Europe's Finance Industry Stands Firm on Green Agendas Despite Political Pressures

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Europe,Finance Industry,Green Agendas

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 U.S. peers to backtrack on their green agendas.

In the United States, conservative politicians have been successful in tamping down environmental, social and corporate governance product marketing, in diluting regulations that promote ESG disclosures, and in discouraging financial firms from co-ordinating on curbing greenhouse gas emissions.

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. Across Europe’s financial services sector there are 20 rules and 25 voluntary guidelines pertaining to ESG, compared to just two rules and five voluntary guidelines in the United States, according to ESG Book.

This is important because most of their members are European. One of the GFANZ coalitions for example, the Net-Zero Banking Alliance, has 71 European members but only nine from the U.S. The Net-Zero Insurance Alliance, has eight European firms as members but none from the United States.ESG has a solid framework of regulation in Europe, including the European Union’s Taxonomy, which defines climate-friendly investments.

There has been a dent in European investor demand for ESG but it has been small. New ESG fund launches fell 10% in Europe in 2023, but the slide in the United States was even more pronounced, down 75%, according to Morningstar.

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