US ESG backslide risks European complications
January 21, 2025
…People familiar with the situation said the rapid change in asset managers’ policies and public stances in response to political changes in the US was similar to the changes made by firms at the start of the decade as the EU imposed its ESG rulebook.
“A lot of firms really designed their products and policies around the European ruleset […] that was not great for their brand in the US,” said Michael Pedroni, chief executive of Highland Global Advisors, a regulatory consultancy.
Pedroni, who was previously head of ICI Global, the asset management trade association, said companies making changes as a result of the political shift in the US should still consider “how that impacts them in Europe”, where regulations and client expectations on ESG differ substantially….
…Pedroni added that the regulatory fragmentation between the EU and the US on ESG was “going to happen again” on crypto assets and artificial intelligence.
The EU’s Market in Crypto Assets regulation came fully into force at the end of last year, while the European Commission is exploring whether specific AI rules are required for financial services as the EU AI Act begins to apply from February 2.
Pedroni said these new regimes would complicate asset managers’ cross-border operations as the Trump administration was expected to take a more lenient approach to the regulation of AI and digital assets.
“What the US carves out is going to be very different from the European rules,” he said.