Navigating corporate climate action under a second Trump administration – 7 focal points for business leaders

With the presidential election decided more quickly than anticipated, Trump will come into office for a second term with likely policy ambitions to increase fossil fuel production, restrict the Environmental Protection Agency (EPA), and loosen climate regulations broadly. His reelection threatens to disrupt corporate plans on Sustainability, Climate, and Environmental, Social, and Governance (ESG) by potentially altering the trajectory of U.S. greenhouse gas emissions, dismantling the Inflation Reduction Act (IRA), eroding federal climate research and forecasting, and stepping back from America’s leadership role in global climate negotiations.

With these heightened risks to business continuity and the energy transition, it will be more important than ever for organizations to develop innovative and cost-effective solutions to maintain their climate and sustainability goals – whether for decarbonization, nature and water positivity, circularity, or climate resilience. At Telesto, we remain committed to developing cost-effective sustainability solutions and supporting our partners to achieve Paris-aligned climate goals. Regardless of the U.S.’s domestic policy, we see a future of expanded global regulation, propagation of consensus-based voluntary standards, and intensified state-level action that will keep U.S. companies moving towards a greener future. No matter who the president is, we firmly believe that global climate action will continue to move forward.

Ultimately, a second Trump term will mean a shift of the U.S.’s climate policies and approaches in material ways, which could pose significant operational, reputational, and financial risks for those who are unprepared. As Trump’s policy platform takes shape in the coming months, U.S. companies must start planning immediately by integrating the following focal points into their strategies and by raising new questions with their management teams:

1. The SEC climate disclosure rule will likely be reversed. The new climate disclosure rule from the Securities and Exchange Commission (SEC) will stay marginalized, with the primary reason cited as the additional cost to companies and investors. The SEC rule, adopted in March 2024, required large publicly traded companies to disclose their levels of greenhouse gas emissions. The proposed rule requires the largest companies to make climate disclosures as early as fiscal year 2025 and provide specifics on greenhouse gas emissions as soon as fiscal year 2026. The SEC had argued that greenhouse gas emission levels and other climate-related data have a material impact on businesses, and investors deserve to know this information. 

Why it matters: With regulatory uncertainty in the U.S., American companies should continue with their extensive carbon accounting and disclosures plans in accordance with California’s requirements, as well the E.U.’s CSRD and EUDR, and other jurisdictions, including Canada, UK, Australia, and Singapore. Adhering to global standards such as the Greenhouse Gas Protocol, sBTI, and ISSB will enhance companies’ continuity and compliance.

2. The IRA will be challenged, which raises questions about the disbursement of remaining funds. Biden’s signature IRA will be on the table, especially if the Republicans gain majorities in both Congressional houses. Since President Biden enacted the IRA in August 2022, some $110 billion of investments have flowed into the electric vehicles and battery sectors. Trump had promised to scrap pro-EV rules, mandates, and has regularly criticized the IRA’s tax policy, especially Section 30D, which provides tax credits. As many Republican states have benefited from clean tech investments from the IRA, Trump may face pushback from within his own party if he campaigns too hard against it. In fact, 18 Congressional Republicans have already publicly opposed repealing the IRA.

Why it matters: Companies and broader value chains benefiting from the IRA’s tax credits should strengthen scenario planning to account for potential tax incentive reductions. Those in the renewable energy sector should expect a contraction if fossil fuel production is expected to increase. This also raises a need for business leaders to re-evaluate the implications to their portfolio of energy costs and Scope II emissions calculations.

3. Weather patterns and climate shocks will intensify more rapidly than previously forecasted, which will dramatically increase costs to companies. Trump’s win and steering towards fossil fuel production expansion are projected to bring about an additional 4B tons of CO2 emissions by 2030 and over 25B additional tons by 2050. With floods, hurricanes, and wildfires worsening, companies should expect increased threats to critical infrastructure, supply chains, and corporate assets. This means significant extra cost to companies, both in the near term and on an increasing basis in perpetuity. The largest global companies report almost $1 trillion at risk from physical climate impacts and $250 billion in potential losses from stranded assets. This trend line will worsen unless we take immediate action, as climate change is expected to cost $38 trillion in damages per year by 2050.

Why it matters: Regardless if the SEC climate rule is overturned, companies must continue to regularly assess their physical and transition risks related to the climate crisis (leveraging the Task Force on Climate-Related Financial Disclosures – TCFD, which is now integrated into the IFRS and ISSB standards). This framework helps companies identify and disclose climate-related risks and opportunities and is now part of global reporting regimes. With billions of dollars at stake, companies have an increased responsibility to understand their exposure, especially under a Trump administration where we will see increased climate threats.

