026

The era of deep financial and economic policy reforms to address complex challenges with the global commons – the natural resources that lie outside of national jurisdictions – has only started. Such reforms will require multi-stakeholder collaboration, ranging from intergovernmental diplomacy and policy–investor dialogue to direct stewardship and engagement with investee companies and beneficiaries.

We expect the following trends, events and priorities to shape sustainable finance policy in 2026:

• Geopolitical turmoil will likely continue to affect markets, blurring the boundaries between economic, environmental, digital and national security policies.
• In September, the UN General Assembly will elect a new UN Secretary General. In October, governments will gather in Armenia for the nature COP17. In November, Australia will take on its role as President of Negotiations for COP31 hosted in Turkey, with many sensitive questions, including carbon taxes, pricing and subsidies to be discussed, whether on or off the official agenda. And in December, the UN Water conference will take place in Abu Dhabi.
• Reconciling economic and financial policy and enabling the transition will remain top priorities for policy reforms across most markets.
  • The EU will seek to continue streamlining regulatory frameworks while improving sustainable prosperity and competitiveness.
  • China will announce the 15th Five-Year Plan which is expected to shed light on an economic strategy aligned with its 2035 NDC.
  • Japan will continue updating sector-specific GX roadmaps, guiding investment priorities in areas like clean energy, industrial decarbonisation and supply chain transformation.
• In the US, federal agencies will likely continue pursuing President Trump’s deregulatory agenda, with the Securities and Exchange Commission expected to issue proposed rulemakings related to shareholder rights and corporate disclosures. Congress will probably continue to take an interest in ESG-related policy, but members will be juggling competing priorities including healthcare reform and the upcoming midterm elections in November. In the interim, state and local leaders will continue to establish themselves as subnational leaders on climate policy.
• Social issues including upholding human rights, addressing extreme inequality, managing the implications of an aging society and the rise of artificial intelligence (AI), and how these are tackled by policy makers in economic transition policies, will remain a key challenge across all markets.

As always, we continue monitoring key policy developments relevant for responsible investors in 2026 and engage with our signatories to share their expectations and experiences of ongoing financial and economic policy reforms.

Get in touch with our experts at policy@unpri.org