Sustainable finance: Transparency is improving on several fronts

Sustainable finance is currently experiencing a crisis of confidence. The idea that an investment can both generate financial returns and benefit the planet is being questioned from all sides. While this idea was gaining momentum a few years ago, it is now struggling to generate enthusiasm and is increasingly met with mistrust and scepticism. 

This loss of confidence in sustainable investment strategies is evident on both sides of the equation: the “investment” side and the “sustainable” side. Let us first consider the ‘investment’ perspective, that of investors whose priority is to optimise the risk/return ratio. In today’s tense, short-termist and militaristic geopolitical context, it is increasingly difficult to gain acceptance for the win-win argument – that sustainable equals profit. 

Let us now look at the issue from the other side — the ‘sustainable’ side — and adopt the perspective of investors who want to improve the state of the world. Here, the negative sentiment stems from a lack of credibility, also commonly referred to as greenwashing. In recent years, studies, media investigations and legal proceedings have highlighted various cases of exaggerated or unfulfilled promises. Certain investment funds marketed as “green”, “sustainable,” or “responsible” have turned out to be too similar to traditional funds to credibly claim a positive impact.

But the situation is not set in stone. Confidence could return. For this to happen, it is particularly essential for players across the sustainable finance value chain —such as companies, asset owners, asset managers, rating agencies —to be more transparent. In this respect, recent developments reported in the media offer positive and encouraging signs. According to the CDP organisation, 877 companies now have an A rating for environmental disclosure (related to climate, water and forests), representing an annual increase of 70%. These leaders are mainly based in Europe, Asia and the Global South. 

Less greenwashing

At the beginning of 2026, the Science Based Targets Initiative (SBTi) announced that it had validated the decarbonisation plans of 10,000 companies worldwide. This validation recognises ambitious, science-based targets that are capable of achieving net zero by 2050. Still on the climate front, the Chinese government has just published a disclosure framework aligned with the International Sustainability Standards Board (ISSB), a move welcomed by sustainability-conscious investors. Meanwhile, according to the Border to Coast Pensions Partnership, which manages pensions for a dozen British local authorities, the number of credible transition plans is on the rise, while greenwashing is on the decline. 

Progress in transparency is also visible among institutional investors. This is demonstrated by the 2025 Global Pension Transparency Benchmark, published last autumn jointly by CEM Benchmarking and Top1000funds.com, which compares 75 pension funds. It reveals that over a five-year period, the average score for responsible investment criteria has risen from 47 to 71 out of 100.

Work in progress

Despite these advances in corporate and investor transparency, not all initiatives have been successful. For example, the UK government has recently rejected calls from several pension funds to improve governance and transparency in the defence sector. Several projects remain unresolved, and requests are still awaiting responses. One such initiative is the Institutional Investor Group on Climate Change (IIGCC), which requires companies, as well as their auditors, to better document the impact of climate risks on their future ability to pay dividends. 

In addition, the IIGCC, together with the Principles for Responsible Investment (PRI) and UKSIF, is calling on governments to strengthen and clarify sustainability disclosure rules. The European Securities and Markets Authority (ESMA) has published a note asking promoters of sustainable investment strategies to better explain what these strategies entail.

The advances described above cannot be taken for granted; they are the result of sustained efforts, enduring commitment and awareness campaigns. In a market economy, transparency is not a natural vocation for companies. They communicate in a targeted manner to promote their products and services, but they often keep many aspects of their activities in the dark, particularly for competitive reasons.

The performance and credibility of sustainable finance – an inherently multifaceted field driven by both financial and non-financial motivations – remain open to debate. The crisis of confidence it is currently experiencing is, therefore, understandable. But it is difficult to dispute the fact that, over the last 20 years, sustainable finance has succeeded in making companies more transparent and open. This is undoubtedly its greatest achievement.

Will recent advances in corporate transparency restore confidence in sustainable finance? We firmly believe so. More information, higher-quality data, less greenwashing – if this trend continues, it should revitalise investor interest in sustainability.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

See how the companies in your sector perform on sustainability. On illuminem’s Data Hub™, access emissions data, ESG performance, and climate commitments for thousands of industrial players across the globe.