2024 Sustainable Investing Trends

Predicting elections is a job for political pundits, oddsmakers and professional election predictors. We offer an unbiased view of how the two U.S. presidential candidates would likely approach climate and other sustainability-related issues and their impacts on the economy and financial markets.

While we don’t have a crystal ball and can’t predict what proposed policies would be enacted under either administration, we know:

• Vice President Kamala Harris and former President Donald Trump want the U.S. to be energy self-sufficient. The difference is in how they talk about accomplishing this goal.

• The IRA, which authorized funding to support clean energy production, domestic electric vehicle (EV) manufacturing, large-scale batteries, solar panels, heat pumps and other clean energy technologies, has created tens of thousands of new jobs and attracted investments from many different countries to the U.S. Just over a year after it was enacted in 2022, 280 clean energy economy projects were announced across 44 states, adding over 80,000 new jobs and roughly $100 billion in new investment.¹

• Despite the pushback against ESG (environmental, social and governance) issues, corporate America continues to emphasize sustainability. A recent survey by the Diligent Institute and Spencer Stuart indicates that almost 96% of board directors expect a continued or stronger focus on sustainability in the future.²

How might the election outcome affect efforts to decrease carbon emissions, reduce waste, support biodiversity and protect workers?

Our conclusion might surprise you: Although there will undoubtedly be changes under the next administration, we don’t expect them to be significant in moving markets, despite all the campaign rhetoric.

The next president could support or impede actions to address climate change and other sustainability issues across the U.S. economy in these ways:

If Harris Is Elected…

At the time of this writing, the Harris campaign hadn’t released a sustainability-related agenda, but we would expect a Harris administration to continue promoting a clean energy economy. The IRA has jump-started green economy investments and job creation, and it would continue to encourage the development of clean tech by U.S. manufacturers under President Harris.

While Harris expressed support for a fracking ban during her 2019 presidential campaign, she recently said she wouldn’t prohibit fracking because she believes we could have a vibrant green economy without such a ban. Furthermore, we expect a sharply divided Congress, so concerns about reducing the federal deficit would make more spending for clean energy projects beyond the IRA unlikely. Still, every government uses policies and regulations to support and protect industries critical to economic and national security interests, as clean energy technology would likely be under a Harris administration.

A Harris administration might pass regulations to protect biodiversity and manage water supplies in drought-stricken areas. We might also see actions to support the property insurance market, as many premiums have skyrocketed from a few years ago, with some carriers leaving markets where fire and flood risks have become too big to cover even with higher premiums. However, the bulk of the responsibility would likely fall on the private sector to invest and create jobs in the green economy.

If Trump Is Elected…

If former President Trump returns to the White House, we believe he may try to roll back parts of the IRA. We think he will reduce or eliminate tax incentives for EV purchases, even though that could hurt U.S. auto manufacturers. He has said that he will revoke unspent funding for clean energy projects authorized by the IRA. Still, we doubt the IRA would be unwound to a significant degree, even if Republicans control the House of Representatives in 2025. Why? Jobs and investment.

The IRA uses tax incentives, rebates, grants and loans to help state and local governments attract employers, creating new jobs and tax revenues. Removing them would be unpopular, as many states already use IRA funding to build factories and launch other job-creating projects.

As of July 2023, $225 billion in IRA-based investments were planned for Republican congressional districts versus $38 billion in Democratic districts. The states leading in new investments and jobs from the IRA include Georgia, North Carolina, Michigan, South Carolina, Arizona, Nevada, Indiana, Illinois, Louisiana and New Mexico.³

The IRA is widely referred to as a game changer in the U.S. and by other governments seeking to emulate the U.S. in attracting investment dollars and creating green economy jobs. A year after it was passed, the AFL-CIO noted, “The IRA already has created more than 170,600 new clean energy jobs, and by 2030, it will result in nearly 1.5 million more while reducing greenhouse gas emissions by nearly 40%.”⁴ Furthermore, the IRA supports Trump’s objective of making the U.S. a “manufacturing superpower.”

Would a second Trump administration be hostile to renewable energy? While the U.S. would likely withdraw from the Paris Agreement on Climate Change, we believe capitalism and markets would have a big say in the growth of renewable energy. Investors are putting billions into funds that invest in businesses developing ways to reduce carbon emissions. Texas now has the most large-scale solar installations in the U.S., even more than California.

Taking the Long View

While the upcoming presidential election will undoubtedly bring changes, the country’s push toward sustainability will likely persist. Both candidates have expressed a commitment to U.S. energy self-sufficiency, albeit through different approaches.

The IRA established a strong foundation for clean energy investments and job creation that will continue to benefit investors regardless of politics. The private sector will play a crucial role in driving further advancements in the green economy, supported by government policies that support clean energy technologies.

As the election nears, we remain focused on the long-term goals of sustainability and economic resilience. The future of sustainability-related regulations will be shaped by market forces, regulatory decisions and the ongoing commitment of businesses and policymakers to create a more sustainable and prosperous future.

Sarah Bratton Hughes

Head of Sustainable Investing

Firm Start

2022

Industry Start

2007

^{¹ Marco Willner, Sebastiaan Reinders, and Aviral Utkarsh, “The U.S. Inflation Reduction Act Is Driving Clean Energy Investment One Year In,” Goldman Sachs Asset Management, October 31, 2023.
² Diligent, “Sustainability in the Spotlight: The Balancing Act of ESG,” June 4, 2024.
³ Jack Conness, “In 2023, the United States Started Building Big Again, Thanks to Biden’s Inflation Reduction Act,” Forbes, July 22, 2024.
⁴ AFL-CIO, “The Inflation Reduction Act Is a Game Changer for Working People,” Press Release, August 16, 2023.}