(Bloomberg) -- Firms that fail to take ESG seriously face a bleak future in the European Union, as the bloc pushes ahead with the world’s most ambitious set of environmental, social and governance regulations.  

That’s according to Mairead McGuinness, the EU’s commissioner for financial markets and services. 

“What the European Union has been doing is quite extraordinary,” McGuinness said in an interview with Bloomberg Television’s Maria Tadeo in Brussels on Tuesday. “Profit is important but we’re now saying it’s not the only thing that matters.” 

Given the regulatory changes underway, “big and small companies know that if they don’t change, they do not have a future,” she said. The process is long term, but companies and investors should view this as “almost a revolution,” McGuinness said.

Europe has blazed a trail in constructing a regulatory framework intended to shift capital into investments that support ESG goals. But as the bloc races ahead of other jurisdictions, a number of its ESG rules have faced criticism from investors and national regulators alike for being incomplete and confusing. 

There’s also been criticism from outside the EU, as the global reach of the bloc’s ESG rules is felt. In the US, Treasury Secretary Janet Yellen recently warned of the “negative, unintended consequences” of some EU ESG rules. 

McGuinness said it’s clear the EU is leading other jurisdictions when it comes to ESG regulations. “But we don’t want to lead only, we want others to come with us,” she said.

Investors should also look for ways to expedite the transition to a low-carbon economy, which includes supporting some “brown” companies, McGuinness said.

“To some extent the focus on green has really not allowed enough discussion around transition,” she said. 

Areas ripe for a regulatory crackdown include ESG ratings, and the EU Commission last month unveiled a sweeping proposal to reform that market.

For now, it’s not clear “how are these calculated,” McGuinness said. “At the moment, it’s quite opaque. So we’re looking at transparency. We’re not telling these companies how to do it, but we’re asking them and insisting that they show how they actually make these calculations.”

Bloomberg News parent Bloomberg LP and affiliates provide access to ESG data products, including Bloomberg’s proprietary ESG scores. Bloomberg doesn’t calculate ESG ratings.

(Adds comment on transition from separate interview, in eighth and ninth paragraphs.)

©2023 Bloomberg L.P.