Taking a breath for a contentious election

Business leaders must plan beyond policy

Only eight elections are left in the over seventy global elections of 2024. For the US, today is that day.

So, if you are in the US, VOTE!
…and if you’re a subscriber of this newsletter, unless you are attempting to be subversive, I’m pretty sure I know where you stand. After all, every sustainability and ESG professional I’ve spoken with supports Harris, and I am no different.

This weekend, the election got a lot more personal for me, as the mountain behind my house was on fire leading up to this morning, where it appears to now be under control.

October 20th:

November 3rd:

The next President of the United States will have to balance climate mitigation and adaptation, and this wildfire is a stark local reminder of just how serious those issues are.

This election is about many things, including climate crises, social issues, business, and ESG. Since this is an ESG newsletter, I will stay on point despite my personal preferences.

The election outcomes will dramatically impact policy, investment, and stability, making it a governance issue. Some groups, like NACD, have already scheduled webinars right after the election to discuss the business impact! There is a lot at stake this time, and significant differences between the platforms and candidates.

Recently, I participated in a panel discussion with VentureESG titled Is ESG and DEI dead in the US? The very first question Hannah Leach asked was this:

How are you feeling about ESG in the US as it currently stands?

Of course, I jumped in and said everybody was catching their breath, and you could feel the election weighing on companies. Still, it is hard to tell how that heaviness manifests into proactive planning with quality governance.

I intentionally didn’t use the word ‘pause’ because I don’t think companies are holding back existing efforts. Still, I’m not sure leaders are discussing it, as I’ve heard some boards are as argumentative as a family dinner regarding politics. Yet, in this unique moment when companies are starting to get control of the regulatory disclosures and thinking about the business value of ESG, a breath can set efforts back.

A pullback in these efforts after the election would be disastrous.

The concern level doesn’t appear high for many ESG professionals, which I find surprising for a group that must continually fight for every scrap of budget and organizational influence. As many have rightly pointed out, ESG issues will persist regardless of who is in office (with my local issue a case in point), and well-governed companies will continue the work.

Yet, the difference in the election outcome could drive board mindshare, making the difference between reacting and proactive planning. The extent to which the government focuses on systemic ESG issues influences US businesses. During his last term, Trump discouraged this non-financial focus.

Trump removed the US from the Paris Agreement and seemingly put up bureaucratic roadblocks during Hurricanes Irma and Maria. He also kicked off the anti-ESG movement by removing ESG considerations from US retirement plans under the US Department of Labor (this is complicated and didn’t actually do anything then or when Biden added it back in). It was also reported in October that Trump asked if areas in California voted for him before releasing wildfire aid. After he left office, the anti-ESG momentum continued at the state level.

These actions haven’t been forgotten.

UN Secretary-General António Guterres compared another US exit from the Paris Climate Accords to losing a limb. He went further to say:

It’s very important that the United States remain in the Paris Agreement, and more than remain in the Paris Agreement, that the United States adopts the kind of policies that are necessary to make the 1.5 degrees still a realistic objective.

Here, we find another reason why sustainability professionals might not be worried. Trump removed the US from the Paris Agreement in late 2020. This was after BlackRock CEO Larry Fink planted the seeds of corporate responsibility and ESG, and the US Business Roundtable shifted to stakeholders. ESG and sustainability concepts were tipping over despite Trump’s efforts. With the rise in globalization, the network effects of these issues simply cannot be ignored.

On the other hand, the next president will decide how much or how little the US government does and could push nationwide policies on sustainability and ESG, such as climate adaptation and mitigation.

If you are on a board and your facilities and value chain are located in vulnerable areas—which, let’s face it, are everywhere now—consider what it would mean if the US government held back aid or didn’t step in to normalize insurance markets because it didn’t support an ESG perspective about climate risk, as we’ve seen in Texas.

During and after Hurricane Helene, the Biden Administration released extensive information about recovery efforts. Biden has also made solid mitigation progress, as he advanced the sustainability agenda in the US with two significant laws: the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA). The latter has secured support, at least in part, from Republicans.

