The challenges of ESG post-Trump: 29 January 2025

The election of President Trump for a second term has ushered in a significant shift in the global ESG (Environmental, Social and Governance) landscape. With the administration and many US states making it effectively illegal to use ESG as a criterion for investing in a company or business, corporations and financial institutions are facing new challenges in navigating sustainability and responsible business practices.

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The retreat of US-based banks from ESG alliances

One of the most notable recent developments is the withdrawal of major U.S. banks from Mark Carney’s Net Zero Banking Alliance (NZBA), a UN-backed initiative aimed at banks achieving net-zero greenhouse gas emissions by 2050. Institutions such as JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley have all exited the NZBA. This mass departure is largely attributed to political pressures and legal challenges, particularly from Republican leaders who argue that ESG-driven financial strategies disproportionately target the oil and gas industries.

NZBA-logo-web-header

The Trump administration’s scepticism towards climate change initiatives has reinforced this trend, creating an environment where banks and investors must tread carefully when considering ESG-related decisions. The result is a potential rollback of sustainable investment strategies that had gained traction under previous administrations.

The EU’s ESG dilemma and global market repercussions

Meanwhile, in contrast to the US retreat from ESG commitments, the European Union (EU) is facing its own set of challenges in implementing stringent sustainability regulations. The EU has been warned that the strict enforcement of its Carbon Border Adjustment Mechanism (CBAM) and Due Diligence Directive could lead to economic complications.

Qatar, a key supplier of liquefied natural gas (LNG) to the EU, has issued a warning that if these regulations are tightly enforced, they may cease exporting LNG to the European market. This potential energy crisis is compounded by the difficulty in calculating CBAM, as the regulatory framework remains under development. The lack of clarity poses a major challenge for businesses trying to comply while maintaining operational efficiency.

The cost of ignoring ESG: a global perspective

While the political battle over ESG rages on, numerous real-world examples highlight the risks of neglecting environmental and social responsibility. Reports continue to surface regarding mining companies leaving behind environmental destruction, unpaid taxes and adverse impacts on local communities. In Ghana, for example, gold mining has had a detrimental effect on cocoa production, while droughts and wildfires—often linked to human activities—continue to cause devastation worldwide.

Ignoring ESG principles entirely is not a viable option. Poor environmental stewardship, lack of governance and social neglect have tangible financial and operational consequences. Companies that disregard these factors may face increased litigation, reputational damage and operational inefficiencies that ultimately harm their bottom line.

The business case for ESG done right

Rather than abandoning ESG entirely, businesses should focus on pragmatic, well-structured ESG programmes that drive tangible benefits. Properly implemented, ESG initiatives can lead to:

  • cost reduction: efficient resource use reduces waste and operational costs
  • risk mitigation: strong governance lowers the likelihood of safety incidents, regulatory fines, and cyber threats
  • revenue growth: companies with responsible sourcing and transparent operations are more attractive to investors and customers
  • improved stakeholder relationships: engaging with local communities, employees and investors fosters trust and stability.

In essence, ESG should not be seen as a political tool but as a business enabler. Companies that take a balanced, practical approach to sustainability and governance can improve their operational efficiency and long-term profitability.

Conclusion: don’t throw the baby out with the bathwater

The political climate in the US has undoubtedly created a more challenging environment for ESG. However, rather than discarding ESG altogether, businesses should refine their approach to focus on practical, results-driven sustainability efforts. The global economy is increasingly interconnected, and ignoring ESG considerations may ultimately prove more costly than integrating them wisely.

As the landscape continues to evolve, companies that take a strategic, rather than ideological, approach to ESG will be best positioned to navigate the complexities of the modern business environment.

Unlocking ESG potential with Future Energy Partners

At Future Energy Partners, we understand that strong ESG strategies are essential for long-term business resilience and sustainability. From developing local workforce capabilities to ensuring compliance with international ESG standards, we help companies navigate the complexities of ESG audits, implementation plans and capability building.

If you’re looking to enhance your ESG performance, ensure regulatory compliance, or build a more sustainable and socially responsible business, we’re here to help. Contact us today to discuss how we can support your ESG journey!