In this week’s edition of Economy and Society:
- Democratic state officials advocate for ESG
- European Commission proposes ESG reporting rollback
- European banks push back against ESG rollback
- UK pension fund leaves State Street over ESG concerns
- American firms continue their retreat from ESG
In the states
Democratic state officials advocate for ESG
What’s the story?
State elected officials signaled their willingness to fight for ESG in pension and retirement plans during a state pension webinar on Feb. 25, 2025.
Why does it matter?
During the Biden presidency, Republican state officials took action opposing and restricting ESG. With President Trump back in office, Democratic state officials are advocating for ESG, arguing that it is a key tool for assessing long-term investments.
What’s the background?
See here to read last week’s story about seventeen Democratic state financial officers’ pro-ESG letter to the SEC and DOL.
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According to Institutional Investor:
More fiduciaries, state leaders, and labor advocates are pushing back, arguing that these efforts prioritize short-term gains for fossil fuel companies over the long-term financial security of retirees and workers. During a February 25 webinar hosted by Americans for Financial Reform titled State Pension Power: How Policymakers Are Deploying It to Grow a Strong Economy, Minnesota Attorney General Keith Ellison criticized the anti-ESG movement as “coordinated bullying,” arguing that Congress has no place to tell a teacher who’s been teaching kindergarten for 30 years what she should do with her money.
“It’s our money, it’s the money of the people of our state,” Ellison said, adding he welcomes arguing the state’s case for ESG, since they’ve “got great answers.” As he explained: “The much harder case is anti-ESG, because the short-term share price is the only thing you can consider” under that rubric, “and any sophisticated investor knows that’s not the case.”
Ellison, who is currently suing Exxon Mobil for alleged climate-related deception, noted that over 80 percent of institutional investors view ESG strategies as critical to managing systemic risks like climate disasters and corporate misconduct. It’s not just money managers — individual investors also understand the value of ethical investing: a recent Moneywise survey found that two-thirds of Americans factor ethics into their investment decisions.
In Europe
European Commission proposes ESG reporting rollback
What’s the story?
The European Commission unveiled a proposal to scale back ESG reporting requirements under the Corporate Sustainability Reporting Directive (CSRD).
Why does it matter?
Germany and France urged the Commission to ease CSRD requirements, arguing that they undermine EU companies’ competitiveness, especially as the U.S. Securities and Exchange Commission (SEC) has paused its reporting rules. The proposal would exempt up to 80% of companies from CSRD compliance.
What’s the background?
See the November 2024 edition of Economy and Society for more on the efforts to convince the EC to roll back CSRD requirements.
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According to ESG Today:
Many of the most significant measures proposed are targeted at smaller businesses, in alignment with the recent release by the Commission of its “Competitiveness Compass” aimed at boosting Europe’s productivity and global competitiveness, which included goals to reduce reporting burdens by at least 25% for all companies, and 35% for SMEs….
The CSRD, based on new underlying European Sustainability Reporting Standards (ESRS), introduces detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk. The directive took effect from the beginning of 2024 for large public-interest companies with over 500 employees, with the first reports being issued in 2025, which were to be followed by companies with more than 250 employees or €50 million in revenue in the following year, and listed SMEs one year later.
Under the new proposal, however, only companies with more than 1,000 employees and either revenue greater than €50 million net turnover or a balance sheet above €25 million would be included in the scope of the CSRD, removing an estimated 80% of companies from the regulation’s sustainability reporting requirements.
European banks argue against ESG reporting rollback
What’s the story?
The European Banking Federation (EBF) argued against the European Commission’s plan to scale back ESG reporting, claiming that the changes will make it harder to evaluate credit risk.
Why does it matter?
Banks and financial groups argue that reducing ESG reporting obligations will not eliminate the need for companies to provide sustainability data. The EBF said that if official requirements ease, banks will still require detailed ESG disclosures for risk assessment.
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According to Bloomberg:
Banks in Europe have been waiting for years for their clients to start providing hundreds of data points under new ESG reporting rules. But as the European Union now looks set to dramatically water down planned regulations, banks fear they’ll be left without the necessary tools to conduct proper credit risk analyses, according to the EBF, whose members include BNP Paribas SA, UniCredit SpA and Deutsche Bank AG.
The EBF’s warning comes as the European Commission unveils its long-awaited omnibus plan. The EU’s executive arm is proposing that the Corporate Sustainability Reporting Directive be scaled back so that around 80% of the companies originally intended to be in scope will no longer be required to comply, it said on Wednesday….
Denisa Avermaete, the EBF’s senior policy adviser for sustainable finance, says that for banks, fewer reporting requirements for their clients “will introduce complexity and a need for bilateral engagement, as banks will always need certain key data that are necessary for sound business and risk management,” she said in an interview.
UK pension fund leaves State Street over ESG concerns
What’s the story?
The People’s Pension, a major, multi-employer pension plan in the UK, recently pulled £28 billion from State Street after reviewing its responsible investment policy. The People’s Pension transferred the contracts to Amundi and Invesco citing ESG priorities.
Why does it matter?
The move highlights the growing divide between U.S. and European approaches to ESG investing. While the European Commission is easing regulations to enhance competitiveness, European and UK investors remain focused on sustainability. In contrast, U.S. asset managers, including State Street, have scaled back ESG commitments amid political and market pressures.
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According to The Financial Times:
After a review of its responsible investment policy, The People’s Pension decided to hand a £20bn developed market equity mandate to Amundi and £8bn of fixed-income assets to Invesco.
The scheme, one of the UK’s largest multi-employer defined contribution schemes, said the two companies would run the funds “with a focus on responsible investment”. It retained just £5bn with State Street, which had previously managed all of its assets.
The move comes amid rising tensions between long-term investors and US asset managers, which have downgraded so-called environmental, social and governance investing after Donald Trump’s election. Money managers have also been targeted by rightwing campaigns opposed to corporate action to limit global warming and promote diversity.
On Wall Street and in the private sector
American firms continue their retreat from ESG
What’s the story?
Two major U.S. financial firms have announced rollbacks of ESG-related initiatives. BlackRock ended its internal diversity goals, while Wells Fargo abandoned its goal of achieving a net-zero portfolio by 2050.
Why does it matter?
Once leading advocates of ESG, BlackRock and Wells Fargo are now retreating from key sustainability and diversity commitments. Their decisions reflect growing challenges for American financial firms in maintaining ESG initiatives amid shifting political and market pressures.
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According to Bloomberg:
BlackRock Inc. scrapped its “aspirational workforce representation” objectives, reversing course on earlier goals after President Donald Trump moved to end diversity, equity and inclusion, or DEI, practices.
The world’s largest asset manager will abandon specific targets to increase the representation of employees in its workforce and will no longer require hiring managers to interview a diverse slate of job candidates, the company’s senior executives said in a Friday memo.
BlackRock, which has roughly 21,000 employees, will also combine staff who were on teams devoted to DEI and talent management into one “Talent and Culture” group.
According to Reuters:
Wells Fargo is scrapping its goal of achieving net-zero emissions across its financed portfolio by 2050 as banks rethink their sustainable lending activities.
The goals had relied on many factors “outside our control” such as public policy, consumer behavior and technological advancements that would help clients transition to greener business practices, the bank said on Friday.
“Many of the conditions necessary to facilitate our clients’ transitions have not occurred,” it added.