ESG Insights 2026

1.  ESG is dead, long live ESG?

2. CSDDD and the Omnibus – have the rules now (finally) settled and do we know what applies?

3. Climate transition plans – still relevant after the Omnibus?

4. ESG & M&A

5.  ESG-related disputes in Sweden

6.  AI and Responsible AI

7. Sustainable Finance

1. ESG is dead, long live ESG?

The debate on ESG (Environmental, Social and Governance) has perhaps never been more polarised than it is now. In the US, ESG has become a symbolic issue in the culture war, with some states actively opposing ESG investments whilst others continue to demand them. Some states have even introduced rules limiting ESG considerations in public procurement and pension funds, and companies risk being caught in the crossfire between federal and state requirements.

The EU, on the other hand, is driving the ESG agenda forward but with a greater focus on competitiveness and simplification. In Europe, ESG has been cemented as part of corporate governance and risk management, and with initiatives such as the CSRD (Corporate Sustainability Reporting Directive) and the CSDDD (Corporate Sustainability Due Diligence Directive), companies need to achieve significantly better traceability in their supply chains regarding issues linked to human rights and the environment. Many Swedish companies with a strong global presence, including Swedish private equity firms, have been working on ESG issues in various forms for a long time. Not least, many companies have already made commitments in their Codes of Conduct to comply with frameworks such as the UNGP (United Nations Guiding Principles on Business and Human Rights) and the OECD’s guidelines on the subject. Many companies are also members of the UN Global Compact and have made public pledges through this initiative.

As regulatory frameworks evolve in different directions – with growing opposition to ESG in the US whilst the EU drives the agenda forward with a focus on competitiveness and simplification – an increasingly fragmented and difficult-to-navigate environment is being created for companies. A further example is the legislation introduced by China in April this year, which aims to strengthen control over the country’s supply chains and protect them from external regulations such as the CSRD and CSDDD, something that further increases the complexity for companies operating in multiple jurisdictions. Polarisation and these protective barriers mean that companies must anticipate, and try to stay one step ahead of, how their actions and communications may be perceived differently in the geographical markets where they operate.

For multinational companies, this is more a matter of strategy than ideology. At the same time, the capital markets – and not least consumers – continue to demand transparency, particularly from global companies with European customers. It is also clear that investors in both the EU and Asia continue to favour companies with robust sustainability governance.

Key points:

• Diverging reporting requirements between the US and the EU
• Increased politicisation of ESG communication
• Continued demand for ‘CSRD light’ reporting even outside the EU – where companies position their sustainability reporting as ‘CSRD-inspired’ rather than ‘CSRD-compliant’
• Risk of “ESG-washing” in both directions, i.e. exaggerated or downplayed communication

2. CSDDD and the Omnibus – have the rules now (finally) settled and do we know what applies?

After several years of political uncertainty and negotiations, the EU’s CSDDD (Corporate Sustainability Due Diligence Directive) and the subsequent Omnibus package are now finally set to fall into place. The directive was adopted in spring 2024 but, as is well known, subsequently underwent extensive amendments, which were finalised by the EU in March 2026. Member States, including Sweden, must transpose the Directive into national law by 26 July 2028, and companies must comply with the requirements from 26 July 2029. Mannheimer Swartling represents the Swedish Bar Association in the expert group supporting the transposition of the Directive into Swedish legislation.

The EU’s new regulation on products made using forced labour comes into force in 2027 and already serves as a practical preview of the CSDDD. Companies must be able to demonstrate actual, documented and risk-based due diligence in their supply chains – not merely refer to policies. The consequences for companies that breach the regulation could include their products being banned from the EU market, seized, or the company being ordered to implement extensive corrective measures with both financial and reputational implications.

The CSDDD significantly tightens the scrutiny of products and supply chains within the EU. General policies are no longer sufficient. Authorities, investors and customers expect concrete evidence that companies understand and manage risks throughout the value chain. This has been a reality for several years in countries such as Norway (through the Norwegian Transparency Act) and France (through the Loi de Vigilance, where we have recently seen several landmark rulings from French courts). Companies must be able to demonstrate risk-based due diligence with regard to compliance with requirements relating to human rights and the environment in their own operations, those of their subsidiaries and those of their business partners. The due diligence methodology is based on the methodology set out in the international framework for responsible business conduct. The supply chain has thus become a strategic “ESG risk zone”. Shortcomings can lead to regulatory sanctions and increased demands from customers and investors.

Many companies today have parts of the structure in place through their compliance programmes, but sustainability requirements demand new skills, new data sources (where AI can play a key role) and more robust verification. This also means that legal, procurement and sustainability functions must work much more closely together – a change that is as much cultural as it is regulatory.

