A recent study by MainStreet Partners, a firm specialized in sustainable investment and part of Allfunds, warns that the European Union is facing serious difficulties in turning its ambitious green agenda into a real competitive advantage.
The report identifies overlapping regulations, administrative burden, and lack of support for key sectors such as electric vehicles as the main barriers. According to Daniele Cat Berro, the firm’s Managing Director, these obstacles are weakening Europe’s role in the ecological transition and undermining its ability to lead in global sustainability.
In the industrial sphere, the company highlights setbacks compared to the Asian market. Despite the EU’s goals to reduce emissions from new cars by 55% by 2030 and eliminate combustion engines by 2035, more than 20% of electric vehicles sold in Europe in 2023 were of Chinese origin. In addition, the battery value chain is increasingly controlled by non-European players, while local industrial projects suffer from delays and limited funding.
“The transition to electric vehicles is strategic, but without a strong industrial base, it risks triggering deindustrialization in regions dependent on the automotive sector. Stronger support for local production is necessary,” said Cat Berro.
In the financial sphere, MainStreet Partners points out that the sustainable investment regulatory framework has reached a level of complexity that hampers market confidence. The combination of SFDR, CSRD, and CSDDD has resulted in high costs and compliance challenges, especially for small and medium-sized enterprises.
As a consequence, Europe recorded net capital outflows in ESG products for the first time in the first quarter of 2025, according to Morningstar data. The European Commission responded by introducing the Omnibus Directive, which includes postponements and adjustments to reporting obligations, but MainStreet warns that the measure is insufficient without a clear and agile execution strategy.
The firm has also expressed concern over the new regulation on ESG rating providers, which in practice will favor large global operators, most of them non-European. This, they note, jeopardizes the continent’s strategic autonomy in an emerging sector.
“The commitment to climate goals must be maintained, but with an approach that prioritizes regulatory clarity, industrial capacity, and international competitiveness,” Cat Berro concluded.
