The new Donald Trump presidency could see major changes in US corporate governance, with the end of mandatory climate-risk reporting rules and an increase in ‘no-action’ letters, a controversial mechanism by which boards seek to exclude shareholder proposals from consideration at AGMs.

The predictions were made as the world comes to terms with the prospect of Trump’s return to the White House for a second term, after losing office in 2020.

Under president Joe Biden, regulators published new climate risk reporting rules in March 2022. Implementation of the rules were suspended in April this year while a judicial review was underway.

Close observers of US governance believe the rules will now never come into effect.

Nell Minow, author and governance expert at ValueEdge, advisers to institutional investors, says: “We know exactly where this will go because it will be more of the same from his first term: increase in no-action letters; further restriction on proxy advisors; rollbacks on climate risk disclosure and restrictions on ESG investments.”

In recent years, ESG considerations have become increasingly controversial in the US. Republican politicians opposed their use in investment decision-making, with claims in some quarters that they are part of a “woke mind disease”.

Republican-controlled states have opposed and attempted to block the use of ESG criteria by fund managers when investing state assets such as pension funds.

There has been opposition too to the role of proxy advisers such as ISS and Glass Lewis using ESG criteria as the basis for voting advice to investors.

Research by the Shareholder Rights Groups reveals the granting of “no-action” letters by regualtors increased to 68.4% in the 2024 proxy season from 56.3% the previous year.

Minow is not the only observer who believes climate disclosures could be killed off under Trump.

The well-respected magazine Scientific American writes this week: “Trump’s victory means the SEC [US Securities and Exchange Commission] will come under Republican control and could take a range of steps to ensure the rule never takes effect or is short-lived.”

Richard Leblanc, a professor of governance at Toronto’s York University and author of the The Handbook of Board Governance, says corporate leaders should expect a “scaling back” in mandatory ESG and diversity and inclusion regulation.

Paris dispatched?

This is in addition to big changes on the trade landscape: Trump’s administration could potentially withdrawing from the Paris climate agreement and trade agreements with the EU, Canada and Mexico; impose more trade tariffs; and, potentially, look to restrict outsourcing production to offshore locations.

“Although a Trump victory was not unpredicted, given the polls,” Leblanc says, “the control of the Senate and possibly the House means a mandate and certainty of reform forthcoming for companies.”

Leblanc notes bank stocks rose after the election results in anticipation of increased deregulation.

As the rest of the world works to regulate artificial intelligence—the EU’s Artificial Intelligence Act came into force in August—there is also some concern a Trump government would see deregulation.

Trump has also indicated he would bring an end to green regulations that block oil and gas drilling and, according to Thomson Reuters , “rescind” all “unspent” funds under the Biden administration’s ground-breaking Inflation Reduction Act, legislation which provided vast subsidies for green technologies, including electric vehicles, solar power, and wind energy.

Peirce opposition

Observers believe Hester M Peirce, a current commissioner at the SEC, could be the new pick to lead the regulator. She vigorously opposed climate risk reporting. In a statement written during consultation on the new rules, she wrote: “We are not the Securities and Environment Commission.”

She had added: “The placard at the door of this hulking green structure will trumpet our revised mission: ‘protection of stakeholders, facilitating the growth of the climate-industrial complex and fostering unfair, disorderly and inefficient markets’.”

The US is not the only place climate reporting is under pressure. The European Union has introduced the Corporate Sustainability Reporting Directive, but there are rumblings among member states, particularly Germany, that the rule should be renegotiated.

Trump is yet to move into the White House. His detailed agenda remains undefined. However, among those who advocate for a substantial corporate role in tackling climate change, there is currently only pessimism.