Key points:

• The European Commission will develop sector-specific guidance and guidelines on how the due diligence process should be implemented in practice
• Although the Swedish regulations transposing the CSDDD will not come into force until 2029, many companies will need to review their contractual relationships well before then to ensure compliance
• Regulatory frameworks for responsible business conduct are increasingly overlapping. Companies need to ensure that data, processes and reporting are aligned to avoid duplication of effort and inconsistencies
• Although the CSDDD covers fewer companies than originally planned, major players will impose equivalent requirements on their suppliers (despite the directive containing safeguards against disproportionate demands on subcontractors) – the requirements will therefore extend far beyond the companies formally covered

3. Climate transition plans – still relevant after the Omnibus?

The Omnibus Directive removed the requirement in the CSDDD for companies to adopt and implement a climate transition plan, i.e. a plan to transition operations to achieve net-zero emissions. However, the removal of this mandatory requirement has not made such plans any less relevant. We see that many companies continue to prioritise work on climate transition plans, not least as a means of supporting the achievement of emissions reduction targets and to identify and manage risks in their operations linked to climate change. Furthermore, many countries have adopted or are planning to introduce mandatory requirements for companies to produce this type of emissions reduction plan, including Australia, Brazil, China and India.

It is interesting to note that although the requirement to develop climate transition plans has been removed from the CSDDD, the regulations nevertheless require companies to identify and manage adverse environmental impacts, which means that the work of developing and implementing a climate transition plan is a relevant tool for analysing risks as well as preventive and remedial measures.

The relevance of climate transition plans is also evident in relation to the requirements under the CSRD/ESRS to report on the company’s climate targets and measures for achieving them. Requirements for transition plans also apply in other sectors, such as for banks under the Capital Requirements Directive (CRD6) and for insurance companies under the Solvency II Directive.

Companies regard climate transition plans as an important strategic tool, not only for their own operations but also in relation to financiers, customers and other business partners. These plans often constitute a concrete strategy and planning document that forms the basis for investment decisions, for example to improve energy efficiency, phase out fossil fuels, or to avoid physical threats or risks to the business. There is also significant value in clarifying targets for reducing emissions and setting out a concrete plan to address the business’s needs and climate-related risks. This enables long-term planning and financing. We also see that financiers and investors are increasingly interested in reviewing such plans as part of due diligence, or simply because companies are required to have ambitious and business-relevant targets.

Key points:

• Climate transition plans are a risk management tool for companies, regardless of the fact that requirements are no longer set out in the CSDDD. Furthermore, many countries have already introduced, or are planning to introduce, mandatory requirements for transition plans, and market-driven demands for this type of plan are growing
• Reporting requirements under the CSRD effectively cover much of the information normally included in climate transition plans
• It is important to carefully consider how and what is communicated in the plan, as commitments and risks are information that the market picks up on and evaluates
• For a plan to be credible, it should be evidence-based and founded on clear data, assumptions and dependencies

4. ESG and M&A

As ESG regulations evolve and receive greater attention in general, this naturally also affects how ESG is handled in M&A transactions, for example through the scope and conduct of due diligence, how risks are allocated between the parties, and how a target company is valued.

In due diligence, the approach to managing ESG issues is evolving from a general review towards a structured and data-driven risk assessment. Buyers are increasingly looking for concrete and verifiable information on climate impact, working conditions, human rights and supply chains. It is no longer sufficient for a target company to have good intentions and relevant policies in place; it is the actual ability to identify, manage and monitor risks that matters. Inadequate management of ESG issues at the target company can lead to reduced interest from prospective buyers, demands for additional contractual safeguards, or the deal simply not going ahead.

In recent years, Mannheimer Swartling has carried out numerous due diligence assignments in major transactions that delve deeply into the legal risks alongside the communicative (as these are often closely interlinked). Our review and analysis can be presented either as part of the legal due diligence or as a separate legal ESG report. We are seeing growing interest in reports of this kind, where the focus is on legal assessments of where the actual ESG risks lie and how they should be managed. Our advice typically begins by identifying the right focus for the review based on the client’s needs (taking into account the client’s own commitments and legal requirements) and the target company’s industry and geographical reach. The review itself is often best conducted in the form of a workshop or interview with the target company rather than through document review, as ESG maturity is embedded in processes and culture rather than in documents.

Regulatory changes are also driving the development of ESG due diligence. The CSRD, CSDDD and national due diligence laws (e.g. in Norway, France and Germany) mean that companies must be able to demonstrate traceability, risk management and actual compliance across their value chains. This has a direct impact on M&A; buyers want to understand whether the target company is ready for existing and upcoming requirements and whether there is a risk of future sanctions, disputes or greenwashing exposure. In international transactions, this becomes even more complex, as ESG regulation is now often a strategic and geopolitical issue.

This heightened risk awareness is also influencing how transactions are structured. We are seeing more ESG-specific warranties, covenants and extensive post-closing commitments.

