ESG: under the Trump storm clouds?
The Trump storm clouds are back! The 6 November 2024 win by the Republican candidate has sent a chill through the sustainable development community. On paper, the candidate’s policies are bad news for ESG[1] challenges. Could the anti-ESG movement, which has already gained momentum in the United States since Trump’s first term, become even stronger? Here’s a closer look at the prospect of a new presidential term fraught with social and environmental risks.
AN OVERVIEW OF THE THREAT
‘Drill, baby, drill’, the Republican candidate’s campaign mantra, sets the tone for his ambitions in the fight against climate change. The promises are many: to reopen the floodgates of oil exploration in the hope of cheaper energy, and to roll back environmental regulations put in place under the Biden administration to free up business. Internationally, Donald Trump is also threatening to pull out of the Paris Agreement once again, and to go even further by withdrawing from the United Nations Framework Convention on Climate Change (UNFCCC), at the risk of wiping out the collective 1.5°C target. According to Carbon Brief,[2] the policies envisaged could lead to an increase in emissions equivalent to 4 billion tonnes of CO2 by 2030, more than the European Union’s annual emissions.
THE THREAT MAY NOT BE SO EASY TO CARRY OUT
Will Trump’s nonchalance be enough to get his plan through? For example, his plan to dismantle the IRA[3] will not go unchallenged, even from within his own ranks. 80% of the investments promoted by the IRA have benefited Republican states. One of these is Texas, which has received major subsidies enabling it to position itself at the forefront of renewable energies and create many jobs in the sector. Some of the environmental provisions of the Act coming under threat actually strengthen the competitiveness of American industry, particularly in relation to China, supporting the ‘America First’ rhetoric dear to the Republican camp. Finally, on the social front, the president-elect’s statements in favour of the mass deportation of 10 to 12 million undocumented workers to their countries of origin will undoubtedly have a negative impact on inflation, as well as on economic growth.
GLASS HALF FULL OR HALF EMPTY?
Given this mixed picture, should we see the glass as half full or half empty? At this stage, the unfavourable nature of the announcements is not conducive to enthusiasm and has led to excessive volatility in assets considered ‘green’. However, the future president’s provocative slogans often give way to more nuanced implementation, as shown by the actual measures taken during his previous term. Even so, there is a risk of contagion to other countries that are less reluctant to scale back their commitments in the face of prevailing climate scepticism.
At a time when many investors are concerned that European economies are losing ground to the US and China, could this actually be an opportunity for Europe to assert its leadership on these key issues for the future of our planet… and our economies? As responsible and committed investors, we continue to encourage companies and regulators to stay the course towards ambitious measures, through the prism of dual materiality.