KEY TAKEOUTS

• Alarm is rising around the negative impact that Trump’s anti-ESG policies could have on global green transition progress.
•  While the US is an important party to the global decarbonisation strategy, Trump’s anti-net zero policies will delay but not derail the global green transition.
• Trump has returned to a significantly difference political environment, driven largely by the Inflation Reduction Act, which has made the economic and political stakes of abandoning the energy transition simply too high.
• A key implication of Trump’s rollback of existing US climate policy is that the US is effectively handing over global climate leadership to either the European Union or China/BRICS.
• Trump’s policies might create opportunities for South Africa to strengthen regional partnerships with the EU, China, and other countries committed to the green transition.

President Donald Trump has made no secret of his view on climate change, with his climate policy stance long being a point of contention, particularly as the world accelerates its efforts to transition to a greener, more sustainable future. As his administration continues to consolidate their position, with the rollback of environmental regulations, withdrawal from the Paris Agreement, and dismissal of climate change as a significant threat, Trump's policies bring into serious question the United States' role in global climate action.

While the planet faces an urgent need for collective action to mitigate climate change, alarm is rising around the significant hindering of progress that Trump’s influence could wield, jeopardising international cooperation and the momentum of the global green transition.

The Trump administration’s walking back of US climate goals, as well as the exit of some of the world biggest banks and asset managers from the net zero initiative, is indicative of the real-world complexity of implementing a global transition into a green economy. With Trump’s climate policies in place, the net zero path will not be easy, but the current situation highlights that it will be even more important for governments and capital allocators around the world to remain relentless in the pursuit of a just transition.

Our view is ultimately that while the US is an important party to the global decarbonisation strategy and Trump’s anti-net zero policies will delay the process of the transition, they will however not derail the green transition ambitions across world economies. 

Landmark legislation and the swell of green finance

The political environment that Trump has returned to this time around is significantly different from that of 2017, and this is largely due to the transformative impact of the Inflation Reduction Act (IRA).

This landmark legislation has directed billions of dollars into renewable energy initiatives across the US. Notably, an estimated 85% of these investments have gone to projects in Republican-led districts, highlighting the widespread, bipartisan economic benefits of the IRA. The IRA’s tax credits and manufacturing incentives have accelerated the US’s green transition, bolstering supply chains for solar panels, batteries, and other renewable technologies, making clean energy a vital economic force, particularly in red states.

This shift is especially striking in states historically reliant on coal. US coal power capacity, which peaked at 317,600 MW in 2011, is projected to fall to 175,000 MW in 2024 and 115,000 MW by 2030 – a worrisome 63.8% decline.

However, Trump has recently announced import tariffs on Mexico, Canada and China, subsequently postponing the Mexican and Canadian tariffs. China has responded by imposing counter tariffs on US energy commodities – thereby setting in motion, a brewing trade war. Should a full-blown trade war materialise there will be knock on effects on supply chains, which will be inflationary. For example, China is the world largest producer and exporter of materials critical to clean energy infrastructure such as solar panels and wind turbines. The increase in the cost of these materials will have an impact on the pace at which the US executes its green energy transition, with the Trump administration’s decision to slow the adoption rate of electric vehicles also impacting US decarbonisation aspirations.

Hot air versus clear air

If Trump attempts to weaken the IRA by the reducing – or in some case cancelling – these tax credits, the bipartisan benefits and industry momentum make a full reversal unlikely. The economic and political stakes of abandoning the energy transition are simply too high.

Even with a sceptical federal administration, state-level policies and corporate sustainability commitments are keeping renewable energy growth on track. Many states have ambitious clean energy mandates, offering incentives and regulations that accelerate renewable deployment.

Meanwhile, corporations are increasingly prioritising sustainability, signing long-term contracts for renewable energy and investing heavily in green projects. These efforts are driven by consumer demand, cost savings, and shareholder expectations – factors that operate independently of federal policy.

The scale of US funding that has been funnelled into green finance spending over the last 25 years is highlighted below. Considering the above-mentioned forces, the relentless march towards a greener economy will ultimately ensure that renewables will continue to grow, regardless of the Trump administration’s stance.

The changing dynamics of the global green finance race

With Trump once again making the decision to withdraw the US from the Paris Climate Accord, as early as his first month in office, he has signalled his intent to try and reverse as many of the previous administration’s climate related policies as possible. However, the key implication of a manoeuvre such as withdrawal from the Paris Accord, is that the US is effectively handing over the keys to global climate leadership to either the European Union or China/BRICS in a pivotal year for landing key global commitments in the run up to COP30 in Brazil.

We already know the role that energy capacity will need to play in the global AI arms race – this is despite the disruption that Chinese tech breakthrough DeepSeek has created with the launch of their markedly cheaper and less energy intense AI tool in the last few weeks.  But Trump has already made major announcements on AI project Stargate, a $500b AI leadership plan with the major US AI players. Any ambition to retain AI leadership will still require vast amounts of energy – with many of the AI players having, themselves, made net zero commitments, relying on renewable and nuclear energy, as well as carbon offsets, to meet these. Simply investing in fossil fuels will not allow this project to materialise. Regardless of what the next Trump announcement is going to be on reversing the climate policy of the Biden administration, a showdown is coming at the G20 meetings between the BRICS nations and the US. As these countries negotiate over climate and sustainability commitments in very robust debates ahead of COP30 in November, ever the negotiator, Trump can be relied upon to create further fireworks. But despite how hard he tries to cement his will when it comes to anti-net zero policy, the global and SA green transition has been firmly set in motion and change is now inevitable.

What does this mean for SA?

While Trump’s policies could diminish the role of the US in global climate leadership, they might also create opportunities for South Africa to strengthen regional partnerships with the EU, China, and other countries committed to the green transition. For instance, China’s Belt and Road Initiative has been increasingly involved in financing and building renewable energy projects across Africa as they look to bolster their green energy position. A more fragmented global approach might lead South Africa to deepen ties with these countries, potentially fostering a more independent but still robust green transition.

Another potential upside is that South Africa might become more self-reliant in its green transition. With reduced international cooperation and the potential for higher costs of imported technology, South Africa could invest more heavily in homegrown solutions, such as developing local green technology industries, tapping into Africa’s vast renewable energy potential, and creating jobs in solar, wind, and other clean energy sectors. While this would require significant investment, it could also position South Africa as a regional leader in sustainable development.

The global green transition has become more complicated with many unknowns. The US and China are material parties to global trade, with tariff-driven inflation in both economies potentially leading to interest rates staying higher for longer. This would have a similar impact in SA, a tough pill to swallow for many South African consumers. Opportunistically, however, South Africa is a commodity powerhouse, and these geopolitical tensions could drive investment demand and opportunities for key resources such as PGMs, gold and energy.

A new era is inevitable

At Old Mutual Investment Group, we remain committed to stewarding the climate agenda in favour of a just and equitable transition, remaining resolute in our strategy to drive sustainable investment forward through our business.

Regardless of what the next Trump announcement is going to be on reversing the climate policy of the Biden administration, a showdown is coming at the G20 meetings between the BRICS nations and the US. As these countries negotiate over climate and sustainability commitments in very robust debates ahead of COP30 in November, ever the negotiator, Trump can be relied upon to create further fireworks. But despite how hard he tries to cement his will when it comes to anti-net zero policy, the global and SA green transition has been firmly set in motion and change is now inevitable.