What does Trump 2.0 mean for Paris-aligned investing?

By contrast, decarbonisation is a long-term trend with ramifications over many decades. If a Democratic candidate were to win the 2028 Presidential election, they will likely fully endorse and re-commit the US to the Paris climate deal again. And in the meantime, companies will still need to aim for net zero GHG emissions by 2050 without losing any progress in these vital years.

Momentum continues

More importantly, we should note that the momentum from US companies to announce their GHG emission reduction goals continued strongly over Trump’s first term (2017 to 2021). Several global industry decarbonisation initiatives also took root during the period. The Climate Action 100+ initiative, launched in December 2017, brought investors together to engage with the world’s largest corporate GHG emitters, to curb GHG emissions and improve governance on climate-related risks. Similarly, the Science Based Targets initiative (SBTi), which began in 2015, gained substantial traction, encouraging companies to set ambitious science-based emission reduction targets in line with climate science, and to have them externally verified.

The companies we invest in across our Paris-aligned strategies are predominantly global organisations operating in many different jurisdictions, including the 193 countries and states that have ratified and will continue to be a part of the Paris Climate Deal. These companies will need to continue decarbonising their own operations and their wider supply chains, as the regulatory requirements and social demands remain in place. Furthermore, any companies operating in the US states that have set state-wide GHG emission reduction goals, such as California, will need to maintain their efforts.

“Companies will still need to aim for net zero GHG emissions by 2050 without losing any progress in these vital years.”

The impact on engagement efforts

We anticipate that climate engagements with some US companies could become more challenging over the next few years, and that the rate of US companies introducing GHG emission reduction targets for the first time – and having them externally verified – may slow.

However, this will make our role as active investors even more important. We must continue to positively engage and support companies from all regions in setting these goals, in order to mitigate risks, and provide a much better framework to generate positive long-term economic value.

The Inflation Reduction Act and climate solution providers

President Trump has spoken of his dislike of the Inflation Reduction Act (IRA), a signature US$500 billion tax incentive for green energy and infrastructure investment enacted under the Biden administration in August 2022. The IRA is not a direct federal government handout, it is a tax break for investment that is built into the US tax code over a 10-year period. It was approved by both Houses of the US Congress, and therefore can be removed only by an act of Congress.

The majority of clean energy manufacturing jobs under the IRA are destined for Republican states, and 80% of clean energy projects are in Republican states. While the Republican party now controls both Houses of Congress and the White House, it will be politically difficult for Republicans to roll this back completely. It is also worth noting that previous federal government incentives for on and offshore wind development in the US, the Production Tax Credit, was successfully reauthorised under the Trump administration and a Republican Congress in 2018.

A potential roll back of the IRA is not a positive development for any companies in the US (US-listed or otherwise) that are seeking to decarbonise their operations.

A setback, not a roadblock

As we look back at 2024, it was the hottest year on record, and the first year where surface temperatures surpassed the limit of 1.5°C above pre-industrial levels. The risks from climate change clearly remain.

While the recent action from President Trump is a setback, we do not see it as a significant roadblock for the long-term efforts of companies and regions across the globe to achieve the goals of the Paris Agreement. It does not deter us from our mission – to invest in quality global companies, that have the potential to make positive contributions towards mitigating climate change, reducing their risks and generating good long-term financial returns.

The value of investments will fluctuate, which will cause prices to fall as well as rise and investors may not get back the original amount they invested. Past performance is not a guide to future performance. The views expressed in this document should not be taken as a recommendation, advice or forecast.