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When Donald Trump assumes office in January as President-elect, he is expected to take steps to roll back regulations related to environmental, social, and governance (ESG) criteria in the United States, reported Bloomberg.
This could involve preventing the enforcement of Securities and Exchange Commission (SEC) rules on corporate and fund disclosures, as well as Department of Labor mandates for pension funds, according to Rob Du Boff, senior analyst at Bloomberg Intelligence. Additionally, the incoming administration is anticipated to restrict ESG-focused shareholder proposals submitted during proxy season, he added.
Under Chair Gary Gensler, the SEC has faced mounting pressure from Republican lawmakers and corporate lobbyists to scale back its rulemaking on environmental, social, and governance (ESG) initiatives.
Earlier this year, the SEC opted for more relaxed climate disclosure requirements, adjusting its initial proposal in response to thousands of public comments and legal challenges. Implementation has since been stalled by ongoing legal disputes, and Du Boff anticipates that this suspension of the new rules may continue indefinitely.
Meanwhile, California’s climate disclosure initiative is still active after a judge refused to nullify the rule based on First Amendment challenges, he noted.
Additionally, the SEC is pushing forward with efforts to address the misuse of ESG labels in investment funds.
According to Du Boff, the proposed rules for ESG fund labelling are unlikely to be finalised due to the potential impact of the Congressional Review Act. Nonetheless, he anticipates that a Republican-led SEC will continue to scrutinise and penalise ESG funds that deviate from regulatory expectations.
Du Boff noted that Trump is also expected to target reforms to the shareholder proposal process, a focal point in recent GOP anti-ESG initiatives. This year, the volume of shareholder proposals has surged by 47% compared to the 2021 proxy season, driven partly by more permissive SEC guidance introduced under the Biden administration.
According to Du Boff, SEC leadership under Trump appointees is expected to impose stricter limitations on the ESG-related resolutions eligible for shareholder votes. He anticipates introducing new, more restrictive guidelines to narrow the scope of allowable proposals.
Trump is likely to quickly block the Labor Department’s fiduciary rule allowing pension funds to factor ESG factors into investments, Bloomberg suggests, because Trump did this during his first presidency, but the Biden administration decided to repeal this rule.
