Europe Resists US-Driven Backlash Against ESG

The finance industry in Europe is withstanding pressures to backtrack on its environmental, social and governance (“ESG”) investments, with some help from regulations and steady investor demand. In the United States, GOP legislators have successfully diluted regulations that promote ESG, reduced ESG product marketing and discouraged financial companies from working with others to reduce greenhouse-gas emissions.

Thus far, Europe has resisted the anti-ESG movement due to consumer support for greener products and regulations supporting operations of companies in the economy, particularly in the finance industry. Some politicians have also helped ease environmental legislations and rules, with investors in Europe injecting even more capital into sustainable fund assets.

Nathan Abela, ESG Book head of research, stated that the faster implementation of regulation allowed for faster conformity. This, he noted, had shielded financial institutions in Europe from ESG headwinds. Across the financial services sector in Europe, there are 25 voluntary guidelines and 20 rules on ESG. This is in comparison to five voluntary guidelines and two rules in the financial services sector in the United States. Europe also has a lot more investor demand, driven by public pension funds.

A survey conducted last year by LSEG found that more than 70% of pensions schemes in Europe said climate change was a priority for investments. This is in comparison to just over 50% of these saving schemes in America.

The commitment of financial companies in Europe to ESG may prove to be critical for the survival of global climate alliances. Initiatives such as Climate Action 100+ and Glasgow Financial Alliance for Net Zero have seen companies in America defect. This is important as most members are companies in Europe.

For instance, one of Glasgow Financial Alliance for Net Zero coalitions, the Net-Zero Banking Alliance, has more than 70 members from Europe but only 9 from America. The Net-Zero Insurance Alliance also has no members from the U.S. but 8 from Europe.

It also helps that individuals in Europe are united in their support for climate action. One study from Pew Research Center found that Europeans of different political standing still considered climate change to be a major threat. The study observed that in America, however, there was a huge divide on climate views between individuals on the left and right of the political spectrum.

It should be noted that despite these positives, Europe hasn’t been entirely immune to attacks on environmental, social and governance regulations. For instance, investor demand for ESG in Europe dipped last year by 10%.

Despite having considerable opposition to ESG, the U.S. is also home to some companies that are leading the way in making sustainability a hallmark of everything they do. Coyuchi Inc. is an example of companies that are walking the talk of ESG as a cornerstone of their business operations.

NOTE TO INVESTORS: The latest news and updates relating to Coyuchi Inc. are available in the company’s newsroom at https://ibn.fm/COYU

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