We’ve had a seismic start to 2025, with Donald Trump returning to the White House. He has led an aggressive roll-back on climate through his attempt to dismantle the clean energy initiatives of the Inflation Reduction Act in addition to putting DEI programmes on the block.
Alex Hyde, our Head of Sustainability, Energy Transition & Circularity, analyses what the new political landscape could mean for leaders across these markets, and why the admittedly tricky picture presents opportunity amid the challenges.
It would be an understatement to say that Q1 has been a whirlwind for leaders in the industries we cover. There has been so much momentum behind the energy transition, and broader ESG policy, in recent years – and yet, as we’re seeing all too clearly now, progress is rarely linear. Donald Trump’s return as POTUS has ramifications not just for climate, energy policy and DEI in the U.S., but throughout the world. Yet just how significant will this be for sustainability professionals and will the energy transition, and shift towards circular business models, ride out the backlash?
Ding, ding – round 2
Donald Trump’s first term as president was nothing if not eventful. He campaigned on a platform of climate scepticism and withdrew the U.S. from the Paris Agreement, joining Iran, Libya, and Yemen as the only non-compliers from nations in the UNFCCC. Joe Biden swiftly rejoined the Agreement after becoming president in 2021, with the 46th U.S. leader making renewable energy a cornerstone of his policy through bills like the Inflation Reduction Act (IRA).
While Trump’s political comeback was bankrolled largely by Elon Musk, record donations to his campaign from Big Oil certainly contributed. Now Trump is back in office, and in control of both the House and the Senate, he is tearing up Biden-era policies at a rate that has left his detractors reeling and many in a state of shock. He has frozen IRA funding, removed mentions of climate change from federal websites, and is withdrawing support for research, both in the U.S. and abroad, that even contains the word ‘climate’. His day-one re-withdrawal of the U.S. from the Paris Agreement will be much faster to enact this time around, while his notorious slogan ‘drill, baby, drill’ lays bare his dismissal of clean energy and belief in fossil fuels.
Political landscape has far-reaching effects
As Trump’s war on federal DEI measures has had a knock-on effect for business, there is a fear that his dim view of green energy will have grave repercussions on sustainability efforts across organisations in the U.S. and beyond. Years of inflation amid the cost of living crisis, heightened insecurity around energy prices and supply – all of which have been intensified by the war in Ukraine – have contributed to diminished political energy to curb carbon emissions and climate change. These factors, when combined with increased investor agitation and broader push-back against the energy transition, have influenced the willingness from business to continue with sustainability and net-zero programmes.
In the financial services sector, the largest U.S. and Canadian banks began to withdraw from the Net-Zero Banking Alliance the month after Trump’s second election win. Australia’s Macquarie Group has also retreated and HSBC, separately, has rowed back on its green plans. This comes at a time when EU businesses, and those operating in the EU, are under increasing regulatory pressure around sustainability, even after Brussels moved to simplify these requirements. While it is noteworthy that this decision came just days after Trump’s re-election, it is worth remembering that all but one of the world’s 10 greenest nations are located in Europe.
What next?
So, is it all doom and gloom for the next (at least) four years? The picture for sustainability efforts certainly looks more complicated – but to tie the fate of the entire energy transition and DEI initiatives to the Trump administration would be misguided. Leaders we’ve been speaking to recently have been working with their boards to understand how to position their efforts and develop strategies appropriate for a new landscape. The reality is that rather than being sidelined, strong sustainability leadership capability has become more important as businesses look to navigate 2025 and beyond.
The banks that have pulled out of the Net-Zero Banking Alliance, and US businesses publicly scrapping their DEI initiatives, are responding to a new business reality in which they fear being excluded from deals that will have a significant impact on short to mid-term revenues. In this context these decisions are understandable, and time will tell what effect these will have in the medium- to long term.
We need look no further than Elon Musk himself for evidence of this change in stance. In 2015, he gave a speech at the Sorbonne University in Paris ahead of COP 21 (at which the landmark Paris Agreement was announced). ‘We’re running the most dangerous experiment in history right now, which is to see how much carbon dioxide the atmosphere can handle before there is an environmental catastrophe,’ he told attendees. ‘We are going to exit the fossil fuel era. It is inevitable.’ At the time of writing, Tesla shares have slumped 9% after a 50% sales drop in the EU as a backlash begins and competition from Chinese EVs ramps up.
It will take time for market conditions to stabilise, or for leaders to adjust to constant volatility if that’s what follows. Long-term focus will likely reap the greatest rewards. Some businesses will row back on their commitments in a bid for survival – see BP – or simply for short-term gain, but most will continue their ESG programmes unabated and with shareholder support, such as organisations like Apple. Many will go even harder, leading the way as recently announced by Ingka (IKEA).
