Steady investor demand in Europe for environmental and socially responsible investments and wide-ranging regulation are helping Europe’s finance industry withstand political pressures that have pushed some US peers to backtrack on their green agendas.
In the United States, conservative politicians have been successful in tamping down environmental, social and corporate governance (ESG) product marketing, in diluting regulations that promote ESG disclosures, and in discouraging financial firms from co-ordinating on curbing greenhouse gas emissions.
But Europe has so far largely resisted the anti-ESG tide, due to greater political and consumer support for greener products and a swathe of regulations that underpin the operations of the finance industry and companies in the real economy.
Some politicians have been active in Europe to soften environmental rules and legislation, highlighting the costs to consumers of going green.
This has led to the watering down of some new regulations promoting ESG in Europe. But fund flow data shows that Europe overall remains an ESG stalwart.
European investors have seven times as much capital in sustainable fund assets than US investors, following five consecutive quarters of US outflows, based on Morningstar data.
“We’ve seen faster regulations lead to faster conformity, which has shielded European financial institutions from ESG headwinds,” said Nathan Abela, head of research at sustainability data tracker ESG Book.