Trump Administration Seen as Likely to Dismantle ESG Rules

President-elect Donald Trump will likely move to dismantle ESG-related regulations in the US when he takes office in January.

That would mean blocking Securities and Exchange Commission rules for corporate and fund disclosures, and Labor Department requirements on pension funds, according to Rob Du Boff, a senior analyst at Bloomberg Intelligence. The new administration also is expected to put limits on ESG-related shareholder proposals filed during proxy season, he said.

“The bottom line is the Trump administration is anxious to undermine these ESG-related initiatives,” Du Boff said.

The SEC, under Chair Gary Gensler, already was under pressure from Republican politicians and corporate lobbying groups to water down the agency’s rulemaking around environmental, social and governance initiatives.

For example, the SEC voted earlier this year to impose climate-disclosure requirements that are significantly softer than those it proposed in March 2022. The change occurred after the agency received thousands of comment letters and numerous litigation threats over the plan.

The climate-related plan still hasn’t been implemented because of legal challenges. And Du Boff said he expects the pause on the climate-disclosure rule to be “extended indefinitely.”

At the same time, California’s climate-disclosure plan “remains in play after a judge declined to strike the rule on First Amendment concerns,” he said.

Read more: California Emissions Disclosure Law Survives First Legal Hurdle

Then there’s the SEC move to crack down on misleading ESG labels for investment funds.

The draft rules for ESG fund labels aren’t likely to be finalized under the specter of the Congressional Review Act, Du Boff said. Still, he expects a Republican-led SEC to continue to “hit ESG funds that step out of line.”

Trump also will likely move to overhaul the shareholder-proposal process, which has been at the center of recent anti-ESG efforts by the GOP, Du Boff said. The number of proposals is up 47% this year from the 2021 proxy season, largely due to more lenient SEC staff guidance under the Biden administration.

Trump-appointed SEC leadership will clamp down on the types of ESG-related resolutions that can be put forward for shareholder votes, Du Boff said. There will almost certainly be new, more restrictive guidance about the kinds of proposals that are permissible, he said.

It’s also likely that Trump will move quickly to block the Labor Department’s fiduciary rule that allows pension funds to consider ESG factors when making investment decisions, the BI analyst said.

This is something Trump did during his first presidency, but the Biden administration then moved to throw out the rule.

Photo: A turbine from the Roth Rock wind farm spins on the spine of Backbone Mountain behind the Mettiki Coal processing plant in Oakland, Maryland. (Photo by Chip Somodevilla/Getty Images)