Is there a growing divide in Environmental, Social, and Governance (ESG) approaches between the US and Europe?  Holly Stebbing and Debra Gatison Hatter considered this precise issue yesterday at Gastech 2024.

Europe, along with the UK, has taken an aggressive regulatory stance on ESG, with stringent frameworks aimed at curbing greenwashing and driving sustainable investment. The EU’s Sustainable Finance Disclosure Regulation (SFDR) and the UK’s mandatory climate-related disclosures lead the way in holding companies accountable.

In contrast, the US has been slower in adopting ESG regulations. However, the Inflation Reduction Act (IRA) has kick-started a green transition, offering significant incentives for clean energy investment. While the US is catching up, its approach is more market-driven and less regulated, avoiding some of the early pitfalls seen in Europe's regulatory rush.  It is yet to be seen whether the IRA will the US’s green transition and attract global investment.

The divide also extends to the politicization of ESG, with Europe pushing for more consistent standards, while in the US, ESG is becoming a politically charged issue, affecting corporate strategies and investment.

While Europe may be seen to lead in regulation, the US is closing the gap through fiscal policies and market incentives, creating distinct paths for ESG growth across the Atlantic.