Energy tax credits have spurred innovation, incentivized investment, and created good jobs in many parts of the country – including many districts represented by members of our conference.

Programs set up at the state level will benefit consumers directly with new incentives. Even the energy industry sees the benefits, fearing the rollback of IRA tax credits for renewable energy.

These laws and other fiscal policies played a big part in driving the US economy’s outperformance against its peers during and after the COVID-19 pandemic. Brooking’s assessment of the recovery calls out specifically:

Investment in the U.S. has been a notable point of optimism relative to other G10 economies. Buoyed by the investment incentives in the Inflation Reduction Act (and to a lesser extent) the CHIPS and Science Act, coupled with broader optimism over the U.S. economy, the U.S. experienced a relative boom in investment compared to its competitors.

In other words, the Biden administration successfully navigated and outperformed in the post-pandemic recovery vs. its global peers, and climate investment played a role!

For a board, the business choice between candidates is evident from a stability and economic growth perspective, but should companies and their leaders speak out for one candidate over another?

Well, this is a particularly challenging election cycle for leaders to navigate. As we all know, politics in the US is especially polarizing at the moment. With so much backlash due to the misalignment of social and climate issues with politics, companies might hesitate to weigh in directly on an election.

Over the weekend, the Financial Times published an opinion piece from Bennett Freeman, an associate fellow at Chatham House and former SVP at Calvert Investments, titled US business leaders must voice their fears about Trump. Freeman’s opinion differs from “business leaders must support Harris.”

What appears to have sparked Freeman’s piece is an article published by the Business Roundtable, a collective of US CEOs, titled Voting Is the Bedrock of Our Democracy. This is the same group that opened up the concept of shareholder primacy to the stakeholder economy. This simple three-paragraph piece encourages everyone to vote but doesn’t go further into a recommendation or how business leaders should consider the potential election outcomes.

It is understandable that the current CEOs of major public companies might hesitate to endorse a presidential candidate. But that does not mean that they cannot speak up about the risks of a second Trump presidency.

Freeman writes about risks ranging from the practical threats of tariffs to the more real and previous threats of violence, ultimately resulting in instability.

He calls on the Business Roundtable, the National Assoc. of Manufacturers, and the US Chamber of Commerce to write about the stakes of this election and overcome their fear of reputational risk. Still, this is nearly impossible without directly or indirectly endorsing Harris.

Companies shouldn’t ignore the election even if they don't speak out, and what they don’t say in public can contrast with what they say in private. In other words, companies and their leaders should put in the work of planning regardless.

Companies must start with the business and consider what policies might come. Policy rollbacks or progression will occur along material ESG issues with such differing candidates. If boards haven’t gone through this exercise yet, they should plan and adjust until early January, when the new President comes in. There are two holidays between these times, so good luck playing catch-up if you haven’t started!

Side note: If your board can’t put aside political differences to discuss the election openly as a governance concern, there are more significant issues to address.

If companies have planned, they should be better prepared to assuage stakeholder concerns in whatever way the election goes. Only from this point can quality messaging be delivered because it comes from the business angle, not outside of it. This doesn’t need to be an endorsement but a thoughtful deconstruction of policy.

As Freeman points out, it is also more than policy; companies, their boards, and their leadership must also understand the impact of these candidates on the company’s stakeholders, their value chain, and the possible outcomes. While Freeman writes about companies speaking out, companies need to assess the other concerns about broader stability.

Rather than discuss those issues in depth, I’ll direct you to a cleverly linked paragraph from the editorial board of The New York Times that outlines some of Trump’s most egregious statements.

It is no small task to unpack all of these issues in addition to policy issues, but there is no denying what he has said. In a world of continuing and growing uncertainty, why add another pile of governance concerns to your growing list of things to consider?

Today is too late for companies to weigh in, but it is not too late for you to voice your opinion and vote if you are in the US. If companies haven’t planned accordingly, I suppose they can finally breathe and start the hard work of moving forward when the results are in.