4. The U.S. will pull back from the Paris agreement, and some companies will question their Paris-aligned targets. During his first term, Trump withdrew the U.S. from the Paris Agreement, an international pact to fight climate change. While campaigning, Trump has promised to take the U.S. out of the Paris climate agreement again and is facing pressure to pull the U.S. out of the U.N. Framework Convention on Climate Change (UNFCCC) for the first time. While leaving the Paris Agreement would be straightforward legally, legal experts remain unsure about whether Trump could withdraw the U.S. from the UNFCCC without the approval of the U.S. Senate. Leaving the Paris agreement would place the U.S. among Iran, Libya, and Yemen, who have also withdrawn.

Why it matters: Rhetorically, the push for companies to be Paris- and science-aligned will be dampened in the U.S. The terms Paris- and science-aligned, are largely centered on companies’ plans to achieve carbon neutrality by 2050. However, with the propagation of Paris-aligned disclosure requirements in the E.U., Canada, U.K, California, Australia, New Zealand, Singapore, and others, U.S. companies will face regulatory pressures (as opposed to voluntary pressures) to be Paris-aligned and will have to disclose accordingly.

5. ESG backlash will amplify for institutional investors. The SEC currently has several ESG-related regulations on its agenda, including rules concerning greenwashing, human capital management, and corporate diversity. These were in process and incomplete, which means their processing and finalization would spill into the Trump administration’s tenure. As it did in its first term, the Trump administration is expected to resist all of these measures. More broadly on ESG investment, during his first term, Trump issued an executive order that made it harder for employers to offer ESG funds in employees’ 401(k) retirement plans. The Biden administration later softened the Trump rule. Now that Trump has been re-elected, he may sign an order barring ESG considerations from retirement investment funds and could then call on Republican-led states, like Florida and Texas, to pressure investment firms to curtail their environmentally friendly investment guidance.

Why it matters: The broad tapestry of ESG had gained momentum with investors given their pushes for greater transparency on critical topic – GHG emissions, dependency on fossil fuels, climate risk, nature risk, water dependency, diversity measures, etc. With so much happening across federal and state lines, expect a continued backlash for institutional investors. On the corporate reporting side, the voluntary ESG reporting measures will remain unregulated and varied. For corporates with a portfolio of ESG targets, alignment to voluntary requirements is critical as well as understanding potential greenwashing risk internationally.

6. Despite Trump’s best efforts, U.S. state-level climate regulation will continue to proliferate. State climate laws like California’s climate bills will inspire NY, MA, IL and 13 others who are planning on following suit. During Trump’s campaign, California officials have worked to insulate its environmental regulation and make them “Trump proof.” Whether California succeeds could affect another dozen states that follow its emissions rules  as well as global companies operating in California that look to standardize their practices and products across geographies. The incoming Trump administration is expected to challenge California’s climate policies, such as tailpipe emissions, which have set the pace for the rest of the nation and world.

Why it matters: Even if the SEC ruling is sidelined, U.S. corporates will need to conform with California climate reporting standards which include emissions disclosures, climate risk, and a degree of assurance. While courts at federal and state levels may complicate the implementation of these measures, about 16 other states are looking to replicate these requirements. With so much uncertainty, corporates should plan to conform to CA’s measures to ensure preparation and compliance.

7. Data quality will degrade on climate science and weather, which will hinder corporate planning. The U.S. has been a world leader in climate science and weather research, with the bulk being conducted by the Department of Energy (DOE), NOAA, NASA, and the EPA. Each may face significant reductions in budget and cuts to civil service-based workforce that could make it easier for political appointees to hire or fire workers. As a result, the research produced by these agencies will decline and degrade. Business leaders will not be able to depend on their research as they have in the past, or may be forced to pay a premium to access privatized, high-quality data.

Why it matters: The highest-performing businesses depend on high-quality data. In corporate sustainability, ESG, and climate, corporates need to understand and model the greening of the green, total national emissions, or intensity of projected climate shocks to inform their strategies. In a second Trump term, these types of data will either lose quality or no longer be reported, which in turn will impede a company’s ability to plan and model. Looking to international and European sources will be critical, as well as taking stronger action now to improve climate resilience to facilities, supply chains, and assets.

With the pending climate policy constraints and restrictions under a second Trump term, it is more imperative than ever for corporates to innovate and bring down the cost of the energy transition. Regardless of partisan positions, we at Telesto are committed to accelerating the global energy transition and achievement of climate goals. Even if U.S. policy will be less conducive to doing so, we will continue to work with our partners ever day towards global decarbonization, management of worsening climate shocks, and hastening our renewable energy future. We will do this for the betterment of business continuity as well as to advance our vision – for the regeneration of the planet.

For more information on how we can support your team in navigating a new U.S. climate policy outlook, please reach out to us at info@telestostrategy.com.

More resources from Telesto:

• • California Leads the Way on Climate and Emissions Disclosures: Public and Private Companies Must Now Prepare for New Reporting Requirements
  • Preparing for Climate Litigation: What Board Members Need to Know
  • How CSOs Can Navigate The “Gray” in CSRD Implementation
  • Climate Risk is Business Risk: How Leaders Can Prepare for a Changing World