Administration of Trump to abandon ESG guideline for pension funds' management

In the midst of a changing climate landscape, pension funds in the United States are finding themselves under increased pressure to address climate change risks and sustainability issues. This pressure comes as the US federal government, under the administration of President Donald Trump, moves to roll back green policies, while some states are taking up the fight against climate change.

On June 6, 2025, the Department of Labor announced its intention to abandon a rule implemented by the administration of former president Joe Biden that allowed pension funds to consider Environmental, Social, and Governance (ESG) factors when making investment decisions and exercising shareholder voting rights. This decision follows a challenge from a coalition of Republican-led states during the previous administration.

However, not all is lost in the fight against climate change. In January 2025, a bill requiring greenhouse gas emissions disclosures was introduced in Colorado, and similar legislative proposals for climate warming and sustainability reporting have been introduced in several U.S. states, following California's landmark climate disclosure laws SB 253 and SB 261 passed in 2023.

Despite the hostility towards ESG factors during the Trump administration, some big pension funds have continued to take more action on climate change. This is evident as some companies are backtracking on their climate commitments as the Securities and Exchange Commission moves to abandon disclosure requirements.

The pressure on pension funds to take more account of climate change risks is mounting, with campaigners calling on trustees to make sustainable investment decisions and use their voting power to push companies they invest in to go green. This is due in part to concerns about the impact of climate change on workers' retirement security. According to the Sierra Club, climate change is a growing threat to this security.

In a worrying prediction, analysis by Ortec Finance suggests that the US and Canadian pension fund returns could fall up to 50% by 2040 if predictions for the worst global warming materialize and if the current approach to climate policy doesn't change. This underscores the importance of pension funds taking action to address climate change risks.

Meanwhile, the move to overturn the rule allowing pension funds to consider ESG factors in their investment decisions has been met with resistance. President Biden issued a veto to reject a Republican attempt to undo the rule in Congress, demonstrating his commitment to addressing climate change and sustainability risks.

As the fight against climate change continues, it is clear that pension funds have a crucial role to play in ensuring a sustainable future for workers and the broader economy. The pressure on pension funds to take more account of climate change risks is likely to continue, and it will be interesting to see how they respond to this challenge in the coming years.