In his latest sustainability news update, Steve Earl, partner at Boldt Partners says businesses are backing away from ESG following US president Donald Trump’s amendments.

Changes to the rules around how US public companies are challenged by shareholders over climate impacts are beginning to put the squeeze on sustainable investment.

The amendments insisted upon by the Trump administration are limiting shareholder resolutions, a technique that has been used often in recent years by sustainable investment groups and funds seeking to influence how large firms take action to counter climate change and pursue ESG measures.

And while many investors and companies have softened their language on ESG in recent times — and often avoid the acronym altogether — the shift in language is becoming less of an effective method for continuing to invest in sustainably while avoiding the anti-ESG backlash, according to Reuters this week.

The rule tweaks come at a time when geopolitical turbulence and trade wars are combining with climate-based fears to make investors demand greater transparency and accountability from companies so they know what risks their portfolios face, with the possibility of legal action by investors if the changes block that.

Yet it also points out that while the recent publication of the European Union’s ‘omnibus’ package, which aims to simplify sustainability rules including the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CSDDD) and the EU Taxonomy, has been widely seen as a backwards step for sustainable finance and corporate commitments, the impact of the latest Trump measures is unlikely to be felt much beyond the US. Separately, a legal change in the US may even prevent American companies from having to comply with the amended EU rules — though that in itself is another big can of worms.

The Reuters piece concludes that there is “growing awareness globally not just of climate impacts on company and investment performance but also the competitive advantages of embracing the sustainability agenda”.

But with linguistic edits unlikely to deter US policy shifts, companies are likely to need to come up with some new narratives and clearer justification for continued commitment to sustainability targets, particularly headline ones to achieve net zero carbon emissions.

Many of those that have stood firm — and are less in Trump’s line of sight — have pointed out that transitioning to a low-carbon future makes plain commercial sense, but as this Wall Street Journal article recently underlined, the notion of “sustainable investing” and “ethical investing” to replace adherence to ESG may soon be usurped by the word “resilience” in an attempt to better embrace the benefits for the planet and profits.

As one asset manager put it, “this is an industry’s effort to describe an incredibly complex thing in a series of one or two marketing words. ‘Resilience’ is the bingo buzzword of the day”.

Maybe. But in the face of regulatory shifts, and the US and Europe staring each other out over trade and conflict, resilience may be the order of the day well beyond a descriptor for investment logic.