Sustainability and ESG investments will keep expanding under Trump

The coming energy policy shift under President-elect Donald Trump and new regulations overseas are prompting investors to be more cautious, but they will likely have a limited impact on the sustainable investment market in 2025 and beyond, analysts and financial firms predicted.Funds seeking to capitalize on energy transition opportunities while hedging climate-related risks face market uncertainty in the US. Those with operations in Europe must also contend with stricter taxonomy regulations for any investments with an environmental, social and governance label.Such pressures will accelerate closures and consolidations of ESG funds globally, Hortense Bioy, head of sustainable investing research for Morningstar, said in an interview.Bioy and other experts who spoke with S&P Global Commodity Insights said investors are not abandoning strategies they have been fine-tuning for several years. The market will also continue to respond to real-world economics that extend beyond Washington politics, they predicted.

slower pace than at the start of the decade

The US market for investments with a sustainability or ESG label stood at $6.5 trillion by the end of 2024 based on public disclosures, according to the US SIF Foundation. The group advocates on behalf of investor members with $5 trillion in combined assets under management.A 2024 US SIF member survey capturing 265 institutions found that 73% expected the market to grow over the next couple of years. However, only 39% thought their own organization would increase sustainable investing, reflecting more subdued market enthusiasm possibly due to political pushback, the report said. The survey covered asset managers, institutional investors, wealth managers and others in the sustainable investment space.