On the Sixth Day of Christmas… The Potential Global Implications of Donald Trump’s 2024 Re-election and how Climate Change may be on the ‘back burner’
In the sixth article of our 12 Days of Christmas series, we consider Donald Trump’s 2024 Election victory and its potential global implication on Climate Change and, in particular, what it may mean for ESG litigation.
Trump's re-election to the White House has the potential to pose a major obstacle to reducing emissions and securing funds for developing nations, as the Trump Administration appears to be preparing to introduce a swath of Environmental, Social and Governance (“ESG”) policies on climate and energy.
Trump's re-election coincides with a period of heightened global emphasis on ESG compliance, leading to its integration into soft law frameworks and EU supply chain due diligence regulations.
This integration includes the Organization for Economic Cooperation and Development Guidelines, UN Guiding Principles, the EU's Corporate Sustainability Due Diligence Directive (“CSDDD”), Germany's Supply Chain Due Diligence Act, and France's Duty of Vigilance. These legal and regulatory developments stem from growing awareness and activism amongst consumers and investors, as well as the increased reputational risks and potential negative impacts for businesses that fail to comply with ESG standards.
With Trump in power from January 2025, the progress made in recent years may face setbacks.
It is understood that once Trump is inaugurated as President in January 2025, he plans to withdraw from the Paris Climate Agreement, dismantle offices in various agencies that address pollution affecting poor communities, and reduce the size of national monuments in the West to permit more drilling and mining on public lands. Despite this, international ESG obligations persist, likely posing challenges for the Trump administration.
The most significant challenge that may arise for US companies is the impact of the CSDDD. Even without internal US ESG compliance policies, US companies wishing to trade in the EU must adhere to the CSDDD. This directive applies to non-EU companies with a net turnover of €450 million or more in the EU. It requires companies within its scope to identify and address potential and actual adverse human rights and environmental impacts, not only in their own operations but also in those of their subsidiaries and business partners involved in their supply chains.
So, what does this mean for ESG Litigation?
Despite the potential impact of Trump's policies on global trade, companies must continue to comply with both local and international laws to avoid violating ESG policies. This is particularly crucial for companies with complex supply chains spanning multiple jurisdictions. As a result, we may see an increase in ESG litigation driven by investors and consumers who demand higher ESG standards, even as regulatory standards decrease. Companies in both the US and the UK that fail to maintain compliance risk facing legal and reputational challenges. Therefore, it is essential for companies to stay compliant with ESG regulations, manage their reputation, and proactively address emerging ESG issues.
