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The "One Big Beautiful Bill" and its Implications for ESG Investors
ESG 3 minutes to read
Ida Kassa Johannesen
Head of Commercial ESG and Education
Summary: Signed into law on 4 July 2025, the "One Big Beautiful Bill" - officially known as the reconciliation bill - introduces substantial budget cuts to key federal agencies and social programs, reshapes tax policy, and redefines regulatory priorities across sectors. This landmark legislation will have far-reaching implications for ESG investors around the globe.
This article breaks down the key elements of the bill, highlights the industries and sectors most affected, and outlines strategic considerations for ESG-conscious investors.
What is the Reconciliation Bill
The reconciliation bill is reshaping the U.S. policy landscape. Its key provisions include broad deregulation, a rollback of clean energy tax credits, deep budget cuts to federal agencies and social programs, and expanded incentives for domestic R&D and manufacturing. It also extends substantial tax cuts to both individuals and corporations.
While the reconciliation bill aims to boost economic efficiency and long-term growth, it is also expected to substantially increase the federal deficit. According to the Congressional Budget Office, the bill is expected to reduce federal tax revenues by approximately USD 4.3 trillion over the next decade, increasing the U.S. deficit from its current level of USD 1.8 trillion to an estimated USD 4.7 trillion.
Environmental Impact: A Setback for Clean Energy
The bill's rollback of clean energy tax incentives means that wind and solar projects, clean fuel, and electric vehicle technologies will lose critical support. According to Princeton University’s Zero Lab, this could place over $500 billion in clean energy and transportation investments at risk. And Columbia University Center on Global Energy policy estimates that, new clean power capacity may be reduced by 50–60% over the next decade. Deregulation favors sectors with historically negative environmental footprints such as oil & gas, mining, and utilities which stand to benefit from accelerated permitting and reduced compliance costs.
The reconciliation bill introduces substantial budget cuts to key social programs both in the US and abroad. Among the most affected are Medicaid and the Children’s Health Insurance, whose funding reductions could severely limit access to healthcare for millions of low-income families and children. From a social perspective, the bill threatens to exacerbate inequality, drive up poverty and food insecurity, widen health disparities, and further erode the social safety net. The impact is expected to fall hardest on low-income families, children, seniors, and individuals with disabilities.Social Impact: Cuts to Public Welfare
Private health insurers and private hospital chains are likely to benefit from increased demand as public coverage declines. Pharmaceutical companies may also benefit from reduced government pressure to lower drug prices.
Sweeping budget cuts to federal agencies such as the Consumer Financial Protection Bureau (CFPB) and the Securities and Exchange Commission (SEC) will have significant implications for the financial services industry and consumer protection. Both agencies will have fewer resources to supervise institutions, conduct investigations and enforce regulations. As a result, financial services firms including bank, brokers, and asset managers, may enjoy greater autonomy and lower compliance costs. Governance Impact:Weakened Oversight
Strategic Considerations for ESG Investors
The bill creates clear winners and losers. Non-ESG investors may reallocate capital toward favored sectors, indirectly impacting ESG-aligned companies through valuation pressures and capital flows.
To navigate this shift, ESG investors should:
- Reassess portfolio exposure to ensure alignment with long-term sustainability goals.
- Consider tilting allocations toward resilient ESG sectors such as sustainable infrastructure and ESG-integrated technology.
- Continue supporting clean energy firms, recognizing the long-term nature of the transition.
- Scrutinize ESG disclosures and sustainability strategies of portfolio companies.
- Monitor media and news coverage for emerging ESG issues and controversies
- Engage actively with companies and asset managers to advocate for responsible practices.
Conclusion
The “One Big Beautiful Bill” signals a pivot in U.S. policy that challenges ESG progress. While it will certainly create (short-term) headwinds, it also underscores the importance of resilient, values-driven investing. ESG investors must stay attuned to what goes around them, adapt to evolving market conditions, and remain steadfast in their commitment to driving positive, long-term impact.
How to Invest Responsibly
You can explore Saxo’s ESG themes to discover curated lists of global companies and funds that integrate ESG principles into their core operations. Note that the ESG landscape is evolving, and over time, the selected companies and funds may adjust aspects of their ESG strategies and practices, which could affect their sustainability status. The lists are reviewed and updated periodically to reflect such changes, although not always immediately.
Before making any investments, it is important to consider your investment objectives, risk tolerance, and time horizon, and review the available information about the product on the platform including the ESG risk rating.This content is marketing material and should not be regarded as investment advice. Financial instruments carry risks and past performance is not a guarantee of future results.
The instruments mentioned in this content, if any, may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and investment options.
The instruments mentioned in this content, if any, may be issued by a partner, from whom Saxo receives promotional fees, payment or retrocessions. While Saxo may receive compensation from these partnerships, all content is created with the aim of providing clients with valuable information and investment options.
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