(Bloomberg) — The US stock market has emerged as the most exposed to divestment after the European Union unveiled new rules limiting how freely asset managers can attach ESG labels to their funds.
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The European Securities and Markets Authority said last month that investment funds with ESG labels or equivalent terms will need to have at least 80% of their assets under management in something that’s actually related to environmental, social or governance goals. They also can’t invest in certain assets such as the largest oil and gas producers.
For fund managers overweight US stocks, that requirement looks set to have outsize implications, according to an analysis by Morningstar Inc.
“The US could see the largest impact in terms of stock market value,” Morningstar said in a report.
Some 42% of the potential stock divestments that may be triggered by ESMA’s new rule will hit the US, measured in terms of…
