Does Trump Win Doom ESG?

Trump has won a second term as President of the United States. This has a huge number of ramifications for America and the world - but it’s worth focusing on one in particular. ESG, sustainability and sustainable finance has seen a boom in recent years. But what will the Trump win mean for ESG going forward?

Trump worse news for ESG than Harris

The first and most obvious thing to say is that a second Trump presidency will be worse news for ESG than a Harris presidency.

While Vice President Kamala Harris has become more centrist and there less explicitly pro-ESG over the course of the race, in broad terms she would be better news for ESG professionals and sustainability more generally, than a Trump presidency. She would likely continue many of the ESG focused policies set in motion during Biden's first term, particularly in terms of climate action, clean energy investments, and corporate responsibility. 

By contrast a second Trump term would likely represent a significant regression in ESG efforts, potentially undermining years of progress in environmental policy, sustainable investing, and corporate social responsibility.

What will Trump 2.0 look like for ESG?

We can predict the impact of Trump 2.0 on the sustainability movement by first assessing his first term and the ESG-related impacts, and by then considering what he might do in his second term. 

Trump’s first term

During his first term Trump took several actions detrimental to ESG and sustainability.

One of Trump’s most contentious policies during his first term was his decision to withdraw the United States from the Paris Agreement, a landmark global accord aimed at combating climate change. In 2017, Trump announced that the U.S. would pull out of the agreement, claiming that it was unfair to American workers and businesses. This move not only undermined the global climate agenda but also sent a message that the U.S. was not committed to mitigating the effects of climate change.

Additionally, Trump’s administration rolled back numerous environmental regulations, including the Clean Power Plan, which aimed to reduce carbon emissions from power plants. These regulatory rollbacks were part of a broader trend where Trump’s policies favored deregulation over environmental protection, further distancing the U.S. from global sustainability targets.

During his first term Trump was also a staunch supporter of the fossil fuel industry, often advocating for increased drilling, mining, and the expansion of oil and gas projects. Under his administration, the U.S. approved the Keystone XL pipeline and opened up drilling in the Arctic National Wildlife Refuge, moves that were seen as antithetical to the goals of sustainable energy and climate action. He also made it clear that he viewed coal, oil, and gas as vital to U.S. economic strength, downplaying the urgency of transitioning to renewable energy.

What will his second term look like for ESG?

Looking ahead to Trump’s second term, it seems likely that this will contain further actions to attack and limit the sustainability agenda, both domestically and internationally. Here’s some specifics:

Further Attacks on ESG Investing

Trump has already made his disdain for ESG investing clear. In 2020, his administration introduced a rule that would restrict how retirement fund managers could consider ESG factors when making investment decisions, arguing that these factors distracted from the primary goal of maximizing financial returns. Trump also made public remarks criticizing "woke" investment strategies, calling them a threat to American prosperity.

A second Trump term could see the expansion of such policies, potentially aiming to block ESG-related shareholder proposals, discourage ESG-focused investment strategies, or even dismantle ESG-related disclosure requirements for public companies. Trump could also continue to influence state pension funds and other government-related investment bodies to divest from ESG-driven funds.

Rollback of Climate and Environmental Regulations

As seen during his first term, Trump’s regulatory approach favored business interests over environmental protections. In a second term, he is likely to continue pursuing policies that loosen restrictions on pollution, reduce the scope of environmental impact assessments, and deregulate industries that are major carbon emitters. Additionally, Trump could accelerate efforts to roll back Biden-era climate policies, such as the Clean Power Plan, vehicle emissions standards, and limits on methane emissions.

It’s unclear whether Trump would repeal or otherwise change Biden’s Inflation Reduction Act (IRA), given that many of the benefits are flowing towards red Republican states.

Hostility Toward International Climate Agreements

Beyond domestic policy, Trump’s second term could see an even stronger rejection of international climate agreements. He may further isolate the U.S. from global climate initiatives and actively work against multilateral efforts to curb emissions, such as the Green New Deal or broader efforts under the U.N. Framework Convention on Climate Change (UNFCCC).

Any Reasons for Optimism?

While a Trump presidency would likely set back ESG progress on many fronts, there are several reasons to remain cautiously optimistic, particularly in the realm of state-level policy and international cooperation.

State-Level ESG Efforts Are Unlikely to Be Undone

Although Trump would have significant influence over federal regulations and executive orders, many pro-ESG policies are now firmly entrenched at the state level. For example, California has passed a number of strong pro-ESG laws, including its own climate disclosure rules and requirements for companies to disclose their climate risks. These laws are not easily overturned by a federal government, especially in a state like California, which has a history of pursuing ambitious environmental policies regardless of Washington's stance.

Moreover, California and other blue states—like New York and Washington—are likely to continue advancing ESG efforts, even in the face of federal opposition. In fact, it’s likely that the ESG agenda will continue to be driven forward by these states, creating a patchwork regulatory environment that contrasts with the federal government’s approach.

It’s worth noting that such a patchwork approach, while positive in the sense that it would continue to move forward the ESG agenda, would also lead to more headaches for businesses, as they would need to deal with more and potentially conflicting regulatory requirements, in different jurisdictions. 

The EU’s ESG Agenda is Beyond Trump’s Reach

While Trump’s domestic policies could impact ESG investing and sustainability in the U.S., the global momentum for ESG is being increasingly shaped by the European Union (EU). The EU’s green finance regulations, particularly CSRD, are already requiring companies to comply with higher standards of environmental and social governance. 

Given the EU is independent from the US, Trump would have limited ability to roll back or influence these international standards unless he can broker a deal with European leaders—a scenario that seems unlikely, given the current political landscape.

Conclusion: Trump Win is Bad News for ESG

We cannot predict the future. However just based on past performance and what Trump has committed to doing in his second term, the evidence suggests that a Trump win is bad news for ESG and a significant setback for the sustainability agenda. From rolling back climate regulations to undermining ESG investing and international agreements, Trump has made it clear that sustainability and corporate responsibility are not priorities. Things are about to get harder for anyone who cares about sustainability, ESG and sustainable finance.