By Jon Solorzano, Jason Halper, and Kelly Rondinelli
With Trump’s inauguration, significant shifts in U.S. Environmental, Social, and Governance (ESG) policies are anticipated, prioritizing economic growth over environmental or social concerns. Biden-era ESG regulations are likely to be rolled back, reducing corporate ESG efforts and providing temporary relief from reporting and shareholder pressure. However, ESG considerations remain material to investors and companies, as they affect financial and operational performance. Despite the politicization of ESG as a concept, robust disclosures will continue to be critical, particularly in navigating long-term risks and opportunities that traditional financial models cannot fully capture. Vinson & Elkins highlights five predictions in its latest report, “ESG in 2025: What to Expect in Trump 2.0”:
- Prediction 1 – Litigation, Litigation, Litigation
- Prediction 2 – The Anti-ESG Playbook Now Exists and ESG’s Critics are Emboldened
- Prediction 3 – Both Pro- and Anti-ESG Shareholder Proposals Will Continue at Elevated Levels but Garner Low Support
- Prediction 4 – Corporates Will Walk Back Their ESG Commitments in 2025 and Beyond
- Prediction 5 – Vacuum for Federal ESG Legislation Will Make US State Actions and Non-US Regulation the De Facto Standards Applicable to Most US Companies
Litigation is expected to become a key battleground for ESG-related issues under a second Trump administration, as federal legislative and regulatory avenues diminish. Both pro- and anti-ESG agendas are likely to drive lawsuits on issues such as greenwashing, antitrust violations, and reverse discrimination. Critics of ESG are becoming more organized and vocal, leveraging tools such as state legislation, lawsuits, and public campaigns to push back against corporate ESG commitments, particularly in areas like diversity, equity, and inclusion (DEI). At the same time, companies face challenges balancing stakeholder demands, reputational risks, and compliance with evolving ESG expectations.
With federal ESG regulations unlikely to progress, state-level actions and international standards, particularly from the EU, will increasingly dictate ESG compliance for U.S. companies. States like California are expected to continue enacting progressive climate and ESG-related laws, while the EU’s robust disclosure frameworks, such as the Corporate Sustainability Reporting Directive (CSRD), will become de facto standards for U.S. companies operating internationally. This patchwork of regulations will create challenges for companies, requiring careful governance and data management to meet diverse requirements and avoid litigation risks. As companies adjust their ESG strategies, they must remain mindful of long-term risks and the potential for shifting political and stakeholder pressures in the years ahead.
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