What a Biden-Harris win means for ESG and impact investing

As Democrats and others worldwide celebrate the historic win of the Biden-Harris ticket, investors should pay close to attention to his plans to Build Back Better. In a clear endorsement of ESG and impact investing, a number of the President elect’s policies are designed to accelerate the focus on ESG issues in corporate United States. We have set out below the key policies to watch for investors:

Paris Climate Accord and a National Climate Council 

Perhaps most importantly Biden, who has aptly called climate change an “existential threat to humanity”, has pledged to rejoin the Paris climate accord on his first day in office, to cut US emissions to net zero by 2050 and for all electricity to be emissions-free by 2035: a stark reversal of the formal exiting of the US from the Paris climate accord which occurred last week on the day after the election.

The Biden-Harris administration is also expected to set up the first National Climate Council, a high-level group whose chair would influence and direct a mandate of climate-related policies across the US government. The implementation of these promises are a dramatic reversal from the position of President Trump, who has weakened environmental rules across the board by overturning over 100 major environmental regulations and may well be the catalyst for the US and the SEC to catch-up with Europe with respect to disclosure regulations and a general support for ESG-investing.

Green stimulus package and the Green New Deal? 

The President-elect has also promised a $2tn green stimulus package to help reduce US emissions by investing in clean energy and incentivising the development of new technologies. One potential source of tension within the Democrats is whether these plans align with the far-reaching and ambitious Green New Deal, and how far the Biden-Harris administration can go without control of the Senate to adopt this platform that has been proposed by more progressive Democrats.

There may also be a common ground with Republicans on this issue, who have also agreed to include clean energy in broader economic stimulus measures. The growth of this industry in one of the world’s largest economies will create opportunities for impact investors to deploy large amounts of capital.

AgTech 

One area that impact investing has been able to make significant progress is in the area of AgTech, with start-ups in this sector looking to bring more efficiency to the agricultural process. As part of their proposed $2tn green stimulus package, Biden-Harris have pledged to create new jobs in sustainable agriculture as well as establishing a new agency to research agricultural techniques. Given the scale of the US farming lobby, this will represent another opportunity to deploy significant capital.

Racial equity

Racial tensions were high during the campaign, and there has been much coverage of the importance of Black and Latin American voters for the historic Biden-Harris ticket. One of their key pledges has been to ensure racial equality across the US economy. With planned reforms to Opportunity Zones and housing projects, investors should expect increased scrutiny of the impact their portfolios have on minority communities.

Employees & unions

Biden was selected as the Democratic nominee for his ability to turn out blue collar voters in the so-called Rust Belt. He has committed to bringing forward legislation to make it easier to unionise, but also to increase wages.

This, combined with the direction of public opinion, represents an opportunity for those companies that consider the needs of their workforce. Many ESG-focused investors purport to consider the impact on workers, but the next four years are likely to throw these efforts in sharper relief.

In summary, the next four years under a Biden-Harris administration promise to represent a time of change in the US economy in favour of ESG and impact investing. Many of these trends are already underway and time will tell the feasibility of the Biden-Harris administration in accelerating these pledges as promised on the campaign trail.