The genie is out of the bottle
It’s important to acknowledge that the momentum driving the energy transition isn’t just going to stop. Where once the move away from carbon was seen as a significant economic burden, investment in green energy is now double that of fossil fuels. China, the world’s largest source of carbon emissions by some distance, last year invested more money into green energy than the US, EU, and UK combined. Few nations can rival China’s ability to enact major infrastructure projects, and their efforts give some context as to what the impact of a new US administration will be on a fossil fuel industry that was already on max oil, gas and coal output under Biden. Even Darren Woods, the ExxonMobil CEO who previously suggested the public were to blame for inaction on climate change, admits that there is only so much oil that the U.S. can, or would want to, extract. A glut of fossil fuels available on the market, be it oil, gas or coal, isn’t helpful for share price – and that’s what this is all really about.
The big question at present seems to be whether the enormous energy consumption being driven by AI and data centres will shift this dynamic. It certainly goes a long way to explain why the CEOs of Microsoft, Google, Apple, Meta and Tesla had a front row seat at Trump’s inauguration. Data centres fuelling AI development can consume as much energy as entire U.S. cities, making cheap fossil fuels attractive in the short term. However, there is significant investment in clean energy alongside the boom in new data centres. Both Meta and Microsoft have recently restated their commitment to matching electricity use with 100% clean and renewable energy and since November’s election results over $100 billion in clean energy deals, solely to power data centres, has been announced. Firms involved in these deals include the likes of Google, TPG Rise Climate, Intersect Power, Acadia, Microsoft, KKR and Energy Capital Partners. Where these companies lead, others will no doubt follow.
The economic benefits of the green economy
Sustainability leaders in the UK and Europe will have to balance what’s happening across the pond with what’s happening closer to home. The CBI announced that the UK’s green economy generated £83.1 billion in gross value added (GVA), a 10% increase from 2023 despite headwinds for the wider economy, which grew by 1.2%. In a market striving for productivity wherever it can be found, the CBI also calculated that for every £1 of GVA in 2024, an additional £1.89 was created across the wider economy, creating a £157bn ripple effect. In the words of Chief Economist Louise Hellem: ‘It is clear, you can’t have growth without green’.
Successfully navigating the two tracks – that of the USA, and that of everyone else – is the new reality for sustainability leaders. I’ve seen examples among my network recently, including a US airline looking for a SAF investment partner in Europe, as well as a European waste to energy business seeking to close out a development deal in the US. The drive for value creation and deal activity in these markets is alive and well in the real economy. This, combined with a few years of quieter M&A and investment activity in the PE and VC markets, means we should also be hopeful that investment teams will find a good use for the $86 billion worth of climate dry powder. Indeed, Brookfield Asset Management see a future in the US, having recently stumped up $1.7 billion for National Grid’s US onshore renewables business.
CEOs of UK and European businesses also need to navigate regional variances in response to the attack on DEI in the US. According to recent polling by Apella Advisors and Find Out Now, 53% of Britons felt it would be ‘bad’ if British companies scaled back their own commitments. This was set against 22% who disagreed that it would be bad, 11% who were undecided, and 14% who did not know.
It’s important to note that opposition was highest amongst people of working age and especially younger ones – i.e., current and future employees and also longer-term consumers. The same poll also found that 43% want more care for the environment, even if it harms economic growth, with only 23% thinking that economic growth should take priority over the environment. Just 14% of respondents thought the UK government needs to do whatever is needed to grow the economy, including supporting Trump’s agenda. In this context, it will be interesting to see how public opinion develops in response to Rachel Reeves’s and Heathrow’s plans to develop a third runway. (Separately, our Aviation & Infrastructure practice has some interesting content about that!)
What can sustainability professionals do?
The complex global picture highlights the need for enhanced sustainability leadership and more investment in ESG functions to develop higher levels of capability. Indeed, the busy activity we’ve seen in the senior job market this year seems to bear this out. The following businesses are just a few of those advertising senior leadership roles focused on sustainability and/or ESG in the UK since the start of 2025: SSE, Haleon, Spirax Group, De Beers, Aviva, AstraZeneca, Drax, EDF, Octopus, Liberty Global, Goldman Sachs and BlackRock. The last two organisations on this list also show that different approaches are required in separate markets, and that withdrawing from the Net-Zero Banking Alliance doesn’t mean they’re out of the game when it comes to sustainability.
Whilst I’m very aware that it is easier said than done, sustainability leaders need to look for opportunities to demonstrate clear value creation in their organisations and support executive boards, who will be looking for guidance at this critical time. Focusing on initiatives that are clear drivers of financial return, developing sustainability strategies that they can flex when required, and adopting strong communications strategies for employees, investors and customers, should be top of the list of priorities.
Maintaining regular dialogue with peers across your organisation and fellow sustainability leaders, from both within and outside your industry, is also critical. It can be very easy to operate in a bubble when under pressure and knowing that you aren’t alone in the obstacles you face is hugely important – as is sharing insight and collaborating on how to best move forward.
In response to these challenges, Venari Partners will be looking to launch several initiatives across our network with the intention of sharing knowledge and experience that will support sustainability leaders during this critical time. Watch this space, as I will announce more on these shortly.
I would encourage any business looking for advice on these topics, or indeed, the leadership capability required to navigate the sustainability, energy transition and circularity landscape in 2025, to contact me. Or, if you’re a candidate with a background in sustainability and are thinking about your next opportunity, just drop me a line. I’d love to hear from you.