INVESTING IN OUR FUTURE: ESG Investing in the EU By India Byrne
01 BACKGROUND AND KEY TERMS
Why Europe?
Why Now?
EU is market leader in ESG investing
Recent EU regulatory changes create compelling case study for US
ESG ETF Assets ($bn) 250 200 150 100 50 0
Europe
US
Greenwashing • Inaccurately portraying environmental or social credentials to entice ESG-conscious investors ETF (Exchange Traded Fund) • Investment fund holding many underlying assets, traded like conventional stock ESMA (European Securities and Markets Authority) • Independent EU authority regulating securities market (SEC counterpart)
Canada
China
In Europe. ESG ETFs comprise of 16% of listed ETFs compared to less than 2% in US
02 TIMELINE A BALANCING ACT
1993
2008
2023
2024
First ETF launched in the US
First ESG ETF launched in Europe
ESMA disclosure requirements begin
SEC releases new climate disclosure policies
2006
2018
2024
2025
ESG added to UN Principles for Responsible Investing Report
ESG financial regulation proposed by EU
ESMA strengthens regulation on ESG ratings
SEC effectively ends climate disclosure rules
Reporting Burden
Investors’ priorities
Fiduciary Responsibility
Long-term Investment
Risk of Greenwashing
Stakeholder Interests
03 INVESTOR SENTIMENT
88%
Consider carbon footprint of portfolio
84%
anticipate ESG AUM to increase in next 2 years
04 CROSS CULTURAL INSIGHTS Why has ESG investment flourished in Europe? Motivations
Information Availability
Risk Assessment
• EU market motivated by more than pure financial return
• EU’s regulation creates available ESG information for investors
• European understanding of climate risk as business risk that investors must consider
$35-50 Expected value of trillion ESG assets by 2030
05 NEXT STEPS Transparency
• Allows for more accurate decision making
Individualism
• Consumers consider their motivations for investment
How to offer effective ESG investments that protects investors from greenwashing or suboptimal financial outcomes?
Sources: https://docs.google.com/document/d/1ylPSH6Qf-ZclTue3IIO__KLj9jIJh9DjACYbUQAvgK0/edit?usp=sharing