The Trump Effect and ESG Backlash

This chapter examines the political aspects of Environmental, Social, and Governance (ESG) investing, with a focus on the emergence of anti-ESG sentiment in the United States during and after the Trump administration. It explores how ESG, once widely embraced as a bipartisan framework for sustainable finance, became increasingly politicised and portrayed by critics as an ideological imposition on free markets. Through case studies of state-level legislation, divestment campaigns, and institutional pushback against ESG mandates, this chapter analyses how political narratives have disrupted ESG fund flows, altered investor behaviour, and introduced new reputational and regulatory risks. Drawing on behavioural finance theory, it further illustrates how political identity, framing effects, and social signalling influence investment decisions in polarised environments. This chapter emphasises the importance of treating political risk as a core variable in ESG analysis, particularly in jurisdictions where sustainability agendas intersect with contentious cultural debates.