Returning US president Donald Trump has carried through on pledges to pull out of the Paris climate change agreement, but that has not dampened enthusiasm for sustainable investment among European investors, a new survey found.
Over 90% of European investors polled in the run up to the 21 January of US president Donald Trump said they were extremely or somewhat concerned over the state of ESG and sustainability practices in the US, but they still intend to either maintain or increase their impact allocations, a survey by Pensions for Purpose shows.
Pensions for Purpose, a UK-based industry body, says the results are significant because, although European and US investors often follow distinct paths on sustainability issues, 83% of survey respondents said US sustainability practices would have some influence on their decision making, even if none said that influence was critical.
The survey of 44 individuals at asset managers, asset owners and consultants from Europe, including the UK, was carried out in November and December 2024, in the wake of the November’s US presidential election.
Investor concerns over the issues raised surrounding sustainable investing are unlikely to be assuaged by president Trump’s first actions on returning to office for a second term. On his first day back in power, he followed through on earlier pledges, by ordering the US to pull out of the Paris climate change agreement and the World Health Organisation, while also encouraging expansion of the US oil and gas industry. Trump has also suspended US foreign assistance programmes for 90 days to review their alignment with his policy goals.
Despite worries over the direction of travel in the US, the survey does indicate continuing commitment to ESG goals and sustainable investing among European investors, Karen Shackleton, founder and chair of Pensions for Purpose, told Impact Investor.
The survey showed that 58% of respondents planned to increase their impact investment allocations over the next 12 months, while the remaining 42% said they would maintain current levels of impact allocations, but not decrease them.
Shackleton said that indicates a commitment to the sector and optimism over the returns it could generate.
“It is a reassuring insight from the survey that European and UK investors still see ESG and sustainability in a very different light to the narrative that’s coming out of the US. I would have been deeply concerned if that had not been the case, because that wouldn’t have aligned with some of the conversations that we’re having,” she said.
There was also continued enthusiasm among European investors for establishing impact goals, with 61% of organisations having already set, or planning to set, specific targets for impact investments. That does leave 39% without plans to set targets – Pensions for Purpose said that pointed to an opportunity for greater engagement and education.
Engagement concerns
“I think impact investing will still be of interest to investors on both sides of the Atlantic, because of the return opportunity – that won’t fundamentally change. But where the change in policy in the US could have an impact is around engagement policies, and we’re already seeing that to an extent,” Shackleton said.
One notable example is the withdrawal of some US-based investment firms with global reach from the Net Zero Asset Managers Initiative (NZAM), which was set up to align big players in the global asset management industry with climate goals. The departure of Blackrock, the world’s largest asset manager, from the coalition in early January prompted NZAM to suspend its activities while the organisation sought to adapt its aims to better tally with the reshaped objectives of US firms adapting to president Trump’s pro-fossil fuels agenda.
Trump is also rolling back diversity, equity and inclusion (DEI) policy introduced under his predecessor Joe Biden, revoking a Biden directive aimed at preventing discrimination based on gender identity or sexual orientation. He has also said that there should be only male and female genders with no scope for changing gender designation.
Shackleton said such roll backs could yet have a beneficial side, if they put the underlying themes in the spotlight, as recent Pensions for Purpose research suggested pension funds were not considering DEI sufficiently when looking at their underlying investments.
“It can be good to have somebody with a fairly extreme opposite view to your own, because it suddenly brings the topic back into people’s minds as one for discussion, particularly with things like diversity, equity and inclusion,” she said.
Shackleton said that pension funds need to think carefully about whether the global asset managers they invest with could still deliver the outcomes they are seeking in terms of sustainable and impact investing.
“If they don’t have confidence that their asset manager is going to be able to deliver to those criteria, then they need to switch away from a global manager towards a more UK focused or European focused manager who can deliver,” she said.
