Trending
Written by: Tara Irwin | Hargreaves Lansdown
- Donald Trump’s presidency prioritised traditional energy sectors like oil and gas
- Harris is a strong proponent of expanding renewable energy projects like wind and solar
- The election results could significantly influence the future of responsible investing
As the 2024 US presidential election approaches, investors are keeping a close eye on how the potential outcomes might impact their portfolios, particularly when it comes to environmental, social, and governance (ESG) considerations. With Vice President Kamala Harris and former President Donald Trump presenting starkly different approaches to ESG-related issues, the election results could significantly influence the future of responsible investing.
Incorporating ESG factors into investment decisions helps investors identify and manage long-term risks and opportunities, which can protect and potentially enhance the value of their investments.
Under the Biden-Harris administration, ESG investing has gained traction, with policies strongly supporting its integration into mainstream investing. Legislation allows pension funds to consider ESG factors, such as fair worker pay, strong governance, and environmental impact. The administration also proposed rules requiring companies to disclose climate risks and their carbon footprint, promoting accountability and more responsible corporate behaviour.
However, the current landscape is still influenced by Donald Trump’s presidency, which prioritised traditional energy sectors like oil and gas and discouraged the consideration of ESG risks in investments. For example, the Missouri state pension fund withdrew hundreds of millions of dollars from BlackRock due to its focus on ESG issues following Trump’s rollback on ESG-focused regulation.
As the election draws closer, both parties have downplayed climate goals to avoid alienating voters concerned about rising energy costs and job losses in traditional energy sectors. Harris has even pivoted on fracking bans, reflecting a focus on energy independence as a key political issue.
Here are the candidates’ key stances on ESG issues:
Kamala Harris
Environmental
Harris is a strong proponent of expanding renewable energy projects like wind and solar, committed to fully implementing the environmental policies initiated by Biden. The administration aims to deploy 30 gigawatts of offshore wind energy capacity by 2030—enough to power 10 million homes, support 77,000 jobs and spur private investment across the supply chain. This support for the climate agenda presents significant opportunities for investors in the renewable energy sector with a Democrat presidency.
Social
Harris has consistently promoted policies that improve labour rights, women’s rights, and increase diversity within corporations. Her focus on social equity could reduce ESG-related risks for investors. Companies that prioritise diversity, equity, and inclusion tend to be more stable and sustainable, creating positive work environments that lead to lower turnover rates and higher employee satisfaction. These practices also help mitigate the risk of social unrest, strikes, or scandals, reducing the likelihood of reputational damage or financial losses.
Governance
Harris advocates for greater corporate transparency in ESG matters, including mandatory disclosures of climate-related risks and carbon emissions, which could enhance accountability and provide investors with clearer insights into a company’s long-term sustainability. Harris is also likely to maintain and strengthen rules that encourage the inclusion of ESG factors in retirement and pension fund investments.
Donald Trump
Environmental
Trump has consistently championed the fossil fuel industry, advocating for deregulation to boost oil, gas, and coal production. From 2016 to 2020, during Trump’s presidency, U.S. crude oil production increased by approximately 30%. In regard to offshore wind, he has vowed to immediately halt and scrap projects on “day one”. His stance on fossil fuels has raised concerns about the potential impacts on climate and the associated risks to businesses, supply chains, and communities.
Social
Trump’s policies prioritised economic growth over social equity, with less emphasis on diversity, labour rights, and income inequality. His administration rolled back several workplace protections and civil rights regulations, and made it harder for unions to operate, which could heighten risks for companies in terms of employee dissatisfaction, legal challenges, and reputational damage.
Governance
Trump’s administration opposed mandatory climate-related financial disclosures, arguing that such regulations would impose unnecessary burdens on businesses. This stance contrasts with global trends toward increased transparency. While reducing regulatory compliance can reduce costs for companies, this also leaves investors with less information on long-term ESG risks. Additionally, Trump’s significant tax cuts, which lowered the corporate tax rate from 35% to 21%, primarily benefited large corporations but also increased federal debt, potentially posing future financial challenges for the US.
Related: Younger Americans Can’t Keep Funding Wealthier Older Generations