After his inauguration, Donald Trump issued a series of executive orders concerning immigration, climate policy, energy, etc. "Already announced, these actions contained few surprises," explains Thomas Höhne-Sparborth, Head of Sustainability Research for Lombard Odier IM.
Once again, President Trump has ordered the withdrawal from the Paris Agreement, originally signed in 2015. This is the second time the United States has withdrawn, after having rejoined the agreement under President Biden's administration. While the United States' withdrawal will be a disappointment for many, it was widely anticipated by markets and investors.
During the previous Trump presidency, when the United States also withdrew from the Agreement, that act prompted the creation of the large coalition "We Are Still In", bringing together states, cities and companies that signaled their continued commitment to the climate goals.
During that same term, the costs of solar energy, batteries and electric vehicles continued to fall, and the markets for these products expanded globally. At the same time, despite the administration's political support for coal, at least 11 coal-producing companies went bankrupt, no longer able to compete with new energy sources.
At Lombard Odier, the first Trump presidency reinforced our conviction that for economic, technological or environmental transitions to succeed, they must above all be guided by a healthy economy.
Ultimately, we believe that the transition to an electrified economy powered by renewable energies will occur because of the demonstrated cost advantages of these technologies. These advantages result from innovation cycles, their modularity and the fundamental principles of engineering.
At Lombard Odier, we adopted from the outset the perspective that the environmental and energy transition should, above all, be seen as a technological revolution.
Other technologies, such as hydrogen or carbon capture and storage (CCS), which are not yet cost-effective, could be held back by a lack of political support. However, in our view, because of their high cost and lack of competitiveness, these solutions should not be considered as playing more than a satellite role in the transition in any case.
Of course, political support always plays a role - and can both delay or accelerate transitions. In the case of the new Trump administration, its policies were well anticipated, with markets reacting and adjusting their projections over the past months.
We believe that the environmental transition will continue, even in the new political environment. Although the rhetoric may shift from a focus on climate and decarbonization to themes such as innovation, infrastructure and affordability, these priorities are in fact two sides of the same coin. We have, moreover, adopted from the outset the perspective that the environmental and energy transition should, above all, be considered a technological revolution.
As the World Economic Forum in Davos begins and the new Trump administration takes office, investors are waking up to a new reality.
At the same time, the Trump administration will open new opportunities in sustainable investment. We expect the government to tackle issues such as food guidelines and food additives, but also to support technology and the continued digitization of the economy. This digitization is a key lever to accelerate transitions toward more efficient consumption systems and industrial models.
Autonomous driving should also benefit from increased support from the Trump administration. Although the motivations are not necessarily environmental, any such measures will provide indirect support to the adoption of electric vehicles. By prioritizing the reshoring of strategic industries, Washington could also unlock additional opportunities in industries such as semiconductors, batteries and other segments.
As the World Economic Forum in Davos begins and the new Trump administration takes office, investors are waking up to a new reality: the path to the energy transition will likely not be as linear as some overly idealized transition models suggest.
Our mantra at Lombard Odier has long been to "rethink everything". In 2025, we believe that should include approaches to sustainable investing, which should remain more than ever at the heart of forward-looking investors' concerns. We believe the end state will be a net-zero-emission economy, positive for nature, socially constructive and digital. Opportunities are more varied than ever.
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