‍A Trump-led SEC would seek to overturn climate disclosure regulation and escalate ESG conflicts, according to sources.‍

Sources indicate that if the SEC were led by Trump, it would aim to repeal climate disclosure regulations and intensify conflicts over environmental, social, and governance (ESG) issues. This move reflects Trump's broader stance against current climate policies and ESG standards.

Should former President Donald Trump reclaim the presidency in November, it is expected that the Securities and Exchange Commission (SEC) under his leadership would scale back recently introduced climate disclosure regulations.

According to an advisor to Trump on SEC matters, this rule “costs companies and investors a substantial amount of money without delivering any benefits.”

A notable exception to the reduction in regulations might be the SEC’s handling of cryptocurrencies, as mentioned by a past assistant director of the commission’s enforcement division.

Under a re-elected Trump, the SEC would likely retract its assertive measures against major corporations, a shift from the approach taken by the current chairman, Gary Gensler, insiders suggest.

Experts and those close to Trump believe that should he triumph over President Joe Biden, one of the first moves would be to ease numerous recently established environmental regulations. The primary focus would be on reversing the new climate disclosure regulations, they detailed.

In March, Gensler and the SEC mandated that major publicly traded companies report their greenhouse gas emissions levels. The most significant companies must start making these climate disclosures by fiscal 2025, detailing emissions by fiscal 2026.

Gensler contends that the levels of greenhouse gas emissions and other climate-related data significantly affect businesses, and that investors have a right to this information.

However, an SEC headed by a Trump-appointed Republican is likely to eliminate these Biden-era disclosure requirements, insiders claim.

This potential rollback of the SEC’s climate disclosure rules also reflects Trump's aversion to environmental, social, and governance (ESG) investment standards, according to sources.

During his presidency, Trump issued an executive order complicating the inclusion of ESG funds in employee 401(k) plans, a regulation later softened by the Biden administration. In February, Trump announced on Truth Social that he would reinstate his earlier rule if reelected.

CNBC received no response from a Trump spokesperson regarding these developments.

BlackRock and Vanguard are facing challenges

A Trump-led focus on ESG issues within the SEC could pose difficulties for some of the nation’s largest investment management firms, such as BlackRock and Vanguard.

These companies have long provided eco-friendly investment choices to their clients. However, the mere availability of these options has recently sparked political controversies, fueled by Trump’s allies.

A Texas public school fund withdrew $8.5 billion from BlackRock, citing the firm’s hesitance to invest in fossil fuels. Additionally, Florida removed $2 billion in 2022, accusing BlackRock of prioritizing ESG over investor interests. Both states are governed by ambitious Republican governors, Ron DeSantis in Florida and Greg Abbott in Texas.

Requests for comments from representatives of BlackRock and Vanguard went unanswered, although the firms staunchly deny prioritizing environmental concerns over their clients’ interests. Both firms are fiduciaries, legally bound to prioritize their clients’ best interests.

Nevertheless, a Trump associate told CNBC of plans to discuss with the former president ways to leverage presidential power to counter ESG investment policies.

If reelected, Trump could issue an executive order excluding ESG considerations from retirement funds and then urge his allies in Republican-led states to exert pressure on investment firms to reduce their eco-friendly investment advice, the source close to Trump explained.

“You take executive action at the federal level, then you prompt state treasurers to pressure investment funds to shift away from ESG, encouraging more states to divest from these funds,” stated the Trump confidant.

The cryptocurrency conundrum

In a potential second term, Trump might continue stringent regulation of the cryptocurrency sector, one area where regulatory cutbacks might not apply.

“The SEC under Trump’s first term aggressively pursued cryptocurrency cases, seeking to clarify and regulate the industry,” noted Jennifer Lee, a lawyer and former Assistant Director at the SEC’s enforcement division.

“With a second Trump term, we can anticipate ongoing SEC efforts to define its authority and influence over cryptocurrencies,” she added.

Lee emphasized that while there’s increasing clarity regarding the standards the SEC might apply to determine if a specific token is within their scope, questions about the extent of the SEC’s jurisdiction still linger.

Source: CNBC