ESG fund managers are being urged to keep their lawyers very close, after Donald Trump emerged as the winner of the US presidential race

Following Donald Trump’s return to the White House, ESG fund managers are being advised to keep legal counsel close, as his presidency is expected to intensify the GOP's long-standing opposition to environmental, social, and governance (ESG) investing. Jefferies Financial Group analysts stress that investors pursuing ESG strategies should ensure they are well-versed in U.S. legal complexities.

“We’d recommend that ESG fund managers have legal support readily available,” wrote Jefferies analysts, led by Aniket Shah, in a client note on Wednesday. “Antitrust risk remains significant for ESG-focused asset managers; there have been no cases yet, so there is no legal precedent. Additionally, fiduciary duty concerns will remain relevant as states continue to push anti-ESG laws.”

Trump’s election win has already impacted green sectors, with shares of wind energy companies seeing significant losses on Wednesday morning. Beyond potential policy barriers, the ESG sector now faces an increased risk of legal challenges.

Prominent GOP figures have argued that ESG-focused firms fail to uphold their fiduciary responsibilities. Meanwhile, several Republican attorneys general contend that finance companies using ESG metrics may be collaborating against the fossil-fuel industry and inadvertently contributing to inflation.

Jefferies analysts also highlighted the potential for “greenhushing,” where companies avoid publicizing their ESG activities to reduce legal exposure. CEOs are likely to consult their legal teams for guidance in navigating this new climate.

“General counsels are closely advising CEOs, concerned about possible legal repercussions for ESG activities,” the Jefferies analysts noted, adding that companies may focus on strategic, business-aligned ESG initiatives.

In contrast, analysts note that consumer and employee pressures—similar to those seen in 2016—may encourage companies to take positions on social issues like abortion and diversity.

Diverging state ESG policies may create a “nightmare” of fragmented regulatory requirements, the analysts said. In addition, shareholders may urge companies to disclose ESG risks in line with standards from the International Sustainability Standards Board, though the U.S. Chamber of Commerce has expressed openness to ESG disclosures.

Jefferies emphasized that these insights are specific to ESG investing and not necessarily to the broader clean energy transition.