Are renewables under threat in a Trump presidency?

It is no secret that Donald Trump has been promising to roll back some parts of the Inflation Reduction Act, which was launched by Joe Biden in 2022.

Now he has his chance.

Mark Harries, chief investment officer at Square Mile Investment Consulting and Research, says: “It seems clear that Trump will revisit the Inflation Reduction Act of 2022, which encouraged investment into clean energy, and there will undoubtedly be a shift in sentiment towards the use of fossil fuels.”

Harries points out that many of the beneficiaries and much of the job creation associated with projects aligned to the Inflation Reduction Act are based in the Republican heartlands, which is why making a full reversal of policy would be difficult to achieve. 

Trump could be the most ESG-unfriendly leader in the Western world, certainly the ‘E’ part

Dan Coatsworth, AJ Bell

Beyond renewable energy, and despite challenges to responsible investing, the core values of diversity, long-term climate goals, and disciplined capital allocation remain paramount. 

As a result, Harries says that many investors and companies are still dedicated to generating free cash flow and making smart capital deployment decisions, even in the face of external pressures.

He adds: “In fact, ESG is seen as a competitive advantage. As client demand for sustainable practices increases, businesses recognise that adopting these strategies not only helps meet expectations, but also drives long-term cost efficiencies and adds value.”

In a recent note by Pinsent Masons, Michael Watson, a specialist climate and sustainability adviser at the law firm, said the recent victory for Trump in the US presidential elections was “very significant” for global climate policy, citing rhetoric from Trump’s campaign that suggested his new administration would not only slow down the speed at which new climate policy is adopted but actively “go backwards in relation to the implementation of legislation”.

Watson said: “At one level, one can anticipate that there will not be a climate policy in the US [under Trump’s new administration].

“Trump said he will withdraw from the Paris climate agreement and potentially also the underlying UN framework convention on climate change, and he said that the US, by virtue of that, would not be participating in the COP meetings annually and will therefore be absent from that negotiation and absent from the attempt to coalesce a global coalition to address climate change.”