What a Trump Presidency Would Mean for ESG Stocks
Video: Which industries are really hurting if Trump wins in November?
Transcript
Kamala Harris, as the Vice President behind Joe Biden in the United States, has clearly been a positive influence on environmentalism and the sectors that benefit from the fight against climate change.
But at the same time, there’s a very real possibility that Donald Trump will be elected in November. And this video is not meant to take a political stance, but this will be a review of what a Trump presidency might mean for green investments.
Let’s review Trump’s environmental record in his first term, and then we’ll discuss what he might do in his second potential term and which industries he would negatively impact.
As you know, if you follow American politics, Trump is very friendly with both the oil & gas sector, as well as the coal industry. So, most of the actions he’s going to take will work in their best interest.
But he’s also made it clear that he will withdraw from most environmental efforts that he sees as unnecessary or too costly.
In Trump’s first presidential term, he made it incredibly clear that he thought the Paris Agreement was a cost that America shouldn’t need to pay. It took three years to make it happen, but he did pull out of the agreement toward the end of his term. Of course, the agreement's main goal is to limit global warming to 1.5 degrees Celsius. Pulling out of that treaty is exemplary of his thoughts on climate change.
The US pledges $3 billion annually to the global Green Climate Fund under the United Nations. The fund’s main goal is to provide funding for developing countries to adapt to climate change. Trump pulled out from that fund while he was president and vows to do it again in a new term.
Other negative actions during his term include:
Relaxing EPA rules about leak detection and maintenance of hydrofluorocarbons, which are considered a super pollutant (page 2)
Weakened coal carbon emission standards (Page 3)
Took steps to try to repeal the Clean Power Plan, which was ultimately struck down by the Supreme Court in 2022 (Bookings tracking)
That was Obama’s plans for the EPA, which were focused on reducing emissions from fossil-fuel power plants.
Other regulations were rolled back by Trump during his term, but the ones I just mentioned were most of the major ones to consider.
And, of course, thanks to the Supreme Court justices that Trump elected previously, we’ve seen the Chevron Doctrine overturned. I made a video on this when it happened, for those interested in a more in-depth explanation.
But in summary, the Chevron Doctrine was a precedent set in the courts that judges should defer to the expertise of an involved federal agency if some language in a law was vague. The agencies like the EPA would interpret what the wording meant. Now, that precedent was overwritten, so judges have more authority to interpret the laws how they wish.
This was seen as a blow to the environmental movement because some of the rules passed by the EPA and other organizations might be increasingly threatened by litigation in the courts over legal authority.
And again, I’m not here to say whether any of these things are right or wrong, I’m just laying out the facts.
So, with some background on the actions Trump took in his first term, we can set some expectations for what he would be likely to do in a second term.
The Biden administration recently passed new emissions standards for light and medium duty vehicles, which would effectively mandate that nearly half of new vehicles sold by 2030 would be electric. This is the primary policy that Trump has mentioned he would revoke in his policies on his website. That’s the only time he mentions something environmental on there at all.
In further comments, he has been adamant that he wants to eliminate a new power plant emissions rule, which would essentially require most new coal and gas power plants to install carbon capture systems by 2032. Obviously, if that policy took effect, this would provide a massive growth tailwind for the carbon capture industry in the US over the next decade.
Inevitably, Trump will likely pull out of the Paris Agreement again, and even the Inflation Reduction Act could be in danger. At the very least, he has talked about getting rid of certain tax benefits or funding from the bill, so he would start gutting it.
Benefits that would be particularly at risk would be the tax credit for EVs, which Trump hasn’t made a decision about yet, and another tax credit for manufacturing facilities associated with reducing emissions, as well as the fee for methane emitters of $900 per metric ton of methane emissions.
Assume that if some benefit or subsidy is included in the IRA, or another climate change related bill or policy from the federal government, it could be at risk.
Ironically, as Bloomberg has pointed out, Republican states have been the largest beneficiaries of the funding and additional investment spurred by the Inflation Reduction Act
States like Arizona, Georgia, and Texas are clear targets for renewable energy and other green projects, creating an interesting dynamic. We could see pressure from these red states to actually leave the IRA alone, for the most part. That will be something to watch if Trump wins.
As you can imagine, Trump isn’t going to benefit most environmental industries, but we can identify which sectors will be affected negatively, and which ones will largely be unaffected if he wins.
I’ve compiled the list of sectors that I cover in my newsletter about green markets into two sections. The industries that Trump will likely hurt, and which ones will likely be unaffected or could even stand to gain from bipartisan political support regardless of who wins.
We’ll start with a list of what Trump hurts, which would include: biofuels, carbon capture, carbon markets, hydrogen, electric vehicles, as well as the battery sector and renewable energy producers.
Most of these sectors are heavily dependent on government support to reach financial viability. That typically comes in the form of tax credits or funding from the Inflation Reduction Act and other bills that could be in danger if Trump wins.
If an industry is reliant on tax credits, especially anything capital-intensive to build out with large infrastructure projects… it could be wise to avoid it if Trump wins.
Even without Trump doing anything, these complex projects have been having issues with growing input costs, supply chain delays, and increased interest rates. Generally speaking, I just like to avoid capital-intensive industries entirely due to the variety of issues they can face.
For example, Plug Power is one of the largest hydrogen infrastructure developers in the United States, they’ve received billions of dollars in tax credits or subsidies… and they have never recorded a profitable quarter. The company has been around since 1997. It could easily never be profitable. That is the type of company and industry I wouldn’t touch with a ten foot pole.
And the one industry I mentioned that isn’t very capital-intensive in most instances, the carbon markets, is unfortunately dependent on the government in both compliance and voluntary markets. Sentiment is a major driver of commerce in these markets, and Trump pulling the US out of climate initiatives around the globe certainly wouldn’t be a positive. Now, I’m not sure how much of an impact he would really have, the carbon markets are global, but, again, not a positive obviously.
On the other hand, there are a decent amount of industries that would largely remain unaffected in Trump were to gain power.
Sectors that would be fine include agriculture and agritech, battery metals, liquified natural gas, nuclear energy, recycling technology, and water companies.
These are industries that tend to hold bipartisan support from both the right and left of the political spectrum.
Trump has particularly mentioned that he is quite supportive of liquified natural gas and nuclear energy. He recently endorsed expediting new energy projects, singling out nuclear energy and small modular reactors at his rallies.
He did provide support to some of these industries during his term, like announcing a plan to spend $1.5 billion over 10 years to build up a uranium reserve to revive the mining industry. The Trump administration invested $100 million to increase biofuel sales, to help support farmers. He signed Save Our Seas 2.0, which provided $55 million in funding through 2025 to improve plastic recycling management.
These are just a few examples. So, he will provide support to these industries, but obviously probably not like Democrats will with their spending packages like the Inflation Reduction Act. Trump seems to be more focused on infrastructure in a broader sense like roads and bridges.
Of course, environmental investments will benefit the most from the Democrats retaining power, but I tend to look for investments that hold bipartisan support, and are non capital-intensive. Meaning companies that don’t need to spend hundreds of millions of dollars to build new facilities to build electric vehicles, or complex infrastructure like hydrogen pipelines.
I will make another video reviewing Kamala’s policies on the environment, if she ever provides details on what they are, because she currently still hasn’t shared any on her website.