셀스마트 자민
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4 months ago
ESG Policies Waver Under Trump’s Return, Investment Appeal Declines (Mar 3, 2025)
The global backlash against ESG (Environmental, Social, and Governance) policies is intensifying. In the United States, President Trump’s rollback of Biden-era ESG-related policies has led the financial sector to withdraw from ESG investment strategies. Meanwhile, in Europe, regulatory easing is gaining momentum as businesses push back against increasing compliance burdens.ESG policies were initially introduced to demonstrate that corporate profitability could align with ethical and environmental responsibility. However, growing concerns over vague definitions and unclear standards have fueled ongoing debate. Additionally, accusations of exaggerated ESG performance by companies and asset managers have prompted stricter greenwashing regulations in both the U.S. and Europe.In the U.S., conservative opposition to ESG policies has intensified under the Trump administration. In December, the Republican-led House Judiciary Committee demanded that investment firms disclose their roles in net-zero (carbon neutrality) groups, such as Climate Action 100+. Some Republicans have criticized these alliances as "climate cartels" that allegedly manipulate market trends.As a result, major financial institutions have been pulling out of ESG alliances. Prominent asset managers and leading banks have withdrawn from the Net Zero Asset Managers Initiative (NZAMI) and the Net Zero Banking Alliance (NZBA). The financial industry as a whole appears to be realigning its ESG strategies to match the new administration’s policy direction.Investor sentiment toward ESG investments is shifting as capital outflows from ESG funds continue. According to a financial data provider, in 2024 alone, approximately $20 billion was withdrawn from U.S. ESG funds, significantly surpassing the $13 billion outflow in the previous year.This trend is not purely political. Investors have become disillusioned with ESG strategies’ underwhelming returns. One of the most well-known clean energy ETFs declined by 27% last year, while the S&P 500 gained 23% in the same period.The weak performance of ESG funds has been exacerbated by rising interest rates and shifting market trends. Since 2022, technology stocks—traditionally a stronghold for ESG investments—have struggled, while oil and gas companies, which had been undervalued, saw soaring profits due to rising energy prices following the Russia-Ukraine war.The push for ESG regulatory relaxation is also becoming evident in Europe. Many businesses argue that excessive regulation could weaken their global competitiveness, prompting the European Commission to consider scaling back ESG compliance requirements.A key revision involves the Corporate Sustainability Due Diligence Directive (CSDDD), which was initially implemented to monitor ESG violations within corporate supply chains. However, to reduce the burden on businesses, the threshold for companies subject to CSDDD regulations is expected to be relaxed as follows:Previously: Companies with over 250 employees and €40 million ($43 million) in revenueRevised: Companies with over 1,000 employees and €450 million ($487 million) in revenueAdditionally, revisions are expected for the Corporate Sustainability Reporting Directive (CSRD) and the EU’s sustainable investment classification framework.An EU official stated, "Regulations must be manageable for businesses and should not impose excessive costs. Current ESG compliance requirements need to be reassessed to ensure they remain practical."Is ESG Investment at a Crossroads?Some experts argue that it is time to rethink ESG investment strategies. A portfolio manager at a global asset management firm commented, "ESG is no longer a strong selling point for attracting investment. The time has come to reassess both the approach and the way ESG is communicated to investors."The recent policy and market changes suggest that ESG investing must evolve beyond its current framework. Rather than merely relaxing regulations, stakeholders must consider how ESG investment strategies should adapt to new market realities.
