February 17, 2025
Pres. Donald Trump’s push for “anti-woke” legislation targeting established ESG-related corporate governance such as climate action and DEI programs will have legal, financial, and regulatory ripple effects across multiple industries. Specifically, the White House’s recent spate of executive orders will heighten regulatory ambiguity, adding complexity and potentially leading to legal disputes and regulatory sanction as companies navigate an uncertain and changing landscape.
In general, volatile policy like this undermines business confidence, impacting long-term investment and strategic decisions. For example, the row-back on climate policy and decision to exit the Paris Agreement risks investments in renewables being delayed at a critical time for climate action, as physical risks and catastrophic losses due to climate change are continually amplified year after year. Other countries will now need to fill the leadership void and could stand to benefit in the renewables technology race. Whatever happens, coordinated international efforts to address climate change will become even more complicated.
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While regulatory volatility on ESG will impact all sectors, insurers specifically need to reflect on and adapt to these changes. Like other companies, many insurers with headquarters or significant business in the EU will need to comply with EU ESG regulations such as the CSRD, CSDDD and Taxonomy. Even with the anticipated amendments to these regulations under the EU’s Competitiveness Compass and proposed sustainability Omnibus, ESG-positive mandates are here to stay. Indeed, ESG reporting requirements exist in China and have recently been passed in the UAE. With U.S. policy pointing actively towards anti-ESG sentiments and actions, multinational companies will need to balance and navigate across increasingly divergent approaches.
This balancing act will only increase uncertainty about disclosures, increase the frictional costs of compliance and raise the prospect of regulatory sanction or litigation. As the legal framework reorients, companies, insurance carriers, and legal experts will need to continually evaluate, upskill and scan the horizon, to manage risk and adapt to uncertain futures.