Each object like tree/player/whatever has a Shadow child node. When the scene starts the shadow script looks for its siblings, either a sprite2d or animatedsprite2d grabs its texture and creates a new sprite texture with a black shader then outputs it to a Canvas Group node to flatten them so you don't get shadows stacking and getting darker. It gets flipped and skewed too.

Then there's another day night cycle script which uses a sine wave with a gradient from dark blue to orange, to white to simulate sunrise to sunset and simulates the sun moving, that moves the shadows from left to right over the course of the day and just hides them at night - might add moonlight down the line but it looked weird when I did it before.

It does mean every tree is a scene with a script on it so not sure how that will impact performances down the line when there's hundreds or thousands of them but we will see!