How is President Trump affecting sustainability?
While the Trump administration's policies may weigh on some areas of the sustainable investing universe, opportunities with strong commercial economics still exist.
Aa
Share
Some of President Trump's early executive orders have weighed on sustainable investments
• The Trump administration has announced plans to withdraw the US from the Paris Agreement, hitting some climate-related instruments.
• It has ended some federal diversity programs, calling into question businesses' commitment to social strategies.
• It seems to favor bilateral agreements over multilateral ones, raising some questions around multilateral development bank (MDB) bonds.
But CIO believes economic considerations will support many sustainability approaches in spite of politics
• Despite US policy shifts, renewable energy makes growing economic sense, with solar and wind costs competitive with gas in many US regions.
• Extensive studies from McKinsey over the past 10 years show a continued benefit to diversity. The most recent study in 2023 shows companies in the top quartile for gender and ethnic diversity in executive teams are 18% and 27% more likely to outperform financially, respectively.
We believe diversified sustainable investment strategies can continue to deliver competitive financial returns
• MDB bonds continue to exhibit strong fundamentals, appealing yields, and tight spreads to highly rated government bonds.
• We believe investment opportunities remain in energy efficiency and infrastructure, especially in transmission and distribution companies linked to CIO’s "Power and resources" portfolio.
• The industrial, materials, and consumer staples sectors still offer compelling opportunities for equity engagement specialists to boost both commercial and sustainability performance.
New this month
The Trump administration has declared that the US “rejects and denounces” the United Nations Sustainable Development Goals (UN SDGs). These are key global goals adopted by UN members unanimously in 2015, as part of the 2030 Agenda for Sustainable Development, aimed at tackling global environmental and social challenges. This is part of a broader retreat by the Trump administration, including removing the US from key climate financing endeavors and exiting the Paris Agreement.
One liner
While some sustainability-related policies may be rolled back, we do not anticipate wholesale changes, and we continue to see attractive growth opportunities in the sustainable investing field.
Did you know?
• The US has about 16% of the total voting power on the World Bank’s International Bank for Reconstruction and Development, followed by Japan, China, Germany, France, and the UK.
• Following the US's previous withdrawal from the Paris Agreement, US electricity generation from coal dropped 22% (excluding pandemic-era generation), according to US Energy Information Agency and Ember data.
Investment view
We recommend a diversified portfolio approach across sustainable equities, bonds, hedge funds, and private markets. ESG leaders' strategies, which are theme and sector agnostic, have demonstrated consistent performance against non-ESG benchmarks and remain attractive options for investors, in our view.
