Sustainability, ESG – in a U.S. election year

One point is clear, regardless of the outcome of the 2024 elections, U.S. companies with European operations, will need to address the CSRD, as well as other country specific reporting standards and related legal objectives, to ensure continued access to the European market.

On November 5, the United States will elect a new president, in addition, all 435 seats in the United States House of Representatives and 34 of the 100 seats in the United States Senate will be contested to determine the mem-bership of the 119th United States Congress. There will also be various state and local governmental elections on that day. 

President Joe Biden ended his presidential re-election campaign on July 21, 2024. He has been a staunch supporter of governmental actions towards environmental, social and governance issues (ESG). One of his first actions as the new President on January 20, 2021, was to rejoin the Paris Agreement, after the Trump administration withdrew from the agreement. 

The current Vice President Kamala Harris has been nominated as the Democratic presidential candidate. This unprecedented and unexpected change in the democratic nominee is remarkably close to the actual election, a certain amount of uncertainty as to her position on ESG exists, she has been mostly silent on ESG. During the recent Democratic National Convention (DNC) she only mentioned ESG once. Where she stands on the issues of ESG are unclear, but one would expect her to be in line with President Biden. 

Former President Donald Trump, the Republican candidate for President, recently said if he is elected President, he would curtail the Security and Exchange Commission (SEC) recent rules requiring climate change disclosure. He has been outspoken in his position against ESG as he believes it is part of an ideological political agenda. As stated in his website, he maintains a pro-American energy vision, has a robust commitment to environmental conservation, renewable energy production, prioritizing the clean-up of major pollution sites, and investing billions in clean water infrastructure.  

The federal government and state governments, have a myriad of laws to protect the environment, social and governance, albeit there is no single comprehensive set of reporting requirements like the CSRD that intends to provide a level playing field. Fundamentally, the split seems to be driven by ideology, and on the best approach to address issues relating to ESG. The legal landscape in the United States is one that often has conflicts between federal, state and local laws. A growing number of states have passed or are considering passing laws to restrict the use of ESG data to make investment and business decisions. Proponents claim that ESG threatens investment returns, and forces businesses to apply standards beyond the rule of law and could lead to higher cost of capital because it is costly to measure and report and prevent free markets from operating effectively. It’s not that states don’t support protecting the environment, it is the issue that forces investment decisions being made on the basis of ESG. Therein lies the great divide in the United States between whether and how much government regulation including a particular political party’s ideology should be law versus a free market system in which consumers decide what to buy and where to invest.