Key points:

• ESG issues are increasingly business-critical and influence which transactions are carried out, how they are structured and how they are priced
• Every ESG due diligence must be tailored to the transaction in question and the issues relevant to that transaction – for one company it is climate, for another it is supply chains
• In ESG due diligence, the focus is on analysing the target company’s ESG maturity. This is best achieved through interviews and workshops with relevant decision-makers at the target company, rather than traditional document review
• Regulation in this area is driving up transaction risk – as more legislation is introduced, ESG becomes a legal issue that must be addressed correctly

5. ESG-related disputes in Sweden

ESG-related disputes and regulatory cases are on the rise in Sweden, albeit to a more limited extent than in several other European countries. Internationally, developments have progressed considerably further. Among the most high-profile cases are the climate lawsuit against Shell in the Netherlands (Milieudefensie v. Shell, 2021), the landmark UK rulings on parent company liability in Vedanta Resources v. Lungowe (2019) and Okpabi v. Shell (2021), the ongoing proceedings in France where major corporations such as LVMH have been tried under the Loi de vigilance, and the climate lawsuit , in which four Indonesian fishermen are suing Holcim in a Swiss court, demanding reduced carbon dioxide emissions and compensation for environmental damage.

Perhaps the most ESG-related case in Sweden is Arica Victims v. Boliden, which concerned Boliden’s liability for alleged health damage linked to an arsenic-containing material exported to Chile. The case raised questions about corporate responsibility in global value chains (a case in which Mannheimer Swartling represented Boliden). Another high-profile case in Sweden is the Aurora case, in which young climate activists have sued the Swedish state, claiming that its climate policy is insufficient and thus violates young people’s human rights.

The most significant development in Sweden, however, relates more to greenwashing. In recent years, the Swedish Consumer Agency and the Consumer Ombudsman (KO) have become significantly more active and have pursued several cases linked to sustainability claims in marketing. The report SOU 2025:124 Measures for more sustainable consumption also proposes tightening the use of environmental claims in marketing through the incorporation of the so-called Empowering Consumers Directive. The legislative changes are proposed to come into force on 1 January 2027.

ESG issues are also appearing with increasing frequency in environmental and permitting processes – not least in connection with the Sami population – as well as in workplace health and safety and labour law disputes concerning the social aspects of ESG. Issues relating to human rights and due diligence have not yet been tested in Swedish courts, but they are gaining in importance as the EU’s regulatory framework is implemented and Swedish companies are expected to demonstrate that they have effective processes in place.

Sweden does not, admittedly, have the same volume of ESG disputes as, for example, France, the Netherlands or the UK, but a clear trend is emerging: investors, consumers and NGOs are increasingly using ESG arguments in complaints, dialogues and public advocacy. Shareholder processes focusing on the board’s management of ESG risks are still rare, but these issues are being raised with increasing frequency in the context of corporate governance and in communications between companies and institutional investors. The authorities’ increased focus on transparency and sustainability claims means that companies lacking clear and robust documentation risk being exposed during regulatory scrutiny or disputes – even if, in practice, they have done much of it right.

Overall, ESG-related risks in Sweden increasingly need to be managed in a structured manner and at management level – and, not least, must be a high priority on legal departments’ agendas. Case law is still limited, but both Swedish regulatory cases and European court rulings clearly point towards stricter requirements for documentation, traceability and internal governance. This is particularly true in light of the upcoming regulatory processes under the CSDD and the potentially significant administrative fines of up to three per cent of a company’s global turnover.

Key points:

• Stricter legal requirements coming into force on 1 January 2027 and supervision by the Swedish Consumer Agency and the Swedish Competition Authority of sustainability claims, with an increased focus on identifying and sanctioning greenwashing
• Increasing demands for traceable, verifiable and internally controlled ESG governance, including robust processes for risk identification and monitoring
• Upcoming due diligence requirements are expected to form a central basis for future disputes and administrative court cases, particularly in light of the CSDDD
• ESG risks are increasingly being integrated into companies’ risk management, reporting and accountability discussions at board and management level

6. AI and Responsible AI

AI development has accelerated sharply during 2025–2026, and companies face both significant opportunities and rapidly growing risks. The EU’s AI Regulation has been adopted and is now in an implementation phase with phased application over the coming years. The regulation establishes a new framework for how AI systems are to be developed, used and controlled, where requirements for classification, risk assessment, data governance, transparency and human oversight will have a direct operational impact on businesses.

In practice, this means that AI is rapidly becoming a “licence to operate” issue. Companies must not only ensure regulatory compliance, but also be able to demonstrate to customers, investors and business partners that their use of AI is robust, traceable and responsible. We are therefore seeing Responsible AI increasingly integrated into corporate governance and compliance structures, with the establishment of AI committees, internal review processes and a clearer division of responsibilities between legal, IT and business operations.

