How will Trump's policies affect ESG?

Trump, now in office for his second term, has consistently expressed his opposition to ESG factors. He claims that ESG practices are detrimental for business, and that unnecessary regulations impede economic growth. Given his stance, significant shifts in ESG policies are taking place in the US, and more are expected to come. These policies can significantly affect the ESG landscape globally, therefore, it is crucial to understand how they can impact your investments in companies and funds that prioritise sustainability.

Environmental policies 

• Climate Agreements: the US, for the second time under Donald Trump, has withdrawn from the Paris Agreement. This means that the US and US companies are no longer formally committed to limiting global warming, and face fewer regulations related to emissions and environmental standards. 
• Fossil Fuels support: “Drill baby drill” were Trump’s words during his inauguration ceremony. His policies clearly favour fossil fuel production, including expanding drilling and reducing regulations on oil and gas industries. 
• Deregulation: several clean energy policies and initiatives have been rolled back, including regulations designed to encourage the adoption of electric vehicles, and incentives for renewable energy projects such as offshore wind farm projects and wind energy rights on public land. These actions undermine investments in renewable energy and other sustainable practices. 

Social policies 

• Diversity, Equity and Inclusion (DEI): in January 2025, President Trump signed an executive order to end DEI-related practices in federal contracting and hiring. The move pressures US companies to eliminate DEI programs, potentially reducing diversity and inclusion efforts in the workplace. Such changes can negatively impact workplace culture and employee satisfaction.

Governance policies 

• Regulatory changes: the Trump administration has rolled back numerous regulations on corporate governance, including policies that required AI developers to conduct safety tests and report results to the government if their systems posed risks. These changes may result in reduced oversight and accountability, thereby increasing the risk of errors and unethical business practices.