In this week’s edition of Economy and Society:
- US-EU trade agreement has ESG implications
- ESG critic sworn in as U.S. ambassador to EU
- European ESG funds build stakes in weapons companies
- Democratic state financial officers send letter to asset managers
- No states acted on ESG legislation last week
- Foreign share of U.S. ESG bond market nears 90%
Around the world
US-EU trade agreement has ESG implications
What’s the story?
The United States and the European Union last week released a joint statement announcing they reached an agreement on trade and tariffs. Details have yet to be finalized, but the EU said it would make sure its ESG regulations “do not pose undue restrictions on transatlantic trade.”
Why does it matter?
According to investment law firm Ropes & Gray, four of the 19 key agreement provisions “relate specifically to EU ESG/CSR-related compliance requirements.” These provisions address the EU’s:
- deforestation regulation,
- forced labor regulation,
- Carbon Border Adjustment Mechanism,
- Corporate Sustainability Reporting Directive, and
- Corporate Sustainability Due Diligence Directive.
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According to Sustainable Views:
The EU says it will ensure both frameworks “do not pose undue restrictions on transatlantic trade”. That could be read as minor tweaks — but it also could mean an essential carve-out for US companies.
The details are yet to be hashed out, but this is clearly a big win for the Trump administration….
On the CSDDD, the EU also says it will propose changes to the requirement for a civil liability regime to hold companies accountable. This was what really gave the directive teeth, taking it further than national-level supply chain rules. Without liability, some would argue there is little to no incentive to comply. That may be doubly true for companies that have the Trump administration batting for them.
ESG critic sworn in as U.S. ambassador to EU
What’s the story?
On Aug. 20, Andrew Puzder, the former CEO of CKE Restaurants, was sworn in as the United States Ambassador to the European Union.
Why does it matter?
Puzder is an ESG critic and wrote an anti-ESG book—A Tyranny for the Good of Its Victims—published in January 2025. Puzder has said ESG is “a very serious threat to our economic freedom and it’s a very serious threat to our personal liberty. It’s socialism in sheep’s clothing.”
The Trump administration announced Puzder as its EU nominee shortly after the book’s release.
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In a column published May 3, Puzder’s fellow ESG critic and author Stephen Soukup wrote:
As I noted in a recent review of Puzder’s new book, A Tyranny for the Good of Its Victims, he “has been involved in the fight against ESG since the very start….he has seen how the foundations of the ‘stakeholder’ ruse—which cynically pits a company’s shareholders against its employees, customers, and others—crumble in the face of simple, honest, basic information about its radical premises and practical incoherence.”
Puzder is now off to Brussels (also pending Senate confirmation), where he will confront a mob of economic illiterates who still believe firmly and passionately in the power of ESG to transform the world. More nefariously, the EU also believes that it can, through its “sustainability” regulations, control American companies, something about which the Trump administration has already expressed significant frustration. Unfortunately for the financial millenarians of Europe—but very fortunately for the rest of us—the EU is about to be challenged at a high, official level on the very premises of its 21st-century economic model. Andy Puzder will, all but certainly, make it clear that the Trump administration intends to intensify the differences between the United States and Europe on economic matters—ESG, business, and capital markets in particular.
European ESG funds build stakes in weapons companies
What’s the story?
European ESG funds have invested heavily in weapons and armaments companies in response to the Russian invasion of Ukraine, including sizable stakes in nuclear weapons manufacturers.
Why does it matter?
Opponents and supporters have argued ESG definitions are too inconsistent. The growth of European ESG fund investments in weapons companies—and nuclear weapons manufacturers in particular—since the Russia-Ukraine war began in 2022 illustrates how ESG definitions change over time and differ between investors.