At the same time, the risk landscape is becoming more complex. The use of generative AI raises issues regarding intellectual property rights, particularly in relation to training data and model output, as well as the division of responsibility between suppliers and users of AI systems. Furthermore, increased reliance on third-party models and suppliers means that AI-related risks effectively become part of companies’ supply chains, requiring due diligence, contractual regulation and ongoing monitoring.

AI risks are also playing an increasingly prominent role in M&A processes and commercial agreements. Buyers are increasingly analysing how target companies use AI, which data sources underpin the systems, and whether there are regulatory, intellectual property or ethical risks that could affect the value of a transaction. At the same time, we are seeing an emerging landscape of disputes linked to AI-generated content, discrimination and liability in automated decision-making.

AI is therefore no longer an isolated technical issue, but a core strategic, legal and operational issue, with clear links to ESG, particularly in terms of governance, transparency and risk management.

Key points:

• The EU’s AI Regulation is in the implementation phase with phased application – the focus is now on practical operationalisation rather than merely regulatory analysis
• Responsible AI is rapidly evolving into a “licence to operate” issue, with demands from customers, investors and business partners
• Increased focus on generative AI risks, particularly in relation to intellectual property rights, training data and allocation of liability
• AI risks are being integrated into supply chains, M&A processes and commercial agreements, with an increased need for due diligence and contractual regulation

7. Sustainable Finance

The sustainable finance regulatory framework in Europe remains in a phase of ongoing change. Despite several years of legislation, guidance and developments in market practice, there is still significant uncertainty regarding the requirements that asset managers, fund managers and investors are actually required to comply with. For many players, the focus has therefore shifted from merely interpreting new regulations to managing a situation where reporting requirements, product categorisation and investor expectations are evolving in parallel. At the same time, both investors and other stakeholders continue to demand sustainability-related information, even where the legal requirements have not yet been finalised or are unclear.

The most significant example is the ongoing reform of the Sustainable Finance Disclosure Regulation (SFDR), often referred to as “SFDR 2.0”. The European Commission’s proposal involves replacing the current, well-known Articles 8 and 9 with three new product categories – Transition, ESG Basics and Sustainable. For a product (e.g. a fund) to qualify for a category, its investments must meet detailed criteria and exclude certain types of sectors/activities. The proposals also mean that the SFDR’s current definition of “sustainable investment” will be phased out, whilst significant restrictions are introduced regarding naming, marketing and sustainability communication for uncategorised products (i.e. products that do not meet the criteria for the new categories). For fund managers and other players in the European market, this means a need to review fund documentation, investor communications, internal governance documents and operational processes.

However, there remains considerable uncertainty. Negotiations on the Level 1 text are still ongoing within the EU legislative process, and the forthcoming Level 2 rules will be decisive in determining how the new categories can be used in practice. It is only once these more detailed rules have been published that the market will be able to assess how feasible the new categories are and what practical consequences they will have. For private funds such as venture capital, private equity, infrastructure, credit and real estate funds, this is particularly important, as several of the proposed criteria and approaches have been designed largely with listed markets in mind. Issues relating to active ownership, operational value creation and sustainability engagement in unlisted companies therefore risk not being fully reflected in SFDR 2.0, despite the fact that these tools are often central to private funds.

For market participants, this means that the sustainable finance regulatory framework is currently a matter of strategic positioning and preparedness rather than merely formal compliance. Although the legislator’s ambition has shifted to some extent towards simplification and proportionality, there remains a need for robust data collection, well-considered communication/marketing and ensuring sufficient flexibility to manage future regulatory changes. Fund managers with exposure to unlisted asset classes, in particular, have good reason to monitor developments closely and to assess now how future product classification, sustainability disclosures and investor dialogues may be affected.

Key points:

• The SFDR is set to undergo a fundamental reform through SFDR 2.0, with three new product categories – Transition, ESG Basics and Sustainable – proposed to replace the current Article 8 and 9 regimes
• The final Level 2 rules will be decisive for how the new categories can be applied in practice
• Private markets players risk being particularly affected, as the proposed rules are largely based on listed markets
• Despite ambitions to simplify the framework, a complex and evolving reporting landscape remains, where the interplay between, among others, the SFDR, the Taxonomy Regulation and the CSRD/ESRS requires strategic preparedness and clear sustainability governance

Corporate Compliance and Risk
Fredrik Svensson, Partner

Environment
Madeleine Edqvist, Partner

Dispute Resolution
Marcus Irajinia Berglie, Partner
Mattias Göransson Rondin, Partner

M&A
Maria Holme, Partner
Jan Holmius, Partner

Responsible AI
Anders Bergsten, Partner
Niklas Sjöblom, partner

Sustainable Finance
Carl Johan Zimdahl, Partner

Sustainability
Sarah Hoskins, Chief Sustainability Officer