Deepening rift on climate change strategies emerges between US and European officials
In a recent report, it has been revealed that European asset managers are outperforming their US counterparts in the field of responsible investment, particularly in areas related to climate resilience and biodiversity. This gap in performance is largely attributed to regulatory and political differences between the two regions.
Almost half of the European asset managers assessed received A to C grades, with Dutch firm Robeco topping the table for the third consecutive time. In contrast, just one Asian or North American firm received a grade above D. This divergence appears linked to stronger regulatory frameworks in Europe.
The European Union has ambitious and comprehensive regulations such as the Sustainable Finance Disclosure Regulation (SFDR) and evolving taxonomy frameworks that set stringent ESG disclosure and investment standards. Enforcement authorities are actively scrutinizing asset managers, requiring clear sustainability risk integration and compliance, with supervisory actions and potential penalties for breaches. The EU is refining SFDR and taxonomy regulations to raise the bar further and simplify sustainable fund categorization.
On the other hand, the US lacks comparable binding regulatory frameworks. The Securities and Exchange Commission’s (SEC) climate disclosure rule faced intense legal challenges and by early 2025 the SEC paused its defense of the rule amid court pushback, causing regulatory momentum to stall. Additionally, US states often diverge in ESG policies, creating a fragmented landscape.
The EU’s collective policy drive links financial markets to legally binding climate and biodiversity goals, creating a coordinated environment where asset managers are pressured to align investments with these goals. There is growing collaboration among financial institutions, corporations, and regulators, and regulatory clarity supports investor action. In contrast, the US market operates under a more market-driven fiduciary freedom approach, with political cycles influencing ESG integration but without a unified regulatory push enforcing climate or biodiversity targets. Investors maintain discretion on addressing climate risk, resulting in varied engagement on responsible investment.
The report finds a wide gap between the rhetoric and action of asset managers on climate change and nature loss. Many managers have adopted a more conservative voting stance and scaled back their backing for climate resolutions, as shown in Share Action's latest voting matters report. European managers significantly outperform their North American and Asian peers across all environmental themes, including climate change and biodiversity.
The world's largest asset managers, BlackRock, Vanguard, State Street, and Fidelity, earned failing grades and collectively met just 4 out of 80 possible key standards across climate, biodiversity, and social issues. The overall pace of change is stagnating, with little progress made since 2023, and in some cases, there are signs of regression.
Despite this, there are signs of progress. Some US managers, such as BlackRock and State Street, have launched proxy voting services for investors in pooled funds. There is growing pressure from asset owners on managers to improve stewardship alignment, as evidenced by the New York City comptroller's warning to managers last month to step up their climate ambitions or risk divestment.
The report measures the 76 largest managers against 20 standards of responsible investment, including governance, stewardship, climate, biodiversity, and social impacts. Biodiversity is the weakest area overall, with more than half of asset managers, especially those from the US and Asia, failing to meet even a single standard.
However, there are positive examples of responsible investment. SEB Asset Management, based in Sweden, has set timebound, absolute emissions reduction targets covering more than 50% of its assets, one of only four firms globally to meet this benchmark. Aviva Investors, Robeco, and Legal & General were singled out for encouraging companies to disclose location-level biodiversity risks and impacts.
As the world continues to grapple with the challenges of climate change and biodiversity loss, it is clear that responsible investment is crucial. The report, titled Point of No Returns 2025, indicates that European managers are making moderate progress on responsible investment, while US managers are significantly lagging. It is hoped that the US will follow the lead of Europe in strengthening its regulatory frameworks and encouraging responsible investment practices.
[1] https://www.esgclarity.com/news/european-asset-managers-lead-the-way-in-responsible-investment-leaving-us-counterparts-behind [2] https://www.ft.com/content/2b345060-2e57-490f-8a18-48f773a3c83f [3] https://www.ft.com/content/17f8e93c-5072-4e8c-b968-76901a39273a [4] https://www.esgclarity.com/news/european-regulators-tighten-the-screws-on-esg-disclosure-and-sustainable-fund-categorization
- The success of European asset managers in responsible investment, particularly in areas related to climate resilience and biodiversity, can be attributed to strong regulatory frameworks such as the Sustainable Finance Disclosure Regulation (SFDR) and taxonomy frameworks, which set stringent ESG disclosure and investment standards.
- In contrast, the US market, which lacks binding regulatory frameworks and faces legal challenges in implementing climate disclosure rules, significantly lags behind Europe in responsible investment, with many US managers failing to meet even a single standard for biodiversity.