With a stroke of his pen, President Donald Trump took a major step toward eliminating his predecessor's landmark climate policy — the Clean Power Plan.
Unveiled by President Obama in August 2015, the plan sought to fight global warming by reducing carbon dioxide emissions from power plants. Now, under President Trump, the plan and other environmental policies are in more danger than ever.
Some investors might be tempted to approach this new normal by reinvesting in oil and gas. But thus far, the reaction has been more muted.
As Francesco Starace, CEO of Enel Group, Europe's largest power company, noted in an April article published in the Financial Times about the potential removal of the Clean Power Plan: "The world is increasingly decarbonizing because it is a good business idea to do it. There is less risk, less liability, and it's faster to build renewables rather than other stuff.
"I don't think the U.S. changing its policy and trying to bring carbon back will have any impact whatsoever,'' he said.
However, what Mr. Trump's action on environmental policy does make obvious is that progress on the environment — and on many other social issues — will increasingly be driven by market forces, not public policy.
A recent example of the power of the market was how companies, investors and consumers all united in pressuring North Carolina to drop discriminatory laws against transgender individuals. On the environment, representatives from U.S. states, cities and universities joined together with more than 100 businesses, including global behemoths like Apple, Facebook and Microsoft, to pledge to maintain the United States' commitment to the Paris climate accord following President Trump's decision to withdraw from the agreement.
While many companies already are firmly on the ESG bandwagon, we can expect to see ever greater pressure on companies to take action on environmental, social and governance issues and to fill the gaps left by federal policy. Given today's political climate, there is perhaps no group better positioned to take on this fight than investors.