In this week’s edition of Economy and Society:
- American companies call for delays in European ESG enforcement
- Commerce secretary joins opposition to EU rules
- ESG supporters argue in favor of EU regulations
- Norwegian sovereign wealth fund divests based on ESG
- Oklahoma launches effort to oppose corporate DEI
In Washington, D.C., and around the world
American companies call for delays in European ESG enforcement
What’s the story?
The American Chamber of Commerce to the European Union—a trade group representing companies including Ford, Exxon, and Amazon—argued Feb. 10 that the European Union (EU) should delay its ESG regulatory implementation.
Why does it matter?
The chamber argued the ESG rules hurt American companies. The statement joins a trend of opposition from European companies, which have argued ESG regulations harm their competitiveness.
What’s the background?
Click here for more on the EU’s ESG regulations and the recent plan to simplify them.
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The American Chamber of Commerce to the European Union, whose members include Ford Motor Co., Exxon Mobil Corp. and Amazon.com Inc., is calling on the EU to delay and even halt major planks of its environmental, social and governance rules, according to a statement on Monday. It also says companies should be free to ignore ESG regulations until a legislative review has been completed and legislation amended.
The demands add to pressure from Germany and France, the EU’s two biggest economies, to simplify ESG rules in the face of flagging competitiveness and economic decline. EU officials are due to propose changes to key regulations — the Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive and the Taxonomy Regulation — at the end of this month, as part of a so-called omnibus process. …
CSRD, which requires companies to provide hundreds of ESG data points, and CSDDD, which introduces legal liability if companies allow ESG violations in their supply chains, are now “a top concern for transatlantic businesses,” AmCham said. It points out that 84% of members that do business in the EU consider ESG rules “a primary barrier” to trade.
Commerce secretary joins opposition to EU rules
What’s the story?
U.S. Commerce Secretary Howard Lutnick also criticized the EU’s efforts to enforce corporate sustainability. He argued the ESG rules hurt American companies and said the Trump administration may consider trade policies to oppose the regulations.
Why does it matter?
Lutnick’s comments add to the opposition to Europe’s ESG approach discussed above.
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According to Forbes:
President Trump’s Commerce Secretary, Howard Lutnick, has already taken aim at the E.U.’s interference with American energy production. In comments submitted to the Senate Commerce Committee, Lutnick singled out the CSDDD as a serious threat to American industry and the American economy.
“The European Union’s Corporate Sustainability Due Diligence Directive (CS3D) that was recently adopted by the EU, will impose significant costs on thousands of U.S. companies doing business in Europe,” Lutnick writes, adding, “This comes at a time when U.S. exports of natural gas are keeping the heat on in Europe this winter because the regulatory structure there has caused companies to flee. Yet the EU is attempting to harm the competitive advantages of U.S. companies by forcing them to comply with CS3D.”
Lutnick also made it clear that the Commerce Department would not stand idly by, stating that the administration would “consider using all available trade tools at our disposal” to push back against the E.U.’s regulatory overreach and defend American competitiveness on the global stage. President Trump has also already signaled its readiness to escalate economic pressure, recently threatening new tariffs on European goods in response to its “unfair” treatment of American businesses.
ESG supporters argue in favor of EU regulations
What’s the story?
A group of pro-ESG initiatives representing nearly $7 trillion of assets—including the Institutional Investors Group on Climate Change (IIGCC), the European Sustainable Investment Forum (Eurosif), and the Principles for Responsible Investment (PRI)—are countering the EU’s ESG critics. The group argued any changes to requirements should be relatively minor and that a larger rollback could violate European law.
Why does it matter?
The calls from ESG supporters show that the debate over EU rules is not clean-cut. Regulators on the continent may upset parties on one or both sides of the issue as they seek to amend and implement its approach.
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According to Bloomberg:
A group of investors representing €6.6 trillion ($6.8 trillion) of assets is calling on European officials not to cave in to mounting pressure to scale back the bloc’s ESG regulations.
The planned reporting rules are essential to help asset managers and owners identify where to allocate funds, according to the group, which consists of the Institutional Investors Group on Climate Change (IIGCC), the European Sustainable Investment Forum (Eurosif) and the Principles for Responsible Investment (PRI).
Any adjustments should be limited to technical standards and guidance on implementation, the group said on Tuesday. The alternative, namely reopening European environmental, social and governance requirements “in their entirety, risks creating regulatory uncertainty and could ultimately jeopardize” Europe’s goal of living up to its Green Deal, which is enshrined in law, the joint statement said.
Norwegian sovereign wealth fund divests based on ESG
What’s the story?
Norges Bank Investment Management—the official name of the Norwegian sovereign wealth fund—continued its ESG investing strategy last year, divesting from companies based on sustainability assessments.
Why does it matter?
The NBIM invests the funds from the country’s oil and gas resources. Opponents of ESG investing have argued the fund’s criteria are hypocritical.
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According to Bloomberg:
Norway’s $1.8 trillion sovereign wealth fund divested from 49 companies last year based on sustainability assessments, down from 86 a year earlier, retaining its focus on ESG in the face of a widespread backlash against environmental, social and governance reporting. …
The fund, which invests Norway’s oil and gas riches, wants to have all the companies it invests in to achieve net zero emissions by 2050 at the latest. It engaged with over 500 companies on topics related to climate and nature last year, it said separately, seeking in particular to influence the biggest emitters in the portfolio through targeted dialogs. …
The report comes at a time when many business leaders and lawmakers in Europe are taking issue with ESG regulations due to concerns the requirements are preventing companies from competing freely with their peers in the US and Asia. They point to the bloc’s stagnating economy, and warn that competitiveness will slide further as President Donald Trump forces through a program of deregulation on the other side of the Atlantic.
In the states
Oklahoma launches effort to oppose corporate DEI
What’s the story?
Oklahoma Treasurer Todd Russ (R) announced plans to oppose corporate diversity, equity, and inclusion (DEI) programs through shareholder proposals using its $2 billion Tobacco Settlement Endowment Trust.
Why does it matter?
DEI is typically associated with the social component of ESG. Treasurer Russ has argued corporations should be politically neutral and avoid using corporate money for DEI and ESG goals.
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According to Bloomberg:
Oklahoma is poised to become the first Republican state to try to use its influence as an investor to end DEI in corporate America, targeting companies including Amazon.com Inc. and Alphabet Inc. in shareholder proxy proposals.
Using an increasingly popular tactic among conservative investors who are going after everything from Wall Street banks to health-care giants, Oklahoma Treasurer Todd Russ is planning to confront six companies that the state invests in through its $2 billion Tobacco Settlement Endowment Trust. The other companies are Netflix Inc., Lululemon Athletica Inc., GoDaddy Inc. and Yum! …
Although anti-DEI shareholder proposals have historically received only about 2% investor support, the move is designed to raise visibility and combat the power of progressive funds from California and New York, which for years have pushed businesses on everything from disclosing their greenhouse gas emissions to undergoing racial-equity audits.