The role of institutional investors in ESG: Diverging trends in U.S. and European corporate governance landscapes

This article explores the divergent regulatory, political, and societal trends in Europe and the U.S. regarding the environmental, social, and governance (ESG) rights and duties of institutional investors. While the SEC in the U.S. has
demonstrated a greater focus on stricter ESG disclosure rules, political debates persist, reducing ESG discussions to mere ideology. In contrast, Europe exhibits a significant surge in sustainable finance and corporate governance, emphasizing
transparency obligations outlined in regulatory initiatives like the SFDR. Examining the tools available to institutional investors, this article delves into the disparities in duties imposed on them in the U.S. and Europe and scrutinizes the voice tools they employ for promoting ESG goals as active owners, with a particular focus on shareholder sustainability proposals. In conclusion, this article highlights the need for a more harmonized and effective approach to sustainable investment. It advocates aligning European aspirations for sustainable capital allocation in the Member States with increased emphasis on sustainability voice, potentially through a forthcoming new Shareholder Rights Directive (SRD III).