Presidential elections are typically defined by the biggest possible questions: war and peace, economic security, healthcare, and social policy. An issue like Environmental, Social and Governance investing rarely breaks through the noise of a national campaign.
That does not mean it is unimportant. It means it is fighting for survival largely out of sight of the average voter.
The 2024 election carried real and lasting consequences for ESG. Whether through executive action, regulatory rollback, or the courts, the decisions set in motion will shape how corporations address environmental and social issues for generations.
A second Trump administration was widely expected to move quickly against the ESG regulatory framework built under President Biden. According to CNBC, reporting on sources close to the former president and experts in securities law, the Securities and Exchange Commission under a second Trump term would likely begin by targeting the new climate disclosure rules, with broader ESG-related regulations to follow.
That assessment proved accurate. The rollback of climate disclosure requirements represented one of the most significant reversals in SEC policy in recent memory, effectively unwinding years of rulemaking designed to give investors standardized access to corporate environmental data.
Trump’s campaign made no effort to obscure its position on ESG. His campaign website stated plainly that the ESG framework was designed to direct retirement savings toward what it characterized as radical political interests, and claimed credit for issuing what it described as the first ESG ban anywhere in the world, according to Ballotpedia.
The legal challenge to ESG moved in parallel with the political one. A coalition of Republican-led states filed suit against a Biden administration rule that allowed employee retirement plans governed by ERISA to consider ESG factors in investment decisions. The case, working its way through the 5th Circuit, became an early test of how courts would approach federal agency rulemaking following a landmark U.S. Supreme Court decision that curtailed the traditional deference courts extended to regulatory agencies.
In a June 28 letter to the 5th Circuit, the challenging states cited that Supreme Court ruling directly, arguing that courts should consider deferring to agencies only when regulations are adopted shortly after the laws they interpret and remain consistent over time. The implication was clear: ESG-related rules issued decades after ERISA was written would face a higher bar of judicial scrutiny.
The U.S. Department of Justice, defending the rule, did not respond to requests for comment, according to Reuters. The Republican-led states subsequently announced they would appeal a Texas federal judge’s decision rejecting their initial challenge, keeping the legal battle active.
Chris Hilson of the University of Reading’s School of Law offers a useful framework for understanding what is happening. Writing in Frontiers in Political Science, Hilson acknowledges that ESG has been widely politicized in the United States, with climate change serving as the central flashpoint. On the surface, he notes, ESG looks like an unlikely candidate for politicization, given that it is largely a technical framework for assessing corporate risk.
The Republican right, Hilson argues, has worked to look beneath that technical surface and reframe ESG as a vehicle for progressive political values. His conclusion is pointed: the politicization of ESG functions as a sideshow, designed to redirect attention away from the substantive environmental and climate goals that ESG frameworks were built to advance.
“ESG looks, on the surface, like an unlikely subject for politicization. However, the Republican right has sought to look underneath the technical surface to reveal what they view as concerning.” — Chris Hilson, Frontiers in Political Science, 2024
The paradox of ESG in electoral politics is that its stakes could not be higher while its profile in public debate could not be lower. Heat domes, intensifying hurricane seasons, and accelerating environmental disruption tied to climate change represent the real-world consequences of the policy questions embedded in ESG regulation. Those consequences will be felt for generations.
Yet because ESG is complex, technical, and primarily fought in regulatory agencies and federal courts, it rarely commands the kind of voter attention that shapes election outcomes. It is an issue decided largely by those paying close attention while the broader electorate focuses elsewhere.
For values-based investors, that dynamic makes engagement more important, not less. The decisions being made now, in courtrooms and regulatory offices, will determine the landscape for responsible investing for decades to come.
Track the 5th Circuit’s ruling on the ERISA ESG investment rule and its implications for retirement fund management. Monitor SEC rulemaking activity for further rollbacks of climate disclosure requirements. Pay attention to how state-level anti-ESG legislation interacts with federal regulatory changes as both tracks develop simultaneously.
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References:
Schwartz, Brian, CNBC, “A Trump SEC Would Aim to Reverse Climate Disclosure Rule, Ratchet Up ESG Fights, Sources Say,” 5/2/24 https://www.cnbc.com/2024/05/02/trump-sec-would-end-climate-disclosure-rule-target-esg-investments.html
Ibid.
Hilson, Chris, Frontiers in Political Science, “Climate Change and the Politicization of ESG,” 3/14/24 https://www.frontiersin.org/journals/political-science/articles/10.3389/fpos.2024.1332399/full
Ballotpedia, “2024 Presidential Candidates on Environmental, Social, and Corporate Governance (ESG)” https://ballotpedia.org/2024_presidential_candidates_on_environmental,_social,_and_corporate_governance_(ESG)