Despite polling in the run up to the election indicating a knife-edge result, Donald Trump has won a decisive victory and is due to return to the White House in January as the 47th President of the United States.

There may well be both positive and negative headline grabbers once the new administration is in place. It is suspected that one of the first moves the new president might make is to withdraw from the Paris Climate Agreement, which would remove the US from legally binding requirements to decarbonise its economy. While this lack of direction is likely to cause some uncertainty for the world’s second largest emitter of carbon dioxide, we are highly encouraged by the direction corporates are taking, independent to regulation. Many of the largest US companies have become signatories to the Science Based Targets initiative, the gold-standard for corporate decarbonisation plans.

There is also increased discourse around how an anti-ESG backlash under the incoming administration could create significant headwinds for the sustainable investment industry. In our view, any anti-ESG movement is unlikely to make significant headway given that ESG, in its purest form, is the consideration of environmental, social and governance data that affect the financial conditions or operating performance of an investment. These factors are therefore intrinsic to the investment case and are not politically motivated.

While the election may affect the outlook for some parts of the Environmental theme, it’s a large and somewhat heterogeneous part of the market with many independent drivers of performance. Though renewable energy providers may be at once synonymous with the theme, there are a range of other areas such as clean water, waste management and energy efficiency which are well established parts of the stock market and that carry less sensitivity to the prevailing political situation. Finally, the three major financing packages passed during the Biden administration including the Inflation Reduction Act (IRA) are all likely to remain broadly intact under the incoming administration.

Beyond the Environmental theme, the EQ portfolios benefit from diversification across other areas of sustainability that are less sensitive to political change. There are several unaffected long-term tailwinds for our investment themes, ranging from an ageing population and wider demographic change, to rapid technological advancement, and to rising inequalities both financially and through unequal healthcare outcomes. We are still excited by the prospects of our sustainable themes which have broadly avoided the ire during the election period.