Sustainability and ethics stand at a crossroads: will Europe keep leading the way?

Financial services are the backbone of economies across the world. The sector fuels growth, enables innovation and has a huge societal impact. Yet as the sector grows, so does the responsibility it has, including its commitment to sustainability, ethical leadership, and inclusive values. And in Europe, those responsibilities and values seem to be at a crossroads.

Recent research by campaign group ReCommon found that more than 2.7 billion tons of carbon emissions can now be attributed to the major banks from G7 countries. Remarkably, this figure surpasses the combined emissions of Germany, France, the UK, and Italy. These numbers are more than just alarming – they demand action. And in Europe, they hit at the heart of our identity.

The EU has a long history of leading the way on environmental, social and governance (ESG) principles. From Corporate Sustainability Reporting Directive (CSRD) whereby nearly 50,000 companies will have to report their climate and environmental impact, to widespread DEI (diversity, equity, and inclusion) adoption, ESG has moved from a trend to a core value.

However, this is not just about regulation, but also represents who we are. ESG should be a reflection of the kind of society we strive to build, one that is equitable, transparent and forward-thinking. The EU’s leadership on ESG has been a source of global credibility and a testament to values that matter deeply to citizens.

Looking at the global landscape, we’ve seen ESG facing political and corporate rollback. Some of the largest finance institutions have scaled back their Net Zero commitments, while numerous household names have retreated from DEI pledges. And this retreat is starting to ripple across the Atlantic.

Our latest research – which draws insights from thousands of European consumers and senior financial professionals in the UK – finds nearly all (97%) providers are now engaged in at least one ESG-related activity, whether that’s encouraging customers to go paperless (36%) or embedding DEI principles into the company’s mission (35%).

However, despite the progress made, over half (56%) of financial professionals now expect ESG to become less of a priority for leadership in the near future. A similar number (54%) say the same for DEI specifically. And retreating from ESG would signal that economic short-termism trumps long-term purpose. This could potentially challenge Europe’s leadership, credibility, and identity.

Europe has always pursued growth, championing sustainability, fairness, and social justice - its founding values.

The findings show nearly 70% of financial professionals still view ESG and DEI as essential to attracting and retaining customers. Consumers agree, with 47% saying they are more likely to choose a bank or insurer committed to DEI – rising to 55% among 18–34-year-olds, underlining how crucial this is to the next generation and a market so many are tripping over themselves to reach.

Of course, businesses face mounting pressures – economic volatility, geopolitical uncertainty, and increasing competition. However, we should project it into the future and consider more the long-lasting effects of our choices. Financial institutions that lead on ethics and sustainability will be the ones that will be best prepared for challenges ahead, retain customer trust, attract top talent, and stay relevant.

ESG progress to date has been far-reaching and significant, with European banks – in France in particular – leading globally on green efforts. And today the challenge lies in managing short-term difficulties and turmoil without compromising long-term goals.

The decisions made now by Europe’s financial sector will shape the region’s economic and social identity for decades. This is about more than climate metrics or diversity policies.

Europe is leading the way in terms of ESG principles and regulation as a reflection of our shared values. The question for the continent’s financial service providers is not whether they can afford to uphold these principles, but whether they can afford not to?