Without getting TOO political (although you can probably tell where I stand by looking at some of my blogs), with any new administration, there is always change.
As an advisor who specializes in ESG investing, I’m pretty sure I can see the writing on the wall as the Trump administration takes office: it’s likely going to get more complex.
According to ESG Dive, “Trump has pledged to once again pull out of the Paris Agreement, expand U.S. oil production and to repeal President Joe Biden’s landmark climate action legislation, the Inflation Reduction Act.”
So, what does that mean for ESG investors?
What is ESG Investing?
At its core, ESG investing is about putting your money behind companies that share your values. Here’s a quick breakdown:
- Environmental: Companies working toward sustainability and fighting climate change.
- Social: Businesses that prioritize diversity, equity, and community impact.
- Governance: Organizations with ethical leadership and transparent practices.
How the Trump Administration Changes the Game
With deregulation and a stronger focus on fossil fuels, the previous Trump administration created some hurdles for ESG investors. For example:
- Environmental regulations were rolled back, making it harder to identify genuinely green companies.
- Corporate diversity initiatives slowed, requiring more effort to find companies committed to gender equity.
- Government support for sustainable business practices was reduced.
Going forward, Rob Du Boff, a senior analyst at Bloomberg Intelligence, noted, “The bottom line is the Trump administration is anxious to undermine these ESG-related initiatives.”
These changes don’t make ESG investing impossible, just more challenging. With a possible shift from focusing on the environment, women who are looking to take a conflict-free stand and invest with their values in mind might need to get more creative during the next four years and possibly concentrate on the “S” and the “G” of ESG investing.
For example, ESG investing can be an excellent way to support companies that prioritize gender equity and diversity, especially in leadership roles. Companies that prioritize women in C-suite positions, actively foster a culture of inclusion, and maintain diverse boards are not only addressing social inequalities but are also demonstrating resilience and innovation. By focusing on these businesses, women can use their investments to signal the importance of representation and equality while potentially enjoying the financial benefits of supporting forward-thinking companies.
How to Find the Right Investments
Finding ESG investments might take a little more effort, especially now, but there are still many options available. Start by exploring ESG ratings from third-party sources to get a sense of a company’s sustainability and ethics. Consider mutual funds and ETFs that focus specifically on ESG investments to diversify your portfolio. You can also review corporate sustainability or responsibility reports to gain insight into a company’s practices.
But if all this sounds like a lot of work…find a financial advisor who specializes in ESG investing. As you’ve probably gleaned from this blog, it takes some research to find the right companies and avoid organizations that might be greenwashing. With so many factors to consider and a political environment that’s not always supportive, having a professional by your side can make all the difference.
A financial advisor specializing in ESG investing can help you find investments that align with your values, analyze the financial potential of ESG options, and keep you informed about changing regulations and market trends.
And remember this projection from the Corporate Governance Institute:
“Trump’s victory doesn’t spell the end of ESG. Trends around the issue come and go no matter who is in the White House, and beneath it all is a vast pool of ESG assets that Forbes still estimates will reach $50 trillion in value by 2030.”
Environmental Social Governance (ESG) has certain risks based on the fact that the criteria excludes securities of certain issuers for non-financial reasons and, therefore, investors may forgo some market opportunities and the universe of investments available will be smaller.
