Trump 2.0 and the ESG Reckoning: What’s Next for Business?

Key Takeaways from the Webinar: The Impact of a Second Trump Presidency on the Sustainability Agenda

This webinar, hosted by Sonali Siriwardena, Global Head of ESG, explored the implications of a second Trump presidency on the global sustainability agenda. The discussion focused on key ESG legal touchpoints, including transactions, litigation, reputation, and antitrust, with insights from experts across various fields. Below is a detailed summary of the key points discussed:

1. Macroeconomic Overview: A Challenging Backdrop for ESG

Presenter: Andy Hartwill, Global Markets Insights Lead

• Uncertainty at Record Highs: The IMF's World Uncertainty Index is at unprecedented levels, surpassing the global financial crisis and COVID-19. Factors include geopolitical tensions, trade wars, low productivity, and rising regulatory divergence.
• Equity Market Paradox: Despite uncertainty, equity markets remain resilient, potentially reflecting optimism about deregulation. However, high valuations and low risk premiums pose risks if markets are overly optimistic.
• Slowing Global Growth: OECD forecasts show slowing growth, with Western economies (US, UK, EU) expected to grow at 1-2%, compared to 4-6% in APAC.
• Net Zero Investment Gap: Achieving net zero by 2050 requires $120 trillion in investment, or $5 trillion annually. This competes with increased defence spending and fossil fuel investments, particularly in the US.
• Reversal of Globalisation: A shift towards bilateralism and localised multilateralism is evident, with reduced foreign direct investment (FDI) and a focus on domestic priorities. The EU remains a leader in responsible investment, potentially driving net zero efforts.

2. US Regulatory Landscape: Fragmentation and Realignment

Presenter: Meaghan Colligan Hembree, Holland & Knight

• Federal ESG Rollbacks: The Trump administration has dismantled key ESG frameworks, including withdrawing from the Paris Agreement, halting SEC climate disclosure rules, and rolling back EPA mandates.
• State-Level Divergence: ESG regulation is increasingly state-driven, with Democratic-led states (e.g., California, New York) advancing ambitious frameworks, while Republican-led states weaken environmental enforcement.
• Litigation and Private Enforcement: Reduced federal enforcement has led to a rise in citizen suits and state attorney general actions, particularly on greenwashing and ESG misrepresentation.
• Reframing ESG: Companies are shifting from explicit ESG branding to operational risk management and compliance. For example, sustainability is framed as materials management, and DEI (Diversity, Equity, and Inclusion) as talent development.
• Opportunities Amid Challenges: Despite federal rollbacks, sectors like green chemistry, carbon capture, and hydrogen are gaining bipartisan support. Private capital is stepping in to fill funding gaps for net zero initiatives.

3. Transactional and Sectoral Impacts

Presenter: Sonali Siriwardena, Global Head of ESG

• Green Bond Decline in the US: US green bond sales have fallen, with companies avoiding ESG labelling to sidestep controversy. In contrast, Europe's green bond activity remains robust.
• Investor Pushback: Some investors are penalising asset managers and companies retreating from climate alliances, as seen with the UK's People's Pension withdrawing $25 billion from State Street Global Advisors.
• Energy Policy Reversal: The administration prioritises fossil fuels over renewables, with deregulation and fast-tracked permitting for extractive projects. The repeal of clean energy tax credits under the "Big Beautiful Bill" has significant geopolitical and economic implications.
• Defence Spending Surge: A record $1 trillion defence budget and demands for NATO allies to increase spending to 5% of GDP signal a shift in fiscal priorities, potentially diverting resources from sustainability initiatives.

4. Antitrust and ESG: A Weaponised Landscape

Presenter: Sarah Smith, Competition, Antitrust & Trade Partner

• Tension Between ESG and Antitrust: ESG initiatives often require collaboration, which can conflict with antitrust laws prohibiting coordination between competitors.
• Global Enforcement Trends: Cases like the EU's fines on car manufacturers for colluding on emissions technology highlight the risks of ESG-related antitrust violations.
• US Antitrust Weaponisation: The Trump administration has signalled aggressive antitrust enforcement against ESG initiatives, with the FTC and DOJ targeting alleged collusion on DEI and green energy goals.
• Chilling Effect: The threat of antitrust scrutiny may deter companies from pursuing ESG initiatives, particularly in the US. Global businesses must navigate differing regulatory expectations across jurisdictions.

5. Litigation and Reputational Risks

Presenter: Rob Allen, Investigations Partner

• Litigation Trends: Activist lawsuits, shareholder actions, and greenwashing claims continue to rise globally. Cases like Shell's climate strategy litigation in the Netherlands set precedents for future claims.
• Regulatory Enforcement: In the UK, the FCA's sustainability disclosure requirements and the CMA's green guidance reflect ongoing regulatory scrutiny. Advertising regulators are also active in addressing greenwashing.
• Reputational Challenges: Companies face heightened reputational risks, particularly in Europe, where public and regulatory expectations for ESG remain high. Multinationals must balance these expectations with the US's deregulatory stance.

6. Key Themes and Strategic Recommendations

• Recalibration, Not Retreat: Businesses are reframing ESG efforts to align with shifting regulatory landscapes while maintaining long-term value and trust.
• Resilience Building: Companies must strengthen governance, compliance, and monitoring to navigate fragmented and litigious regulatory environments.
• Cross-Border Collaboration: Firms should leverage private capital and public-private partnerships to drive sustainability goals amid reduced federal support.
• Transparency and Communication: Clear, credible ESG reporting and messaging are essential to mitigate reputational and legal risks.

Conclusion

The second Trump presidency has introduced significant challenges to the global sustainability agenda, with federal rollbacks, state-level fragmentation, and heightened litigation risks. However, opportunities remain for businesses to adapt, innovate, and lead in the evolving ESG landscape. The key is to remain agile, proactive, and transparent in navigating these complexities.

For further insights or tailored advice, attendees are encouraged to contact the speakers or access the webinar recording.