Will Trump Be the Death of ESG?

Since his election, US President Donald Trump has waged a fierce campaign against ‘woke-ism.’ His administration has swiftly dismantled key environmental, social, and governance (ESG) initiatives — halting diversity, equity, and inclusion (DEI) programs, exiting the Paris Agreement again, and cutting global aid funding.

Just a month into his second term, Trump’s rhetoric and policies have galvanized ESG critics, posing immediate challenges. Yet, while this US shift may slow progress in some areas, it’s unlikely to kill the ESG movement entirely. Robust structural momentum — global and domestic —underpins its resilience.

The US Versus the World

Trump’s anti-ESG stance contrasts with much of the world. In Australia, decades of legislation—corporate reporting obligations, the Sex Discrimination Act’s positive duty, and Respect@Work laws—set firm DEI benchmarks that resist quick reversal. In the EU, the Corporate Sustainability Reporting Directive (despite a delay in implementation) will require the largest companies operating in the region to report on emissions, human rights, and other disclosures under European standards. Meanwhile, 30 jurisdictions, covering over 50% of global GDP, will adopt International Sustainability Standards Board (ISSB) rules by 2025-2026, forcing multinationals to comply to access global markets, regardless of US policy.

ESG Makes Business Sense

Beyond politics, ESG aligns with solid business fundamentals. Numerous studies (of admittedly varying quality) show companies adopting DEI programs show better talent retention, innovation, and financial results. In Australia, the Responsible Investment Association Australasia’s certified responsible investment products (to the end of 2024) have outperformed traditional funds over 1-year, 5-year, and 10-year periods, debunking performance myths. Renewables, now the cheapest new electricity source in many regions, thrive economically without subsidies. Ironically, the US Inflation Reduction Act (IRA), one of the most significant climate investment programs in history, has disproportionately benefited Republican-led states – where much of America’s renewable energy development is occurring. Though Trump may tweak IRA funding, clean energy’s logic endures—global spending on it now outpaces fossil fuels 2:1, up from 1:1 five years ago, signalling a lasting shift.

Structural Issues, Cyclical Politics

ESG’s integration into markets and society is structural, while politics runs in cycles. A single term—four years—can’t undo trends in governance, investment, and consumer expectations. Morningstar data shows sustainable fund assets hit US$3.2 trillion by December 2024, up 8% from 2023 and quadruple 2018’s level. In Australia, 88% expect their AU$4 trillion superannuation pool to be responsibly invested (RIAA); in New Zealand, 74% demand ethical handling of NZ$112 billion in KiwiSaver funds. This demand outlasts political noise. Most investment managers—81% in Australia, 87% in New Zealand—embed ESG, driven by fiduciary duties to manage risks like climate change. Trump’s rollbacks may trigger “greenhushing,” but the momentum persists.

Navigating the Headwinds

Still, challenges loom. Not all ESG criticism is baseless. It’s crucial to ensure ESG efforts aren’t just box-ticking but deliver shareholder value—like better retention or lower costs. Equally, ESG risk management shouldn’t be confused with solving vast social or environmental issues, a pitfall some asset managers and marketers exploit for appeal or sales. This overreach justifies skepticism; when ESG is pitched as a cure-all rather than a tool, it risks losing trust. Healthy scrutiny keeps it effective.

ESG is Here to Stay

Trump’s presidency will test ESG, especially in the US But it’s no longer a fringe concept—it’s embedded in global markets, risk management, and consumer expectations. Policy turbulence will be a hurdle, but not a halt.