Read more
According to Bloomberg:
Since Russia’s full-scale invasion of Ukraine in February 2022, the number of ESG equity funds exposed to the nuclear arms industry has soared more than 50% to over 2,000. Though the holdings represent just a fraction of the wider defense sector, the shift means that roughly half the ESG-registered equity funds in Europe are now allocating at least some capital to companies that manufacture, supply or transport nuclear arms, according to data compiled by Bloomberg. …
The development puts in the starkest possible terms the dramatic evolution of environmental, social and governance investing practices since the term was coined over two decades ago by a team backed by the United Nations. And as Europe’s tensions with Russia escalate, the idea of what ESG can represent has gone from wind farms to weapons of mass destruction with breathtaking ease….
With war raging in their backyard, Europe’s leaders have made it clear they don’t want any ESG qualms to get in the way of steering private capital into a military deterrent strong enough to resist Russia.
In the states
Democratic state financial officers send letter to asset managers
What’s the story?
Seventeen Democratic financial officers (16 state officers, plus New York City Comptroller Brad Lander) sent a letter to 18 of the largest asset management firms on Aug. 15. The officials asked the firms to confirm their commitment to considering climate and other ESG factors in their long-term return models.
Why does it matter?
The Democratic officials said their letter was a response to an anti-ESG letter, sent July 29, from Republican state financial officers (in conjunction with the State Financial Officers Foundation). The Democrats’ message said they “offer a fundamentally different vision of fiduciary responsibility than the one advanced in the July 2025 letter to you from signatories of the State Financial Officers Foundation (SFOF).”
What’s the background?
Click here for more on the July letter from Republican financial officers.
Read more
According to Bloomberg:
The request from more than a dozen state treasurers and comptrollers calls for investment firms to reject pressure from the Trump administration and GOP lawmakers, and instead commit to thorough evaluations of risks tied to global warming, supply chains and corporate governance.
The Republicans are misrepresenting “the true meaning of fiduciary duty” by requiring asset managers to take “a passive approach to oversight while ignoring the nature of long-term value creation in modern capital markets,” according to one of the Democrats’ letters sent to investment firms. “In contrast, we believe that fiduciary duty calls for active oversight, responsible governance and the full exercise of ownership rights on behalf of the workers and retirees we serve.”
The coordinated Democratic campaign comes more than three years after Republican politicians initiated their attacks against environmental, social and governance investing, calling it a threat to capitalism. The GOP has launched investigations, introduced more than a dozen anti-ESG bills across the US (many of which have failed) and gone as far as restricting some firms from doing business in their states.
No states acted on ESG legislation last week
No states took action on ESG-related bills last week (since Aug. 20). Click here to dive into Ballotpedia’s ESG legislation tracker.
On Wall Street and in the private sector
Foreign share of U.S. ESG bond market nears 90%
What’s the story?
Foreign companies have issued 89% of ESG corporate bonds sold in the U.S. so far this year. That’s up from about 30% in 2020, when American firms issued most ESG corporate bonds sold in the U.S.
Why does it matter?
The data suggests U.S. companies may be wary of issuing ESG-labeled debt out of concern that consumers and investors have grown skeptical of the term. Brian Popoola, an analyst with S&P, told Bloomberg many firms are greenhushing—pursuing sustainability efforts without branding them as ESG—to avoid political or reputational risks. That dynamic has left foreign companies dominating the U.S. ESG bond market.
Read more
According to Bloomberg:
Foreign firms account for 89% of green, social, sustainability and sustainability-linked corporate-securities sales in dollars this year, up from 76% through the first half of last year and just 30% in 2020, BloombergNEF data through the end of June shows.
Companies including Toyota Motor Corp., Deutsche Bank and the Industrial & Commercial Bank of China Ltd. have tapped the US market with labeled debt, while many US banks and utility companies that once sold such bonds have so far opted not to. …
The shift is emblematic of a growing divergence between corporations in the US and the rest of the world when it comes to environmental, social and governance strategies. American companies under President Donald Trump sold $5.36 billion of the bonds in dollars in the first half of the year, down from $14.4 billion at the same time last year.