In the months leading up to the November 2024 American election, the discourse around sustainable investing is more contentious and politically charged than ever before. With President Joe Biden stepping down and endorsing Vice President Kamala Harris as the Democratic nominee, the stakes have shifted dramatically, turning ESG policies and green energy investments into a pivotal campaign issue. Meanwhile, the Republican contender, former President Donald Trump, has sharpened his criticism of ESG initiatives - framing them as harmful to economic growth and traditional industries.
Shifting Political Platforms and Candidate Stances
Vice President Kamala Harris’s campaign seeks to expand and build upon Biden’s sustainability policies. Harris’s focus on the Inflation Reduction Act highlights her commitment to climate action, through investments in clean energy and the establishment of financial regulations aimed at promoting corporate responsibility. Her platform promotes further incentives for renewable energy projects and mandatory climate disclosures for corporations, reinforcing her push for a greener economy.
On the other hand, Donald Trump has positioned himself as a staunch critic of ESG investing. As seen from his campaigning back in 2017 and today, he actively promotes dismantling the work done by the Democrats. Instead, he wishes to focus on deregulating the fossil fuel industry and reducing, what he perceives, as unnecessary oversight. In 2017, his plan, known as the America First Energy Plan, centred on boosting traditional energy sectors like oil, gas, and coal, which Trump argued were critical for economic growth and job creation – a plan that influences his campaign now in 2024.
Public Sentiment and the Market’s Reaction
Public opinion around sustainable investing in America remains deeply divided. The majority of younger and progressive voters strongly favour aggressive action on climate change, seeing ESG policies as necessary for corporate accountability. Harris’s campaign is heavily targeting this voter base, emphasising a forward-looking climate strategy.
Conversely, there is significant opposition to ESG initiatives among conservative voters and traditional business groups. Critics, including Trump and his supporters, frame ESG as a costly imposition on businesses and a distraction from core economic goals. This growing divide is mirrored in financial markets, with investors cautiously navigating an environment where both green energy stocks and traditional energy companies face political and economic uncertainty.
Regulatory Moves and Economic Pressures
The Securities and Exchange Commission (SEC) has proposed new climate disclosure rules that would require public companies to report on climate-related risks in their financial statements. Harris has voiced strong support for these regulations, arguing that transparency is essential for responsible investing and risk management. However, the proposed rules have faced significant opposition from Republican lawmakers and business groups, who argue that these measures place undue burdens on companies.
Economic pressures such as rising inflation and fears of a recession have also fuelled criticism of ESG policies. Trump and his political allies argue that sustainability mandates are unaffordable at a time when businesses are already struggling with rising costs.
Global Context and COP28
At COP28, the US reaffirmed its international commitments to reducing emissions, aligning its domestic policies with the global climate agenda. Harris’s campaign leverages these global commitments to reinforce the need for domestic policy continuity, positioning the US as a leader in sustainable investment and climate action.
In contrast, Trump’s approach is more nationalist in tone. He has criticised international climate agreements, arguing that they unfairly constrain the US and harm domestic industries. His campaign promises to put American economic interests first, advocating for renegotiations or withdrawals from key global climate accords.
The Anti-ESG Backlash
Anti-ESG sentiment has become a defining feature of this election cycle. Republican-led states have introduced laws that limit the influence of ESG criteria in investment decisions and public pension funds. This backlash is driven by a belief that ESG considerations conflict with fiduciary responsibilities and represent a form of political and corporate overreach. Trump’s campaign amplifies this message, framing the ESG movement as a left-leaning agenda that threatens free-market principles.
Campaign Contributions and Corporate Influence
The political battle over sustainable investing is also reflected in campaign contributions. Fossil fuel companies, which benefit from Trump’s promises of deregulation, have increased their donations to Republican campaigns. Whereas technology firms and renewable energy companies are throwing their weight behind Harris’s candidacy, supporting her push for stronger sustainability regulations and incentives.
Voter Influence and Grassroots Movements
Grassroots organisations, particularly those focused on environmental and social justice, are playing a critical role in mobilising voters. Movements like the Sunrise Movement have actively campaigned for Harris, framing the election as a pivotal moment for climate action. Their efforts aim to turn out voters in swing states, where sustainability and climate policies are increasingly seen as key electoral issues.
What does this mean for the UK?
You are probably wondering what this means for us in the UK? The US’s stance on sustainable investing and energy policy could have significant ripple effects in the UK:
- Climate Commitments: A rollback of US climate commitments could weaken global momentum, affecting international efforts like the Paris Agreement. As a key advocate for net-zero, the UK may find it harder to maintain unified global action on emissions.
- Trade and Regulations: Different regulatory approaches to ESG could complicate UK-US trade relations. UK businesses may face higher compliance costs or strategic shifts to align with both stricter UK and looser US standards.
- Market Reactions: Diverging energy policies could impact investor sentiment globally. UK green energy companies might face competition if traditional energy sectors in the US gain renewed support.
- Energy Security: Increased US fossil fuel production could influence global energy markets and prices, potentially affecting the UK's energy strategy and import costs.
In summary, shifts in US policy could present strategic, regulatory, and economic challenges for the UK, particularly in maintaining aligned climate strategies and competitive markets.
The outcome of the 2024 election will have significant implications for the future of sustainable investing. If Harris wins, her administration is likely to continue and expand upon current ESG policies, strengthening regulations and incentives for green sectors. Alternatively, a Trump victory could lead to a rollback of key policies, prioritising traditional energy industries and limiting the scope of ESG considerations.
In this highly polarised environment, the state of sustainable investing in America reflects broader debates about the country’s direction on climate, economy, and corporate responsibility. As voters head to the polls in November, the stakes for sustainable investing, and the nation’s approach to corporate governance, have never been higher.