President Trump has confirmed the US will withdraw from the Paris agreement on climate change, one of his first in office.
One of his first acts as returning president was signing an executive order, alongside the letter to the UN giving formal notice that the US will once again exit this global agreement.
The only other countries not to sign up to the Paris Agreement are Iran, Libya and Yemen.
This is part of Trump’s stated plans to remove limits on the US’s fossil fuel industry, and reverse the efforts of the previous administration to grow the green energy sector, particularly through Biden’s Inflation Reduction Act. Trump has repeated several times, including at yesterday’s inauguration, that his administration will ‘drill, baby, drill.”
Signing the order Trump said: “The United States will not sabotage its own industries while China pollutes with impunity. China uses a lot of dirty energy, but they produce a lot of energy.”
This shift in direction could have a major impact on the world’s efforts to reduce greenhouse gas emissions and as a result harm efforts to limit climate change.
It could also impact efforts being made by the global financial industry, particularly in Europe and the UK to support the transition towards a lower carbon economy.
The vast majority UK pension scheme now have defined net zero targets and ESG and sustainable investment strategies. These strategies may prove less effective in terms of delivering returns to investors, and also supporting a successful transition. Many may seek to shift towards adaptation rather than transition strategies if they see temperatures continuing to rise.
While none of the UK pension schemes have yet commentated on the direction the US is now taking, it is expected most will for now broadly stick to their currently defined investment objectives.
This news comes after climate scientist revealed the 2024 was the hottest year on record and the first calendar year that has reached more than 1.5°C above the pre-industrial level.
Rachel Cleetus, policy director of the Union of Concerned Scientists called the withdrawals “a travesty” and “in clear defiance of scientific realities.”
There has been widespread acknowledgement among UK pension providers of growing ‘eco-sceptism’, particularly in the US, with asset manager BlackRock pulling out of the Net Asset Managers initiatives at the start of this month. This follows other JP Morgan Asset Management and State Street Global Advisors quitting Climate Action 100+ last year, and BlackRock downgrading its membership of this group.
However in a recent survey for Corporate Adviser all of the UK’s main workplace pension providers said eco-sceptism would not affect their current plans for decarbonising portfolios and promoting responsible investment strategies.