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Could a change of presidential control kill sustainability initiatives? It is highly unlikely. Despite the election outcome, sustainability preferences for many economic stakeholders are poised to remain popular. However, the upcoming U.S. presidential election will be critical for the near-term future of sustainability because the executive branch of government can influence the speed at which policies are adopted, enforced, supported and funded.
No president operates in a vacuum, and a presidency accompanied by a same-party supermajority in Congress—where one party controls both Houses—would have a drastically greater impact on shaping the path forward for sustainability initiatives for at least the next two years. Let’s look at what could play out in Democratic or Republican administrations—and what is unlikely to change regardless of White House control.
A Democratic Presidential Administration
If a Democrat is sworn in this coming January, the administrative and executive focus on sustainability and renewables will likely increase. The President has significant authority through the executive branch of government, and things like the SEC Rule regarding emissions are likely to find new tailwinds despite legal challenges in the courts and objections of Republican lawmakers and business leaders.
Policies favoring wind, solar, biomass and other non-fossil-fuel energy sources are likely to be implemented through the executive branch of government. An accompanying supermajority of Democrats would likely lead to significant additional legislation favoring green energy.
A Republican Presidential Administration
If a Republican president is sworn in this coming January, the change in control of the U.S. executive branch would likely yield a significant governmental shift regarding sustainability. The SEC and other executive branch entities and administrations focused on sustainability and emissions may take the foot off the gas of planned reporting, targeting and risk management initiatives to reduce pressure on companies. They may even try to slam on the brakes for reporting to give companies some breathing room.
A Republican presidential administration would likely have a drastically different view on fossil fuels, especially oil and gas. A Republican president accompanied by a same-party supermajority in Congress would likely lead to favorable legislative conditions for oil and gas.
Stakeholders Beyond U.S. Politics
Regardless of the U.S. political approach to emissions reporting and official U.S. government requirements, many stakeholders will continue to prioritize emissions reporting, emissions reductions and climate risk disclosures. On this long list, we find support from credit rating agencies, European governments, the Californian government, institutional investors and public corporations and the American public.
1. Rating Agencies
First off, the rating agencies will not abandon the topics of emissions, climate change and climate risk because these topics impact the financial risks a company faces in the future. It can restrict their future access to capital and drive up their WACC (weighted average cost of capital). This, in turn, can drive down the valuation of a company, hurt its share price and eventually risk becoming a going concern issue. This is also true for some companies that have assets in areas with greater weather disaster risk, which is often couched as climate risk. As the rating agencies are unlikely to abandon the trend of sustainability reporting, emissions reductions and risk management, corporate access to capital will also likely require continued reporting.
2. European Governments and California
Next up are the European governments and the government of California. For companies doing business in these locations, emissions reporting, reduction plans and climate risk assessments are likely to continue and increase in their importance. A change of White House control is unlikely to change the minds, mandates and policies of these governments. Even the critical European elections this year are unlikely to change the broad mandates to reduce emissions to manage climate risk.
California emissions and climate risk reporting are also unlikely to be swayed by a change in presidential control.