![](\"https:\/\/www.insurancejournal.com\/app\/uploads\/2025\/12\/EU-flag-at-european-parliament-building-in-strasbourg-france-bloomberg-580x387.jpg\")
<\/p>\n![](\"https:\/\/www.insurancejournal.com\/app\/uploads\/2025\/12\/EU-flag-at-european-parliament-building-in-strasbourg-france-bloomberg-scaled.jpg\")
<\/div>\nThe European Union\u2019s ESG framework \u2014 a shadow of its former self after a year of deep cuts \u2014 is drawing renewed threats from the US.<\/p>\n
At issue is the so-called extraterritoriality of the Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive. The EU just struck a deal to exempt more than 80% of companies once in scope. But it\u2019s also agreed that the rules will continue to apply to large foreign firms doing business in the bloc.<\/p>\n
The US has made its displeasure clear. President Donald Trump\u2019s top trade negotiator, Jamieson Greer, characterizes the EU\u2019s ESG deal as inadequate. He also says the trans-Atlantic tariff agreement struck this year, which includes assurances from the EU that its ESG regulations won\u2019t impede trade, would be at stake if more concessions aren\u2019t forthcoming.<\/p>\n
Read more:<\/strong> Europe Agrees to Drastic ESG Cuts After US Pressure Intensifies<\/a><\/p>\n \u201cThey have to deliver on this,\u201d Greer said during a recent Senate hearing<\/a>. \u201cThe reality is, if the Europeans don\u2019t deliver on what they\u2019ve committed, they won\u2019t receive the benefit of the tariff relief they\u2019ve been granted.\u201d<\/p>\n The threats add to tensions between Washington and Brussels over issues spanning tech regulations to defense spending. When it comes to environmental, social and governance standards, the Trump administration has made no secret of its disdain, with key planks such as net zero goals \u201cbeing dismissed as \u201cterrible\u201d policy<\/a> by US Energy Secretary Chris Wright.<\/p>\n EU lawmakers interviewed by Bloomberg say there\u2019s no real leeway in the bloc\u2019s overhauled ESG framework to give the US what it wants.<\/p>\n \u201cThis outcome was politically unavoidable,\u201d said Jorgen Warborn, a lawmaker from the center-right European People\u2019s Party who oversaw talks to cut back CSRD and CSDDD in the EU Parliament.<\/p>\n \u201cOptions such as repealing the directive entirely or limiting it only to EU-based companies were never viable \u2014 both to preserve a level playing field and to secure a parliamentary majority,\u201d Warborn told Bloomberg.<\/p>\n CSDDD, which puts companies at risk of significant financial penalties if they fail to monitor value chains for environmental and human rights violations, \u201cis, by its nature, an extraterritorial instrument,\u201d he said. So its \u201coverall reach remains\u201d intact.<\/p>\n Proponents of ESG warn that failure to require companies operating in the EU to comply with the bloc\u2019s sustainability rules would have serious consequences, not least because investors wouldn\u2019t know how to assess where to place their capital.<\/p>\n For now, however, there\u2019s little evidence that investors are deterred by the risk that US companies might lag behind their European peers on ESG disclosures and due diligence.<\/p>\n Europe-domiciled funds holding US equities drew $56 billion in net new money in the 12 months through October, according to data for large and small-cap strategies compiled by Morningstar Direct. That\u2019s about the same as went into Europe-domiciled funds holding European equities. US-domiciled funds holding US equities, meanwhile, drew $39 billion in the period, which is more than three times the amount that flowed into US funds holding European equities, the Morningstar data show.<\/p>\n A spokesperson for the European Commission said the bloc\u2019s rules ensure all companies operate on a level playing field, adding that the EU will enforce the rules fairly and without discrimination.<\/p>\n At the same time, engagement with the US will continue as Europe implements the EU-US joint trade agreement, the commission spokesperson also said, in comments sent by email.<\/p>\n The EU and US agreed in July<\/a> to limit tariffs on most EU exports to 15% in a deal that included a commitment<\/a> from the EU to ensure CSDDD and CSRD don\u2019t get in the way of trade. Since then, EU lawmakers and member states have resolved some specific US concerns, including axing mandatory climate transition plan requirements.<\/p>\n Overall, though, the legislation \u201csafeguarded\u201d the core purpose of Europe\u2019s ESG regulations, said Pascal Canfin, a senior lawmaker negotiating for the EU\u2019s centrist Renew Party.<\/p>\n \u201cThe proof is that the Trump administration continues to oppose these laws,\u201d Canfin said<\/a> after the Dec. 16 vote. Companies such as Exxon Mobil Corp. \u201ccould face fines of up to almost $10 billion\u201d if they don\u2019t comply with CSDDD, he added.<\/p>\n US lawmakers have made clear they intend to push back hard. In his comments to the Senate appropriations committee, Greer was responding to a question from Republican Senator Bill Hagerty, who earlier this year said he would use \u201cevery tool<\/a>\u201d to block CSDDD, and introduced the Prevent Regulatory Overreach from Turning Essential Companies into Targets (PROTECT USA) Act of 2025.<\/p>\n \u201cThis is extremely egregious, this attempt to overreach as they have,\u201d Hagerty said at the Dec. 9 hearing, noting that both chambers of Congress have introduced legislation to block CSDDD. \u201cLawmakers remain very aggressively focused on maintaining United States sovereignty.\u201d<\/p>\n Commerce Secretary Howard Lutnick has also warned that he\u2019s ready to explore the use of \u201ctrade tools\u201d to retaliate against EU ESG rules.<\/p>\n EU lawmakers argue that the issue of extraterritoriality should be less of a concern now that the bloc\u2019s ESG rules have been cut back so drastically. The changes to CSRD and CSDDD \u201csubstantially reduce the burden while keeping the rules workable for European companies and for non-EU companies operating in the EU market,\u201d Warborn said.<\/p>\n An Exxon spokesperson said that while \u201cit\u2019s true that the EU agreed to remove some of the most irrational and harmful parts of CSDDD,\u201d the bloc hasn\u2019t gone \u201cnearly far enough.\u201d<\/p>\n \u201cThe ability of Brussels to regulate a US company\u2019s operations anywhere in the world remains, and this is completely unacceptable,\u201d the spokesperson said. \u201cThe Trump administration has made clear this is a non-starter for trade talks and we look forward to a common-sense resolution in the near future.\u201d<\/p>\n Photograph: The European Union (EU) flag at the European Parliament\u2019s Louise Weiss building in Strasbourg, France. Photo credit: Stefan Wermuth\/Bloomberg<\/em><\/p>\n Topics<\/span> USA<\/a> Europe<\/a> <\/p>\n<\/p><\/div>\n Was this article valuable?<\/p>\n<\/p><\/div>\n