Investment managers focused on climate change—an issue that President-elect Donald Trump has previously dismissed as a “scam” and a “hoax”—are calling for a shift in the language used to discuss environmental initiatives. They argue that it is essential to adopt a more inclusive dialogue that resonates with the millions of Americans who supported Trump in the recent election.
Joe Sumberg, a former managing director at Goldman Sachs who now oversees real estate investments at billionaire Tom Steyer’s Galvanize Climate Solutions, emphasized the need for change. “We need to change the language we’re using when we talk about climate and the energy transition,” he stated in an interview. Sumberg pointed out that the current rhetoric often alienates potential supporters, particularly those in middle America. He added, “We don’t want to sound like coastal elites coming into middle America telling people they need to install carbon capture at their properties or compost toilets on industrial sites.”
The recent elections have prompted investment managers targeting Environmental, Social, and Governance (ESG) strategies to reassess their approach. The consensus among green asset managers is that while many policies related to climate change are popular—even in Republican states—the way these initiatives are communicated can be polarizing. Ian Simm, CEO of Impax Asset Management, which manages approximately $50 billion focused on clean-energy investments, remarked, “This election is a wake-up call for those who label their work as ESG or sustainable investing.” He noted that these terms are relatively new and may not align well with traditional views on fiduciary duty.
Since Trump’s victory, there has been a noticeable sell-off in stocks associated with prominent ESG themes such as wind and solar energy. Analysts have cautioned ESG professionals to remain vigilant and consult legal advisors due to the changing political climate. The president-elect has made it clear that he intends to increase fossil fuel production, roll back environmental protections, and embrace deregulation.
As the ESG investment landscape faces increasing hostility from certain political factions, there is an urgent need for those involved in this sector to adapt their messaging. Simm expressed concern over the confusion surrounding definitions and framing within the ESG discourse. He asserted that the term “ESG” has been around for too long without sufficient clarity and needs to be replaced with more straightforward language.
Following the election, analysts from Jefferies predicted that ESG professionals would need to abandon terminology that has defined their work thus far. Aniket Shah, the lead analyst at Jefferies, suggested that the backlash against ESG should lead to a more “focused and pragmatic” approach in discussing these issues.
Even before Trump’s election victory, GOP-led states had initiated lawsuits against climate-finance alliances, forcing a reevaluation within the ESG industry. Maslansky + Partners, a New York-based consultancy specializing in language use, warned last year that the terminology employed by ESG professionals risks alienating significant portions of the population.
These tensions are not limited to the United States; they are also evident in Europe, which holds over 80% of global ESG fund assets and is experiencing rapid warming. The European Union’s Sustainable Finance Disclosure Regulation is currently facing substantial revisions after investors expressed concerns about its complexity. Furthermore, Morningstar Inc. reported that European climate funds experienced net outflows of approximately $20 billion during the first nine months of 2024—a significant milestone for redemptions within the region.
Despite these challenges, Sumberg remains optimistic about the future of green investing. He pointed out that even if a different administration were in power, it would likely be more supportive of green initiatives. However, he emphasized that profitability should be at the forefront of discussions regarding climate investments. “We’re not ignorant of the fact that if a different administration was in office, they probably would be more supportive,” he said. “But at the core of it, this is already profitable.”
Sumberg recently oversaw his third green real estate deal this year for Steyer’s firm with the acquisition of an industrial property in New Jersey. The objectives for this property—like others acquired by Galvanize—include reducing energy costs and emissions while enhancing property values.
Interestingly, Sumberg noted that during Trump’s previous presidency, tax credits for wind and solar energy were extended—a move that coincided with a significant increase in investments related to energy transition initiatives. He argued that this growth was not solely due to subsidies but rather because investing in clean energy is inherently profitable.
As investment managers navigate an increasingly polarized political landscape regarding climate change and ESG initiatives, it is crucial for them to refine their messaging strategies. By adopting clearer language and focusing on profitability rather than ideological divides, they can engage a broader audience and foster support for sustainable practices.
The challenges posed by shifting political winds require adaptability from those involved in climate finance and sustainable investing. As they strive to communicate their objectives effectively without alienating potential allies or stakeholders, it becomes evident that framing matters just as much as substance when it comes to advancing climate-related goals.
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