This is a marketing communication.

With Donald Trump just sworn in as President of the US, we take a look below at what this will mean for ESG – investing that takes account of environmental, social and governance factors. As we note below, while a roll back of much of the advances of the ESG agenda of recent years may be on the cards, it is not entirely doom and gloom, as some of the ESG factors have become embedded in how the global economy and financial markets work. Nonetheless, now is the time for investors interested in ESG matters to do all they can to ensure that it remains top of their agenda, keeping it as an important factor for financial markets in general.

Trump ESG Impact

Donald Trump’s pro-business, pro-fossil fuel, and anti-regulation stance signals challenges ahead for ESG initiatives. While Trump’s presidency may amplify rhetoric against ESG (environmental, social and governance investing), the momentum behind sustainable investing is unlikely to vanish overnight.

ESG Investments Remain Resilient

Despite political headwinds, ESG assets are still projected to grow to $50 trillion by 2030, underscoring their deep-rooted appeal to investors. While anti-ESG rhetoric dominates U.S. politics, ESG remains a critical tool for comparing corporate priorities in a globalized economy, ensuring its relevance beyond partisan divides.

Market Shifts and Policy Impacts

Markets are expected to favour traditional energy sectors like oil and gas, while clean energy investments under the Inflation Reduction Act (IRA) may face reduced funding. However, experts doubt Trump will repeal the IRA entirely, as its tax credits and existing commitments are difficult to reverse.

National Spotlight on ESG

Under Trump, ESG will move from state-level battles to a national issue, with Congress and the White House becoming key arenas for debate. Expect intensified polarization as pro- and anti-ESG lobbies clash over the future principles of American business.

Greenhushing and Rebranding

Trump’s presidency could spur “greenhushing,” where companies downplay climate commitments to avoid criticism from both sides. Additionally, the term “ESG” may face a rebrand as its politicization grows, echoing trends like BlackRock’s decision to avoid the term despite supporting its principles.

Global Ripple Effects

The anti-ESG movement, currently U.S.-focused, could gain traction globally as Trump’s influence inspires similar sentiments abroad. While immediate effects may be limited, particularly in Europe, the long-term impact on global ESG strategies warrants close monitoring.

While challenges lie ahead, the enduring economic and environmental value of ESG principles suggests sustainable investing will continue to evolve, even in the face of political opposition.

Aidan Graver, Co-Manager for Paris Aligned Fund, L&P