Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
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How will Trump's policies affect ESG?
ESG
Ida Kassa Johannesen
Head of ESG investments, Saxo Bank.
Summary: Donald Trump has made it clear that he opposes environmental, social, and governance (ESG) factors. Consequently, significant changes in ESG policies are occurring in the US, and it is essential to understand their potential impact on ESG investments.
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- Climate Agreements: The US, for the second time under Donald Trump, has withdrawn from the Paris Agreement.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.
Potential impact
Trump's policies can create a challenging environment for companies and funds that prioritise sustainability, potentially reversing progress made in responsible business practices. The industries that could be most negatively affected by Trump’s policies include:
- Renewable energy companies due to decreased government support and incentives for clean energy projects.
- Electric vehicles (EVs) companies may struggle with reduced incentives and support.
- Companies committed to ESG may struggle to meet their ESG goals in a less supportive regulatory environment. They could face reputational risks if they are perceived as not aligning with the broader market trends.
Policies that undermine ESG principles can affect investor confidence in companies that prioritise sustainability. These companies might find themselves at a competitive disadvantage compared to those benefiting from deregulation and lower compliance costs. Consequently, they might experience poor performances, which could in turn reduce the performance of ESG-focused funds and decrease the demand for these funds and the companies they invest in, ultimately slowing the growth of ESG investments.
What is a responsible investor to do
Although the next few years may be bumpy, as responsible citizens, we simply cannot ignore climate change, the aspiration for a more inclusive and diverse workplace, and the need for better governance from companies that provide us with goods and services that significantly impact our lives. Neglecting these issues can lead to long-term environmental, social, and governance problems, ultimately resulting in higher costs to society.It is important to remember that ESG investing is about both performance and upholding principles and values. A responsible investor is not one who focuses on short-term gains but rather one who remains committed to ESG principles and chooses to stay the course for the long term, even during market volatility. Essentially, as the saying goes: "When the going gets tough, the tough (in this case, the responsible investor) get going".
How to invest in companies and funds that prioritize ESG
You can browse through Saxo’s ESG themes for lists of companies and funds that prioritise ESG factors. Please review the themes' description to gain an understanding of the selection criteria and ensure that they align with your objectives.
Before making any investments, you should consider your investment objectives, risk tolerance, and time horizon, and review the available information about the product on the platform.
Before making any investments, you should consider your investment objectives, risk tolerance, and time horizon, and review the available information about the product on the platform.
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