Europe's resilient finance sector amid US ESG backlash

In Europe, a consistent demand for environLmentally and socially responsible investments, coupled with comprehensive regulations, is bolstering the resilience of the finance industry against political pressures.

Meanwhile, in the United States, conservative politicians have effectively stifled the marketing of environmental, social, and corporate governance (ESG) products, weakened regulations promoting ESG disclosures, and discouraged financial institutions from collaborating to reduce 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.