“Left trash”, something typical Green and the communists. This is what Donald Trump thinks about sustainability. The Republican candidate – many of whose strongholds are oil states – is slightly ahead of Democrat Kamala Harris in the polls as the November 5 presidential election approaches. In recent years, President Joe Biden has provided strong support for the energy transition, with the Inflation Reduction Act (IRA), the largest package of measures pro decarbonization of history. The question is: is this law, the true flagship of the Biden administration, in danger? What implications would a Trump victory have for sustainable investing? This song was featured in the last elEconomista.es ESG meeting.
According to Natalia Luna, analyst senior According to Columbia Thematic Investing Threadneedle, “Trump has included opposition to this law in his campaign rhetoric, but what he does in practice is another matter.” We must not forget, Luna emphasizes, that the majority – more than 60% – of the tax benefits of this legislation went precisely to Republican states, which stimulated the creation of businesses and jobs. This is why Luna considers “quite difficult” for us to consider a total repeal of this law.
But this analyst believes we could see a partial repeal of the IRA. This law establishes tax assistance for clean energy projects for 10 years, and Trump could reduce its scope. Columbia Threadneedle believes he probably will, given that the candidate has said that if elected he would extend tax cuts for businesses; so he must reduce IRA benefits, in order to maintain this corporate tax cut.
“People think the IRA only involves tax benefits, but Biden supplemented it with other regulations that favored reducing emissions or that encouraged certain sectors to meet renewable energy requirements. This was in addition to other Environmental Protection Agency funding programs. So even if Trump doesn’t completely repeal this law, he can still change things, for example, changing regulations; “emissions for certain companies, or regulations that promote sustainability in certain sectors”, explains Natalia Luna.
Which sectors will suffer less and less under Trump?
However, which clean energies are the most vulnerable to a Donald Trump victory? Virginia Pérez, investment director of Tressis, considers that “solar energy presents the most modest political risks; It is the most abundant and cheapest energy in the United States. It has significant growth potential and, whether or not a hypothetical Trump administration provides subsidies, exposure to this sector, in our view, remains logical. These companies “are mainly domestically produced, so, in addition, “they could benefit from a stricter tariff. environment on Chinese imports, not to mention what solar power means for job creation in red states. » For example, an oil state like Texas is also the state that invests the most in renewable energy, due to its privileged location, which provides cheap solar energy. and wind energy.
Tressis is much more cautious with onshore wind power, “which is more mature”, and with marine energies.: “It was in the off where investors were expecting more significant growth, but Trump has been very negative about it, so we would stay away. » They also believe, explains Virginia Pérez, that “there is “a significant risk of seeing subsidies for the purchase of electric vehicles disappear”aid which can currently reach $7.5 billion per vehicle in the North American country. Tressis is also avoiding investing in hydrogen companies, “at least until we have more evidence that their profitability is sustainable.” Natalia Luna agrees that among the clean technologies most at risk of being eliminated or weakened are both the electric car and the off.
THE nuclear energyOn the contrary, it could pave the way for collaboration between Republicans and Democrats, since both parties have at one point spoken out in favor of this energy source, which represents 20% of electricity production in the United States .
The outlook is also favorable for all investments in energy infrastructure, says Natalia Luna, in a country that needs to modernize its electricity networks to enable the deployment of renewable energies and progress in electrification. This supports what is called built-in utilities.
Regardless, experts agree that beyond momentum generated by elections, investments in businesses Green It will continue to grow because it is profitable. “In the short term we can see a market reaction in many companies, but in the long term we believe there is very strong demand to continue investing in renewables, nuclear and grids,” says Luna .
There’s no going back
“Trump will be able to stop the IRA, but not completely cancel it,” recognizes Jesús López Zaballos, president of Efas, the European Federation of Associations of Financial Analysts. “At Effas, we see a very clear dichotomy between what politicians say as part of electoral propaganda and what investors do.. Because we have the big North American employment pension fund, and a manager like Fidelity, who are betting on ESG issues. » There is, on the other hand, “a series of political contradictions”, such as the fact that the Republican candidate chose Elon Musk, president of the electric vehicle giant Tesla, to head his new government monitoring commission. “What is certain is that is that, if Trump were to win, we would have a problem with information transparency,” he adds, while Kamala Harris would propose. continuity with what he said and what Biden achieved.
Whoever wins the elections, sustainability will continue, explains Alberto Andreu, executive director of the Master in Sustainability at the University of Navarra and senior advisor from EY: “There is a very relevant question, namely that the CSRD – the European regulation on sustainable development reporting [a cuya transposición en España acaba de dar luz verde el Consejo de Ministros] opens the door to the sustainability report being subject to reasonable assurance from 2028-29. » In other words, This would equalize the type of audit carried out on corporate sustainability information with the type of financial audit. (currently many more checks are carried out light).
“What lies behind this reporting movement is the awareness that Environmental, social and governance aspects generate economic impacts and can generate financial losses.. “Any investor and any analyst, to know a company, must know both financial and sustainability data,” adds Alberto Andreu. Around 50% of companies by market capitalization already report their ESG data according to the European Sustainability Disclosure System.
