How Trump’s Election Could Shape Sustainability Policies and Investments in the US and Europe

By Nikos Avlonas

President of the Center for Sustainability and Excellence (CSE)

The prospect of Donald Trump’s return to the U.S. presidency in 2025 has sparked discussions about how his policies might impact sustainable development and climate action in the US and globally. During his previous term, Trump pulled the U.S. out of the Paris Climate Agreement and reversed over 125 environmental regulations intended to reduce greenhouse gas emissions. His current campaign has continued to question climate change, and he’s pledged to increase fossil fuel production while eliminating subsidies for renewable energy sources, like wind energy.

Considering these stances, Trump’s election could have significant repercussions on climate-related policies, like the SEC’s Climate Rule and the Inflation Reduction Act (IRA), which allocates half a trillion dollars toward renewable energy projects. The SEC’s climate rule, which requires public companies to disclose annual information on climate-related risks and carbon footprints, has faced legal challenges, with enforcement currently paused pending court decisions. Despite federal pushback, California has moved forward with similar regulations on its own.

If Trump dismantles these policies, the resulting shift could lead to increased greenhouse gas emissions, undermining global climate action efforts. The potential rollback of international agreements and reduced funding for sustainable technologies could hinder global collaboration on Sustainability and Green Transition.

Potential Impacts on ESG Investments and Energy Sectors

A Trump presidency may also slow down ESG (Environmental, Social, Governance) investments, with trends indicating the following:

1. Increased Resistance to ESG Investments: U.S.-based investors focused on sustainable, environmentally responsible practices might shift to other markets or reduce their U.S. investments due to potential misalignment with environmental standards.
2. Growth in Traditional Energy Sectors: Trump’s rollback of environmental regulations may attract investment back into carbon-based sectors like coal, oil, and natural gas, shifting focus away from “green” investments and toward more polluting industries.

In contrast, Europe could potentially benefit from these policy shifts. If the U.S. cuts funding for renewables by rolling back the IRA, Europe may regain a competitive edge in sectors like wind and solar energy, where the U.S. has recently made significant strides.

Will this be a setback or just a short-term slowdown?

In conclusion, a Trump election could signal a pivot toward more traditional economic policies, with reduced emphasis on clean energy investments and ESG priorities. Fossil fuel industries and large manufacturing sectors might see medium-term benefits, while global ESG investments remain robust, still representing around 40% of total investments. Many institutional and private investors worldwide continue to support sustainable strategies, despite potential U.S. policy shifts.

Although the U.S. may face delays in sustainability investments and regulatory reviews, Europe and global markets are unlikely to experience long-term negative impacts from a Trump presidency. The resilience of ESG investments globally, especially since 2016, suggests a continued commitment to sustainable development, with only a potential short-term slowdown.