How to Invest Sustainably During a Trump Presidency
During the first Trump presidency term, there was an explosion of growth amongst investors who were looking to align their assets with their values. Sustainably managed assets ballooned to over $17 trillion by 2020. Navigating this space during a second term that may prioritize deregulation and fossil fuel industries can present unique challenges and opportunities, however. Drawing lessons from Donald Trump’s first term, here’s how to invest sustainably as his second term begins.
1. Understand What Sustainable Investing Means
Sustainable investing, also known as socially responsible investing (SRI) or environmental, social, and governance (ESG) investing, focuses on generating financial returns while supporting companies and projects that prioritize sustainability. This includes:
- Environmental: Renewable energy, waste reduction, and climate change mitigation.
- Social: Fair labor practices, diversity, and community development.
- Governance: Ethical leadership, transparency, and shareholder rights.
Most commonly, investors find sustainable investments through the use of mutual funds, although ETFs have grown in this sustainable investing space as they have everywhere else.
2. Assess Your Values and Goals
Begin by identifying the causes that matter most to you. Whether it’s combating climate change, promoting gender equality, or supporting local communities, having clear priorities will help you select investments that align with your values. You can use our free Investing Values Questionnaire to gain clarity on what matters most here.
3. Adapt to Regulatory Shifts
During Trump’s first term, policies favored traditional energy sectors like oil, gas, and coal, while rolling back environmental regulations. With the "Project 2025" playbook in the background as his second term begins, investors should:
- Stay informed about changes to ESG-related regulations. Project 2025 mentioned ESG 32 times, so expect increased regulation and hurdles for sustainable investors.
- Identify sectors with resilience to policy shifts, such as renewable energy companies with strong international markets. Or, take a broader approach and focus on a strategy that is more broadly diversified and less subject to sector related risks.
4. Research ESG Funds and Companies
Despite political headwinds, demand for ESG investments continues to grow. Many financial institutions offer ESG-focused mutual funds, ETFs, and index funds. Resources for research include:
- Morningstar’s ESG Screener: Offers ESG ratings for funds and companies.
- Sustainalytics: Provides in-depth ESG risk analysis.
- MSCI ESG Ratings: Helps investors assess companies on ESG metrics.
If you work with an advisor, now is the time to ask them to use their expertise to navigate this for you. If your advisor doesn't have the expertise or desire to invest sustainably, now may be a good time to shop around.
5. Diversify Across Sustainable Sectors
Even with policies favoring traditional energy, sustainable sectors remain viable and can often thrive due to consumer demand and global trends. Consider investing in:
- Renewable Energy: Solar, wind, and geothermal companies that benefit from state-level incentives and international markets.
- Sustainable Agriculture: Organic farming and plant-based food producers, which align with growing consumer preferences.
- Green Technology: Companies developing energy-efficient products and services.
6. Consider State and Local Opportunities
State and local governments often pursue sustainability initiatives independently of federal policies. Look for investment opportunities tied to:
- State-level renewable energy programs.
- Municipal green bonds for infrastructure projects.
7. Monitor Policy Changes and Their Impact
While federal policies may not favor sustainability, international agreements and market trends can still drive growth in ESG sectors. For example:
- Global climate initiatives: Many countries continue to invest in renewable energy and carbon reduction, creating opportunities for U.S. companies with international operations.
- Corporate commitments: Many large corporations have set sustainability targets, creating opportunities for investors.
8. Engage with Companies as a Shareholder
If you invest directly in companies, use your shareholder rights to advocate for sustainable practices. You can:
- Vote on ESG-related proposals during annual meetings.
- Write to company leadership to express your concerns.
If you use mutual funds to invest, consider working with fund managers who have a deep, active shareholder engagement strategy that can be monitored. At Green Future Wealth Management, we monitor the real world ESG impact of our mutual fund managers.
9. Work with a Financial Advisor
A financial advisor with expertise in sustainable investing can help you build a portfolio that balances your values with financial returns. Ask about their approach to ESG factors and ensure they align with your goals. Advisors with the CSRIC designation have specialized training in managing sustainable investments.
10. Stay Resilient and Informed
Sustainable investing is a long-term strategy. Political leadership may change, but consumer demand for ethical products and services, along with global market trends, will continue to drive the growth of sustainability-focused companies. Staying informed and adaptable will help you navigate challenges and seize opportunities.
By following these steps, you can invest sustainably and contribute to a better future, even during a Trump presidency. As always, reach out to book a complimentary consultation to learn how.
Investing involves risk. Depending on the different types of investments there may be varying degrees of risk. Socially responsible investing does not guarantee any amount of success. Clients and prospective clients should be prepared to bear investment loss including loss of original principal.