Trump vs. Harris Presidential Election —What’s at Stake for ESG in America?

Environmental Legislation/Politics/Corporate Governance

(Source: NBC News)

With the November 5th election fast approaching, the future of ESG investing in the U.S. could take sharply divergent paths, depending on whether Vice President Kamala Harris and the Democrats prevail over former President Donald Trump and the Republicans. ESG investing has become something of a political flash point in the U.S. over the past few years, with fierce debates over the possible conflict between ESG principles and the fiduciary duties that financial actors owe their clients. Despite incredibly close national polling, the two candidates could not be further divided when it comes to their parties’ stance on ESG.

Trump is certainly no stranger to pushing back against pro-environmental movements. He infamously withdrew the USA from its commitments to emissions reduction under the Paris Climate Accord in June 2017, whilst remaining a staunch supporter of fossil fuel usage in America throughout his tenure as president[1]. This anti-green sentiment is further reflected in much of his manifesto for 2025. It includes proposals to curtail the climate disclosure powers recently granted to the Securities and Exchange Commission under President Joe Biden, which will require America’s largest publicly traded companies to disclosure their greenhouse gas emissions[2].

When it comes to ESG, Trump and the Republicans as a whole have been vocal in their condemnation, with the former president describing ESG investments as ‘poorly performing woke financial scams’ and, ‘radical left garbage that would never be funded on their own merits’[3]. This follows a narrative held by many on the political right in America — that ESG investing represents a clear breach of fiduciary duty to maximise investors' returns, as funds are directed into schemes which do not solely prioritise return on investment, but environmental and social considerations instead. Towards the end of his tenure in 2020, Trump attempted to push through Department of Labour rules that aimed to severely limit the consideration of ESG principles in investment decisions made on behalf of pension funds. If re-elected, it seems as if the Trump administration will pick up exactly where it left off, with the former president declaring that he ‘will sign an executive order and, with Congress’ support, a law to keep politics away from America's retirement accounts forever’[4].

House Bill 3: Requires that investment decisions are based entirely on pecuniary factors (relating to financial returns), without any environmental or social considerations

This promised ‘law’ would likely follow along the lines of legislation introduced in a coalition of Republican states – the staunchly anti-ESG House Bill 3 (HB3) spearheaded by Florida Governor Ron DeSantis in 2023, which Trump himself publicly praised[5]. In Florida, under HB3, investment advisers for public funds must now certify that their investment decisions are based exclusively on pecuniary factors, meaning they must maximise financial returns without considering ESG principles. On a national scale, if Trump were to succeed in passing such a law, this would designate a grave future for U.S. ESG, as public funds represent some of the largest ESG investors in the country.

In contrast, the election of a Harris administration would outline a completely different trajectory for ESG and sustainability-minded investment in the U.S. It would likely follow in the footsteps of the Biden administration which saw huge emphasis placed upon renewable energy, sustainable business practices and corporate accountability. Unlike their Republican counterparts, the majority of Democrat-controlled states have continued to support ESG considerations in investment decisions made by public funds. This aligns with the views of asset manager Blackrock — that integrating ESG factors into their investment processes is not only consistent with their fiduciary duty, but also enables them to manage long-term risks and opportunities, as well as help achieve risk-adjusted returns for clients[6].

Under a Harris presidency, such commitments to ESG considerations in investment decisions is likely to continue. The ability to veto any potential anti-ESG legislation would allow the U.S. ESG market to flourish. Biden adopted a similar stance — notably, he issued the first veto of presidency on a resolution that sought to rescind the Department of Labour law which allowed for ESG considerations in investment decisions made by pensions funds[7].

Ultimately, although the election of either candidate will produce a starkly different path for ESG than the other, considerations for the future of ESG must also regard the composition of Congress throughout the next presidential term. Whilst a divided Congress may present difficulty for the President’s ability to influence legislation, a unified government may well lead to more drastic legislation. In particular, a Trump presidency paired with a Republican-controlled Congress could lead to the swift enactment of aggressive anti-ESG legislation on a national scale.

Research Analyst: Oli Lewis

Research Editor: Ryn Tan

References

[1] “Trump Vs. Harris: Analyzing the Environmental Policies of Presidential Candidates.” Advisorpedia, n.d.

[2] Schwartz, Brian. “A Trump SEC Would Aim to Reverse Climate Disclosure Rule, Ratchet up ESG Fights, Sources Say.” CNBC, May 3, 2024.

[3][4] DonaldJTrump Verified 3.13k. “Agenda47: President Trump Continues to Lead on Protecting Americans From Radical Leftist ESG Investments,” n.d.

[5] “Governor Ron DeSantis Leads Alliance of 18 States to Fight Against Biden’s ESG Financial Fraud,” March 16, 2023.

[6] BlackRock. “BlackRock ESG Integration Statement,” July 2018.

[7] U.S. GOVERNMENT PUBLISHING OFFICE and THE PRESIDENT OF THE UNITED STATES. “VETO MESSAGE ON H.J. RES. 30.” VETO MESSAGE. House Document 118–18, March 20, 2023.