This article provides a quick overview of the effects of Donald Trump's second presidency on ESG (Environmental, Social, and Governance) investing.
Donald Trump, now the 45th and 47th president of the United States, assumed office again on January 20th of this year. He immediately set forth his plans for the next four years, which include new trade policies that have caused global shockwaves and the rollback of numerous Biden-era initiatives and projects. One area facing significant challenges under the new presidency is ESG, which is encountering multiple setbacks and regulatory changes that threaten its very existence. What new policies are reshaping ESG, and what does the future hold for ESG investing?
What Has Happened?
Since the start of Trump's second presidency, several policies have been reversed or introduced that significantly impact ESG. For instance, Trump immediately withdrew the US from the Paris Agreement, which he labelled as 'climate extremism' (Segal, 2025). This move is expected to halt many sustainability advancements in the country and lead to a significant increase in greenhouse gas emissions. Trump, a strong proponent of fossil fuels, has also vowed to 'unleash' oil and gas drilling, which could have disastrous environmental impacts. Additionally, Trump, along with Elon Musk, has strongly condemned DEI (Diversity, Equity, and Inclusion) initiatives in both firms and the government, recently banning DEI initiatives in federal agencies.
Anti-DEI Policies and Their Implications
Trump has signed several orders dismantling Biden's DEI efforts, including removing DEI considerations from job applications, placing all federal DEI staff on leave, and issuing an executive order recognising two sexes as 'biological reality' (The White House, 2025) (Golden, 2025). Trump's stated reasons for these orders are to "protect women from radical gender ideology" and to save government spending on DEI salaries (Golden, 2025). However, these actions will likely marginalise LGBTQ communities in both federal and private sectors and reduce diversity within these jobs. In terms of ESG, this is a significant blow to the progress made since its inception, greatly reducing social equality in the US.
The Future of ESG Investing
The culmination of changes to the ESG framework creates an uncertain outlook for the future of ESG investing and many sustainable companies within the US. While the near future for ESG in the US looks bleak, it should not significantly impact international companies. ESG investors should prioritise companies outside the US. Ideally, this change is short-term, and sustainability and inclusion can eventually be reintegrated into the US. However, as of now, ESG has taken a substantial hit that may take years to recover from.
In summary, Trump's second presidency, which began on January 20th, 2025, has seen several executive orders rescinding Biden's DEI initiatives, marginalising LGBTQ communities, and creating a bleak outlook for the climate with promises of extensive oil drilling and withdrawal from many environmental agreements and projects. This has created a grim outlook for the future of ESG, and investors should likely avoid firms that prioritise ESG, as their future remains uncertain.