Economy and Society: March 11, 2025
In this week’s edition of Economy and Society:
- Trump administration rejects UN climate goals
- European ESG funds invest in defense sector
- European pensions to review American managers
- State Street removes diversity goals
- American businesses oppose European ESG regulations
In Washington, D.C., and around the world
Trump administration rejects UN climate goals
What’s the story?
The Trump administration announced last week that it opposed the United Nations (UN) Sustainable Development Goals.
Why does it matter?
The UN’s Sustainable Development Goals were unanimously adopted in 2015 and are a key part of the body’s plans for global sustainability and Net Zero. The UN has been one of the driving forces behind ESG since the release of its Principles for Responsible Investment in 2005. The Trump administration’s rejection of the goals reduces the agenda’s global support.
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According to ESG Today:
The announcement was made by Counselor for Economic and Social Affairs (ECOSOC) at the U.S. Mission to the UN Edward Heartney at the General Assembly, prior to a vote on “creating an International Day of Peaceful Coexistence,” which included a reaffirmation of the 2030 Agenda for Sustainable Development.
In his remarks to the UN General Assembly, Heartney said that “Agenda 2030 and the SDGs advance a program of soft global governance that is inconsistent with U.S. sovereignty and adverse to the rights and interests of Americans,” adding that the new U.S. administration has “set a clear and overdue course correction on “gender” and climate ideology,” which he said “pervade the SDGs.”
The announcement forms part of a broader retreat by the Trump administration from international climate and sustainability initiatives, including removing the U.S. from key climate financing endeavours, and exiting the Paris Agreement in one of President Trump’s first executive orders after his inauguration in January.
European ESG funds invest in defense sector
What’s the story?
European ESG funds have boosted their investments in defense stocks, rejecting definitions that categorize the sector as incompatible with ESG.
Why does it matter?
Historically, ESG supporters have disagreed over whether defense stocks were compatible with their investment strategies. ESG investments in European defense companies rose between 2022 and 2024 during the war between Russia and Ukraine. The recent disagreement between President Donald Trump (R) and Ukrainian President Volodymyr Zelensky over American support for the Ukrainian war effort has accelerated the shift in favor of the sector.
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According to The Financial Times:
Friday’s blistering spat in the White House produced one winner. On Monday morning, European defence stocks including Germany’s Rheinmetall, France’s Thales and BAE Systems shot through the roof.
Expectations of government spending have pumped up prices. But war’s rebranding — think national security, supporting downtrodden allies and resilience — has been paying dividends for a while. Ethical investors are slowly starting to shed their squeamishness about the sector: the 1,856 European ESG funds with no exposure to the sector at end-2023 had been whittled down to 1,614 a year later.
Indeed, holdings of defence stocks by environmental, social and governance-focused funds had swollen to €8bn by the last quarter of 2024, up from €2.7bn in the first quarter of 2022. That’s partly a factor of the sector’s massive outperformance. Stocks in Europe’s aerospace and defence sector have risen 2.5 times since Russia invaded Ukraine in 2022, multiples of the benchmark gains.
Also, according to Bloomberg:
France is considering revamping hurdles banks face when lending to the defense sector, after the financial services industry emerged as an obstacle to Europe’s efforts to rapidly boost its military capabilities.
Current regulation designed to divert lending away from companies seen as problematic under environmental, social and governance (ESG) aspects makes it hard for banks to use their deposits for loaning money to arms manufacturers, France Budget Minister Amélie de Montchalin said Sunday in a TV interview. …
The comments highlight how Europe’s politicians, defense industry executives and senior bankers alike are calling for an urgent revamp of regulations and internal processes to make it easier for banks to quickly channel funds into arms manufacturers and military contractors. That’s become necessary after the US under President Donald Trump has signaled a declining willingness to defend Europe against potential aggressors.
European pensions to review American managers
What’s the story?
Additional European pension funds—including the Dutch PME—have announced plans to review their relationships with U.S. asset managers based on ESG considerations.
Why does it matter?
The announcements follow a decision by the People’s Pension—a British pension system—two weeks ago to change asset managers and pull £28 billion from State Street Global Advisors. The decisions may signal a trend of European institutional investors leaving asset managers over reduced ESG support in America.
What’s the background?
The divergence between Europe and the U.S. on ESG has grown over the last few years. American companies have moved away from the strategy as Republican public officials have opposed such considerations, while European managers and funds have typically favored ESG.
See here for more on the People’s Pension’s break with State Street.
Read more:
According to Bloomberg:
Efforts by US asset managers to try to adapt their business to the political reality at home are now alienating some of their clients in Europe.
State Street Global Advisors has already lost mandates with pension funds in the UK and Scandinavia. And more Europe-based institutional investors, including PME in the Netherlands, are currently reviewing their relationships with US managers. The trigger, they say, is a trend on the other side of the Atlantic to downplay climate risks.
“We have relatively high standards with regard to sustainability and responsibility in our investing,” said Anders Schelde, the chief investment officer of Danish pension fund AkademikerPension. He says he’s recently informed State Street that he’s pulling a mandate worth 3.3 billion kroner ($480 million).
On Wall Street and in the private sector
State Street removes diversity goals
What’s the story?
State Street removed corporate board diversity requirements from its 2025 proxy voting guidelines in a Feb. 28 update.
Why does it matter?
State Street is the third Big Three passive asset manager (following BlackRock and Vanguard) to scale back diversity, equity, and inclusion (DEI) voting policies this year. DEI is part of the social component of ESG.
What’s the background?
See here for more on Vanguard’s DEI changes.
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According to Bloomberg:
Last year, State Street Global Advisors said it expected corporate boards to be comprised of at least 30% women or it may vote against the head of the companies’ nominating committees.
That policy no longer exists in the money manager’s 2025 guidelines for shareholder voting and corporate discussions, according to an update released Friday. The company manages $4.7 trillion. …
The changes at State Street are salient given that the asset manager launched the “Fearless Girl” campaign in 2017, prompting large investment firms to vote against directors at companies that lacked women on their boards. State Street unveiled the Fearless Girl statue in New York’s financial district in lower Manhattan in the wake of the #MeToo movement.
In the spotlight
American businesses oppose European ESG regulations
What’s the story?
The American Chamber of Congress to the European Union (AmCham EU) argued against the European Union’s (EU) ESG policies and its proposed revisions to its reporting regulations. The chamber said the amended ESG requirements would still hurt American companies.
Why does it matter?
The AmCham EU’s opposition is part of a larger pattern of complaints about European regulators potentially influencing the behaviors of American companies. Republicans in Congress and the Department of Commerce have said the U.S. may respond with economic restrictions against perceived overregulation.
What’s the background?
See here for more on the EU’s regulatory reform efforts.
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According to Bloomberg:
The American Chamber of Commerce to the European Union (AmCham EU) says proposed revisions to the bloc’s environmental, social and governance rules don’t adequately protect US interests. The complaint is part of a growing US response to Europe’s ESG framework. Republican lawmakers call the rules “hostile” and warn that America’s jurisdictional sovereignty is at stake, while Commerce Secretary Howard Lutnick has said he’s willing to consider “trade tools” to retaliate.
The European Commission proposed changes last week that would rein in the scope of two major ESG laws: the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. However, big international companies with business in the EU would still have to comply.
The upshot is that non-EU companies risk being ensnared by the bloc’s ESG rules, even for products that aren’t sold in the EU, said Kim Watts, senior policy manager for AmCham EU, whose members include Ford Motor Co., Exxon Mobil Corp. and Amazon.com Inc.
