Will Trump's Second Term Derail Global Sustainability and ESG?

To begin, it helps to understand the kinds of directives that have fueled uncertainty. On the environmental front, the administration has instructed agencies to unwind regulations it says were overruled by recent Supreme Court decisions. This has led to high-profile attempts to pause or rescind methane rules, power-plant emissions limits, and a broad memo telling agencies to strip out any rule deemed invalid. In practice, courts have intervened—issuing injunctions and delaying implementation—citing concerns that these rollbacks sidestep established rule-making processes.

Meanwhile, regulations around diversity, equity, and inclusion have also been targeted. New policies have attempted to scale back DEI programs for federal contractors, curtail recognition of transgender individuals in government benefits, and even threaten law firms with contract suspensions if they maintain certain D&I policies. Again, courts have blocked these moves, labeling them as likely unconstitutional or procedurally flawed.

Outside of the domestic arena, there’s been a handful of foreign-policy gambits—like attempts to reroute foreign-aid funding and designate new terrorist groups—that have been enjoined by the judiciary or meet resistance in Congress. Trade initiatives, by contrast, have mostly been limited to bilateral negotiations rather than sweeping new tariffs or taxes, and haven’t faced the same legal scrutiny (yet).

So why does all of this matter for ESG? At every sustainability conference over the past few years, participants point to Washington’s shifting political winds as a major risk factor. Some business leaders talk openly about how these executive reversals have spooked them into slowing or shelving ESG projects. The fear is that if requirements can be rolled back overnight, any investment in sustainability becomes a precarious gamble—potentially leaving companies with stranded assets, costly compliance resets, or reputational blowback when policy inevitably snaps back. For firms operating on tighter margins, especially in energy-intensive industries, the calculus suddenly looks far less attractive.

That said, there’s a clear split emerging between two very different mindsets within the corporate community. On one side are the companies that have paused their ESG efforts—concerned about regulatory whiplash, wary of political backlash, and focused on protecting near-term profitability. Their argument goes something like: “Why pour billions into green initiatives if tomorrow’s administration might revoke access to incentives, scrap regulations, or undermine reporting standards?” These organizations often have a lower tolerance for policy volatility. They prefer short-term clarity, see ESG as an optional expense rather than a strategic imperative, and are inclined to wait for a more stable—and perhaps friendlier—regulatory environment.

On the other side are firms that view ESG as a core element of long-term value creation, regardless of narrow political cycles. These companies point out that investor demand for sustainable, transparent business practices has become a global phenomenon—not limited to U.S. policy debates. Pension funds, asset managers, and even sovereign wealth funds around the world increasingly rank ESG criteria alongside traditional financial metrics. For them, rolling back climate regulations represents nothing more than a temporary interruption. They reason that economies of scale and technological innovation will ultimately bring down the costs of renewable energy, carbon capture, and other green technologies, making sustainability a competitive advantage rather than a regulatory box-check. In short, when policymakers waver, markets keep moving in the same direction.

Which camp is likely to prevail? From a risk-profile standpoint, the “spooked” cohort is reacting rationally to immediate policy uncertainty—but by doing so, they risk ceding ground to more forward-looking rivals. If one company delays its decarbonization plan until “the coast is clear,” but its competitor presses ahead and secures a cheaper, cleaner energy supply chain, who do you think wins market share in five years? Equally important, global capital flows into ESG-branded funds have continued to rise—east of Suez just as much as in Europe. Even if U.S. investors temporarily shy away from ESG screening, global demand for green bonds, sustainability-linked loans, and “transition finance” tools remains robust. In fact, recent data shows that 84 percent of the world’s sustainable-fund assets are domiciled in Europe and Asia-Pacific, with only about 11 percent in the U.S. This imbalance suggests that, while U.S. policy oscillations matter, they do not set the global pace.

Critics might argue that aggressive rollbacks in the U.S. will embolden other countries to follow suit. But so far, the opposite is happening: emerging markets from India to Indonesia are doubling down on net-zero commitments. ASEAN nations, including Singapore and Malaysia, are moving rapidly to develop circular-economy strategies, sustainable finance hubs, and green hydrogen projects. China has reaffirmed its 2060 net-zero goal. The collective momentum outside the U.S. is simply too large to be overturned by one administration’s stance. Indeed, many multinationals headquartered in the U.S. still publish detailed climate disclosures and set ambitious emissions targets because their investors and customers—whether in Europe, Japan, or South Korea—demand it. In this way, the Trump administration’s actions resemble a speedbump rather than a roadblock.

Will Trump’s second-term rollbacks affect global ESG progress? Of course. They will create near-term noise and inject volatility into certain markets. Some U.S. companies may pause or dial back their initiatives, and domestic regulators may tilt toward less stringent enforcement. But for the broader global economy—where ESG has already matured from buzzword to business necessity—the impact will likely be limited and temporary. The overwhelming majority of global capital is still headed toward low-carbon, inclusive growth models. Once political tides shift again, U.S. policy will tend to follow suit, catching up to global norms rather than dragging the world backward.

In the end, the real measure is not how far a single president can roll back regulations, but how deeply sustainability has embedded itself into corporate strategy, investor expectations, and consumer behavior around the world. On that count, the evidence is undeniable: ESG is not a passing trend but a structural pivot. And while U.S. policy uncertainty may add friction, it is unlikely to derail the airliner of global sustainability that has already taken flight.