The responsible business community are nervously watching to see what other ESG policies will be in the president’s crosshairs.
Trump’s second term is not the end of ESG, but a crossroads moment
Donald Trump is sworn in as the 47th president of the United States during the 60th Presidential Inauguration in the Rotunda of the U.S. Capitol in Washington, Monday, Jan. 20, 2025. Pool via REUTERS/Morry Gash
The US president’s second term is a pivotal moment for ESG, as his administration could reshape corporate responsibility globally
Katie Fowler is director of responsible business at the Thomson Reuters Foundation and leads the Workforce Disclosure Initiative, the foundation’s programme to improve corporate transparency and accountability.
During U.S. President Donald Trump’s first four years in office, the world came to learn a reliable lesson – judge him on what he does, not what he says. Yet this time, in his first fortnight in the White House, it is clear that when it comes to responsible business practices and the virtues of Environmental, Social and Governance (ESG) principles, Trump’s hostility is no mere campaigning ploy.
As soon as he was inaugurated on Jan. 20, the U.S. president confirmed plans to withdraw his country from the Paris Agreement in a widely politicised move aimed at, in his words, “ending Biden’s policies of climate extremism”.
Since then, Trump has already signed dozens of executive orders, many of which vastly affect the green agenda. One example is the “Unleashing American Energy” Executive Order which, under a section titled “Terminating the New Green Deal”, pauses all funds from the Inflation Reduction Act and the Bipartisan Infrastructure Law.
This should come as no surprise, Trump’s anti-ESG rhetoric has been a lynchpin of his campaign. Prior to his inauguration he made a slew of anti-ESG appointments, most famously hiring billionaire Elon Musk, who has branded ESG a “scam” and “the devil”, as co-lead of the government efficiency group.
In his first term, Trump reversed or significantly altered nearly 100 environmental rules, most notably withdrawing from 2015 Paris Climate agreement. His administration also aimed to boost U.S. oil, gas, and coal production by opening protected areas for drilling.
Now, as he settles into the presidency for a second time, the responsible business community are nervously watching to see what other ESG policies will be in the president’s crosshairs.
Beyond the destruction of the Green New Deal, Trump has also announced plans to “end leasing to massive wind farms”, reiterating his campaign promise to “drill, baby, drill”. How this might impact policies both in the U.S. and worldwide remains to be seen.
But perhaps the biggest fallout of Trump’s decisions is with Diversity Equality and Inclusion (DEI).
DEI in the spotlight
Trump’s anti-DEI rhetoric often came to the fore during his first term. In 2020, he passed an Executive Order on Combating Race and Sex Stereotyping that imposed limits on certain workplace DEI training, branding it a “malign ideology”. This order may well return in some form. Now the U.S. Securities and Exchange Commission’s proposed Human Capital Management Disclosure rule, requiring companies to report on the makeup of their workforce, is also unlikely to be finalised.
At the start of his second term, the U.S. president is upping the ante on his war against DEI through a series of executive orders targeting the military and federal government.
One order he signed on his second day in office ends workforce DEI initiatives, which he called “dangerous, demeaning and immoral”. The Order decrees that federal government agencies no longer consider diversity when hiring and remove DEI from employee training programmes.
Trump's opposition to all things ESG could have a knock-on effect on financial markets.
This attack is expected to bleed into the private sector, with Trump already directing all federal agencies to create a list of private sector companies whose DEI programmes should be investigated as potentially illegal.
Trump's opposition to all things ESG could have a knock-on effect on financial markets, reducing enthusiasm for investment products like green bonds and sustainability-linked loans, and causing companies to roll back on DEI commitments.
This was already a trend before Trump, with Morningstar Inc data finding that sustainable funds suffered their worst year on record in 2023. Now, with Trump breathing down the neck of ESG, the trend is set to intensify.
Asset managers like BlackRock, Deutsche Bank, and Invesco have already reduced the number of new ESG funds for 2024, while Meta, Amazon, McDonalds and Walmart have all announced plans to reduce their DEI initiatives.
A crossroads, but not the end, for ESG.
Trump’s regulatory rollbacks, and the shifts in market sentiment they are causing, pose significant challenges to global responsible business efforts.
Yet this does not sound the death knell to ESG. Rather it is a crossroads moment.
As the Trump administration begins to strip back regulation on ESG issues, Europe is ramping them up and putting human rights at centre stage. European companies are looking ahead to the roll out of the Corporate Sustainability Due Diligence Directive in 2026, which will mandate Human Rights Due Diligence throughout their supply chain.
More than 80% of executives believe a stronger commitment to a positive human impact would increase their company’s profitability.
This is a positive step for corporate transparency. Data from the Thomson Reuters Foundation’s Workforce Disclosure Initiative suggests that regions with increased mandatory reporting requirements often have better disclosure rates.
Elsewhere, Deloitte reports that more than 80% of executives believe a stronger commitment to a positive human impact would increase their company’s profitability and appeal to customers and clients. Indeed, tech execs at the at the recent World Economic Forum in Davos held firm on DEI.
The global impact of the measures in the early days of Trump’s second term remain to be seen. Nevertheless, there remains a clear commitment to the principles of responsible business and the value of legislation for companies, investors, workers and consumers.
Any views expressed in this opinion piece are those of the author and not of Context or the Thomson Reuters Foundation.
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- ESG
- Climate policy
- Corporate responsibility
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