WHEN Donald Trump took office on Jan 20, 2025, he became only the second president of the United States to serve two non-consecutive terms, following Grover Cleveland, who became the 22nd president after the 1884 elections and the 24th president eight years later.

However, unlike the challenges faced by President Cleveland more than 130 years ago, President Trump now has bigger hurdles – not only within the United States, but also in managing international relations, as well as pressing issues related to climate change.

When Trump became the 45th president after the 2016 presidential race, his stance on environmental issues had several far-reaching consequences for global efforts to reduce carbon emissions.

Eight years ago, known for his opposition to issues related to the environment, Trump not only rolled back several climate regulations, but also pulled the United States out of the Paris Agreement – a legally binding international treaty on climate change signed by 196 nations.

The Paris Agreement limits the increase in the global average temperature to well below 2°C above pre-industrial levels, with efforts to keep it under 1.5°C. However, the United States rejoined the Paris Agreement in 2021, soon after President Joe Biden took office.

Trump’s Campaign

In the run-up to the presidential elections in November last year, Trump continued to attack climate action and science throughout his campaign.

Instead, he was all for more oil and gas extraction, and climate change, in his view, was nothing but a scam.

Hence, it was not a surprise that one of his first orders of the day upon becoming the 47th US president was to withdraw from the Paris Agreement yet again.

In addition, it is widely speculated that Trump will also pull the United States out of the United Nations Framework Convention on Climate Change (UNFCCC), which sets out the legal framework and principles for global climate cooperation.

Withdrawing from the Paris Agreement and UNFCCC would mean the United States would no longer report on greenhouse gas emissions, while reducing its legal obligations in providing climate finance for companies to adopt clean energy globally.

What’s Next for ESG?

As it is, there are notable campaigns in the United States that are against environmental, social and governance (ESG) compliance due to the costs to businesses and a lack of understanding of what ESG principles are all about.

This has allowed anti-ESG campaigns to flourish and with the United States being the largest oil and gas producer in the world today, there is fear that focusing on ESG issues will allow other nations, especially China, to benefit from renewable-energy solutions that they could very well export to the United States.

Politically, the United States is divided when it comes to ESG issues.

Democrats are known to be supporters of ESG incentives as they take the view that long-term sustainability is vital for economic stability.

However, the Republicans are generally opposed to ESG as they believe in the free market and capitalism, over the government’s intervention as to what corporations ought to do.

Hence, should Trump pull out of the Paris Agreement and at the same time make efforts to withdraw from the UNFCCC, the world is in for a tough battle against climate change.

As it is, according to the 2024 Global Climate Report issued by the National Centres for Environmental Protection, last year was the warmest year since global records began in 1850, registering 1.29°C above the 20th century average of 13.9°C. This was 0.10°C higher than the previous record set in 2023. Interestingly, the temperature increase on land by 1.98°C was offset by a slower increase on ocean, which rose by 0.97°C.

The Arctic and Northern Hemisphere land temperatures have already exceeded a 2°C rise, with an increase of 2.71°C and 2.28°C, respectively.

The 10 warmest years in the past 175 years of record-keeping all occurred between 2015 and 2024.

With the world’s largest economy potentially withdrawing from both the Paris Agreement and the UNFCCC, global warming is set to accelerate even faster.

Climate Change Investment Decisions

How does one incorporate climate change or ESG investment, which are mostly non-financial elements, into investment decisions?

Would this lead to lower investment returns as, inherently, corporations that strive to adopt ESG matrix or sustainability efforts could well be sacrificing profits over doing good for all stakeholders?

With the evolving nature of reporting on sustainability matters and those related to the ESG matrix, one cannot run from regulatory demand and, hence, adopt them with an open mind.

After all, what is good for business must be sustainable and what is sustainable must be good for business as well.

Our regulators are already making disclosures mandatory for public companies.

Failure to adopt them can lead to negative repercussions for publicly listed companies and may even lead to higher risk assessment by investment funds, that may deter investors or raise costs of capital.

Here to Stay

The potential moves by President Trump on climate issues and sustainability may lead to uncertainty with respect to US efforts in incorporating the ESG matrix into action.

Nevertheless, as the world is moving towards uniformity in sustainability reporting, the United States cannot afford to ignore reporting on issues related to ESG and sustainability.

Furthermore, growing demand from consumers and international investors for sustainable business practices requires companies to improve their ESG performance.

The United States will have to play a leading role towards a more sustainable world.

While political shifts may slow the sustainability journey and progress on ESG practices, they are unlikely to stop it entirely.

After all, according to Deloitte’s latest report on the Adoption of International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards on Jan 7, 2025, the United States joined 31 other countries globally (including Malaysia) in adopting the new standards in one form or another.

In the case of the United States, the Securities and Exchange Commission (SEC) announced its climate-disclosure standards in March last year.

According to the SEC, the US reporting framework has elements in common with the Task Force on Climate-Related Financial Disclosure recommendations.

It requires US companies to disclose at least some material climate-related information, such as risk management practices and potential risks to their strategy or financial performance.

Larger companies will be required to disclose Scope 1 and Scope 2 greenhouse gas emissions, or the emissions associated with their operations and with their purchased energy, but only if the companies deem those emissions to be material.

While the SEC acknowledged the “similarities” between its standards and the IFRS rules, it has said that it does not recognise the IFRS standards as an alternative reporting regime for the time being.

In other words, while the politicians and the government of the day may have a different agenda when it comes to climate change, regulators have more foresight to do the right thing for mankind and the future.

The article was first published by The Star.

Photo by Daniel Funes Fuentes on Unsplash.