The political landscape in the US has had a significant impact on corporate ESG (Environmental, Social, and Governance) strategies.
Under the new Trump administration, some US companies have reduced their commitments to climate action and net-zero goals.
There has also been a shift in how businesses approach inclusivity and governance, with some companies reversing earlier commitments. In some parts of the US corporate and financial world, the term 'ESG' itself has become controversial. Major asset management firms have distanced themselves from ESG criteria due to political pressures, particularly from Republican-led states like Texas.
Given the size and influence of the US economy, these shifts have global implications. However, it's important to recognise that such changes are largely tactical and driven by short-term political cycles.
Effective ESG and sustainability strategies should instead be guided by long-term scientific and socio-economic cycles - rather than short-term political trends.
ESG's future is more complex than politics suggests
Despite political resistance, the broader reality of ESG in the US remains more nuanced. Key economic states like California and New York continue to enforce climate policies and corporate social responsibility measures aligned with international agreements.
Even influential investors who previously focused solely on shareholder profits have started to acknowledge the financial risks posed by climate change - for example, Warren Buffett. In early 2025, Buffett warned shareholders about massive potential losses from severe storms.
Central banks are also integrating ESG risks into their financial models. They use scientific data to assess:
- The economic impact of climate change
- The transition to a net-zero economy.
The concept of 'Green Swan Risk', which refers to the financial instability caused by climate-related events, underscores the urgency for businesses to adapt. Climate-related losses can lead to bankruptcies and market crashes, while disruptions in food production may drive inflation.
Given their focus on long-term financial stability, central banks are unlikely to be swayed by short-term political trends.
As a result, companies' access to finance will increasingly depend on their ability to manage environmental risks. Reliable ESG reporting is crucial for banks, insurers, and investors to assess these risks. While political cycles may cause temporary shifts in ESG policies, long-term corporate strategies will likely be shaped by climate science and economic realities rather than political rhetoric.
In the short term, we might see some businesses in the U.S. adopt more flexible reporting standards or avoid using the term 'ESG', while still complying with global expectations.
However, multinational companies will continue to align with international ESG and sustainability standards. This is largely due to investor and regulatory pressures.
The global shift towards ESG and sustainability
Beyond climate change, other elements of ESG are gaining traction globally, for example:
- Social responsibility
- Inclusivity.
While some US states resist ESG-related regulations, other major economies like China and the EU are taking a science-driven approach to environmental and social policies. China's 'common prosperity' policy aims to balance corporate profits with reducing income inequality. Institutions like the IMF advocate for similar measures in Western economies.
Businesses worldwide are increasingly expected to create value for all stakeholders - not just shareholders - by prioritising environmental and social responsibility.
The long-term view: science over politics
Political cycles are short-lived compared to planetary and socio-economic cycles. While some businesses may temporarily adjust their ESG strategies in response to US political shifts, the long-term trajectory remains clear. Sustainable business practices are becoming the norm due to:
- Evolving regulations
- Financial incentives
- Growing stakeholder expectations.
The tools and frameworks for managing ESG risks are also becoming more sophisticated. Standardised reporting systems, ESG rating agencies, and financial regulations are creating a strong institutional foundation for sustainability. Moreover, intergenerational shifts and evolving stakeholder demands will continue to reinforce the importance of ESG in corporate strategy.
Despite political headwinds, the US remains home to some of the most influential institutions shaping global ESG policies. The long-term reality is that businesses worldwide will create the most value by aligning their ESG strategies with science-based planetary cycles and evidence-based socio-economic trends rather than short-term political cycles.
In short, companies that take a long-term, strategic approach to ESG and sustainability will be better positioned for success - both financially and reputationally - regardless of political changes.
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