As the dust settles on what has been described as a political earthquake of Donald Trump’s election, having been sworn in as the 47th US president earlier this week, the scramble has begun to piece together what international sustainability reporting landscape will look like in 2025 and beyond.
The Republican stance on sustainability issues has focused prominently on energy security, with a strong pushback on the concept of Environment Social Governance (“ESG”) matters in particular – with several Republican-led US states (such as Texas and Kentucky) over recent years taking steps to boycott or restrict the use of ESG criteria in asset management, citing concerns that ESG practices conflict with financial performance and fiduciary duty (ensuring the interests of beneficiaries).
As part of Trump’s 20 core promises, 4th on the list relates to making America “the dominant energy producer in the world”, as well as regaining energy independence. This includes plans to: lift restrictions on American energy production, terminate the Green New Deal (which was enacted by Joe Biden’s administration as a plan for one hundred percent clean, renewable energy by 2030) and unleash energy production from all sources, specifically including nuclear, whilst ending “market-distorting” restrictions on oil, natural gas and coal. “DRILL, BABY, DRILL” is the lasting and much-quoted refrain from the Republican Party’s 2024 Platform. Further to this, Trump’s 15th promise is to “cancel the electric vehicle mandate and cut costly and burdensome regulations”, with specific restrictions on the importation of Chinese vehicles.
The Republican Party’s broader focus on de-regulation also indicates that the introduction of federal US laws relating to sustainability disclosure, like we have seen through the EU’s Corporate Sustainability Reporting Directive (“CSRD”) and the Task Force on Climate-Related Financial Disclosures (“TCFD”) globally, is not likely to feature towards the top of Trump and his party’s agenda. Certain states in the US, such as California (with a largely Democratic voter-base and the largest sub-national economy in the world) are also keen to continue to push forward their own state regulations, which could well have a big effect on some of the world’s largest companies. Late last year, California’s Democratic Governor convened a special meeting of state lawmakers to discuss how the state’s ESG policies could be retained following Trump’s inauguration.
“asset managers, in particular, have to stay increasingly aware of the interoperability between sustainability/ESG-focused regulations”
Companies with a large global presence will nevertheless likely be impacted by EU regulations or TCFD reporting in some form through local subsidiaries, which in some cases require group-level reporting. This may cause a further rift to grow between companies with and without a European presence from a sustainability regulation perspective. Asset managers, in particular, have to stay increasingly aware of the interoperability between sustainability/ESG- focused regulations from financial supervisory bodies as well as various governments. Although this can present a burden of reporting on companies, it could also present an opportunity for more uniformity in sustainability disclosure in future.
“CSRD is incredibly comprehensive and is going after level of disclosure that is unprecedented… the EU is not going back”.
The EU and the UK have both indicated strong support for detailed sustainability reporting, whilst many companies (including Jupiter) already report through voluntary disclosures such as CDP (previously the Carbon Disclosure Project). Paula Di Perna, CDP Special Advisor, remarked “CSRD is incredibly comprehensive and is going after a level of disclosure that is unprecedented… the EU is not going back”.
Adopting a more positive outlook for ESG’s future in the US, Trump’s strong desire for energy security, efficiency, and affordability may also help in reviving discussions on nuclear energy, carbon capture and storage technologies, as well as progressing much needed grid changes, including the provision of electric vehicle charging points – which may be boosted given Trump’s close relationship with Elon Musk. Musk has previously recognised global warming as a “major risk”.
“a 1.5 degree scenario is unachievable without significant technological progress”
It will be interesting to see how the US approaches nuclear energy, electric vehicles and geoengineering over the next four years, and what this will mean for climate change mitigation and adaptation efforts around the world, particularly given that a 1.5 degree scenario is unachievable without significant technological progress, and given Trump’s withdrawal of the US from the Paris Agreement
Summary
As a UK-based asset manager, Jupiter aims to weather the political uncertainty ahead, whilst keeping its commitments to sustainability reporting through frameworks such as TCFD and CDP. Jupiter also remains a signatory to the Net Zero Asset Managers initiative (“NZAM”), and the Finance for Biodiversity Pledge (“FfB”), among other sustainability initiatives.
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