This chapter delves into the evolving non-financial reporting landscape in the European financial sector, emphasizing the strategic and regulatory shifts driven by ESG imperatives. The first section presents the EU’s regulatory response to greenwashing and the demand for greater transparency by developing a harmonized sustainable finance framework. The EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR) are central to this framework, which provides a structured classification of sustainable economic activities and imposes transparency obligations on financial market participants. The chapter elucidates how these instruments enhance investor confidence and facilitate capital allocation that is aligned with long-term sustainability objectives. The second section addresses the integration of ESG reporting into financial decision-making and its inherent challenges. It contrasts the standardized, audit-driven nature of financial reporting with the fragmented, voluntary frameworks of ESG disclosures. Drawing on empirical findings of previous academic research, it highlights issues such as selective disclosure, greenwashing, a lack of standardized indicators, particularly for SMEs, and the informational asymmetry investors face. The chapter ultimately underscores the need for more robust, comparable, and transparent ESG reporting standards to support meaningful investment decisions and sustainable development outcomes.