The Implications of President Trump’s Executive Orders on the Sustainability Sector: Terms of the Second Term

COLIN CURZI | HEAD OF BUILDING POLICY ADVISORY

_{Colin Curzi serves as the Head of Building Policyat RE Tech Advisors, a Blackstone preferred provider of consulting services to decarbonize and improve ESG performance of investment portfolios. Colin integrates the climate risks posed by building efficiency and disclosure policies into decarbonization strategies and carbon accounting methods.}

_{For questions on Policy & Compliance, please reach out to  Colin.Curzi@ReTechAdvisors.com}

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President Trump’s Executive Orders on Sustainability & Climate Change

The first day of President Trump’s second term came with more Executive Orders and Presidential Actions than any previous administration. As it is his second term, these orders outline a familiar stance on clean energy and the environment.

• The Putting America First in International Environmental Agreements Executive Order called for the “formal written notification of the United States’ withdrawal from the Paris Agreement.”

• The Unleashing American Energy Executive Order eliminated the electric vehicle mandate, disbanded the “Interagency Working Group on the Social Cost of Greenhouse Gases,” and, most notably, prioritized “terminating the Green New Deal” with the order to “immediately pause the disbursement of funds appropriated through the Inflation Reduction Act (IRA) of 2022.”

These, paired with the Declaration of a National Energy Emergency advancing fossil fuels and the accompanying initiatives to pause offshore wind development while prioritizing the development of Alaska's liquified natural gas potential, articulate a near-complete overhaul of the Biden Administration’s environmental aims. It is the direction the Sustainability Sector expected from President Trump’s return.

But that’s just it…

It is President Trump’s second term, and the market knew what to expect. The Executive Branch has limitations with regard to previously-passed tax-based incentives. State and Local Governments have made massive advancements in decarbonization policies over the last four years, and the International Community, still moving forward with the Paris Climate Accords, has established ESG reporting regulations that extend their reach across the Atlantic.

American companies – real estate companies in particular - continued their commitment to sustainability during President Trump’s first term. And by all accounts, they will find that the broader landscape of policy and reporting will allow them to go further during this second term.

Pausing the Inflation Reduction Act: Funding vs. 179D Tax Deductions

The pause of IRA funding represents perhaps the most immediately tangible impact to the sustainability sector. The Federal Government’s Clean Energy Investments directive, the $27 billion Greenhouse Gas Reduction Fund, and Climate Pollution Reduction Grants allocated within the IRA to finance clean energy infrastructure are all at risk.

However, the door is not entirely closed on the IRA. Following the initial pause, federal agencies will have 90 days to submit recommendations for reassuming the disbursement of funds to the Director of the National Economic Council (NEC) and the Director of the Office of Management and Budget (OMB).  

The Executive Order itself is already facing legal challenges. NPR reported that, following stakeholder pressure from a federal judge’s ruling on the case, “the Trump-Vance administration has abandoned OMB's ordered federal funding freeze” for the time being.

Regardless of the degree of impact the IRA funding freeze has, Commercial Real Estate may find their business case for decarbonization unchanged with regards to the IRA thanks to the design of the 179D – Energy efficient commercial building tax deduction.

The IRA’s enhancements to the 179D Internal Revenue Code increased the scale of available tax deductions for cases “of any energy efficient commercial building property, energy efficient building retrofit property, or property installed pursuant to a qualified retrofit plan.”

179D’s tax deductions were authored to apply to all manner of building upgrades including lighting, heating, cooling, hot water systems, ventilation, and even building envelope upgrades. The provision’s allowable deductions of “$0.50 per square foot with 25% energy savings, plus $0.02 per square foot for each additional percentage point up to $1 per square foot at 50% savings” appear to be exempt.

What seems to exempt them from the Unleashing American Energy Executive Order is that tax deductions, rather than direct funding, and IRA Tax credits:

“…are allowed by statute. They cannot be rescinded or denied by executive order.  Any rollback would take an act of Congress to repeal or amend the statutes that constitute the IRA.” This makes any retroactive tax code alterations very unlikely.

The tax incentives for commercial real estate to advance energy efficiency appear to remain intact. At the same time, the risk of delaying decarbonization posed by state and local governments continues to escalate.

Building Performance Standards: The National Coalition of Local Governments

In 2022, President Biden announced the formation of the National Building Performance Standards (BPS) Coalition. The goal of this first-of-its-kind partnership was to advance the passage of BPS policies that “set prescriptive energy and/or emission targets for commercial real estate that extend 10 to 20 years – with interim escalating targets that must be met at a range of every 3 to 6 years.” The cost to comply with these BPS policies regularly rises to multi-million-dollar figures and attach a significant financial figure on any “do nothing” climate strategies.

Despite its name, the National BPS Coalition was and is not dependent on any Federal-level guidance. It is a disparate collection of state and local governments passing policies similar in tone, but specific to their regional building and energy make-up.

In fact, the impact of BPS policies on the sustainability sector began during President Trump’s took his first term. Harvard Business Review cited one of the earliest BPS policies, New York City’s LL97, as a milestone “counterweight to the U.S. withdrawal from the Paris Climate Accord during Trump’s first presidency”.

Since President Trump’s victory in November, the State of Maryland finalized its rules on their Building Energy Performance Standards. The state’s most populated county, Montgomery County, quickly followed suit on January 30 with the Transportation and Environment Committee voting unanimously to approve its own BPS regulations and advance the vote to County Council for approval.

The advancements in BPS over the last few weeks punctuate that Executive Support for the National BPS Coalition is not required for local governments to effect the more than “15 billion square feet of applicable floor space” represented by its signatories. The commercial real estate sector has been preparing for additional BPS policies and will be required to comply with these local laws.

State Leadership in ESG Reporting Requirements

Local building decarbonization is not the only area where states are assuming an increased leadership role.

President Trump’s nominee to Chair the U.S. Securities and Exchange Commission (SEC), Paul Atkins, is expected to “undo many of the climate and social regulations and proposals brought forward” during the Biden Administration.

The SEC Rules to Enhance and Standardize Climate-Related Disclosures for Investors released in 2024 were set to require publicly-traded firms to report their climate-related financial risks, goals, and mitigation strategies as well as their scope 1 and 2 greenhouse gas emissions beginning this year.

In the absence of the SEC, several states have passed or are pursuing similar company and portfolio-level emissions and climate risk disclosures. California’s recently-passed Climate Corporate Disclosure Accountability Act (CCDAA) requires the annual reporting of GHG emissions (organizations >$1B in revenue) and the bi-annual disclosure of climate risks (organizations >$500MM in revenue) for any entity that “does business in California.” The broad reach of this definition invites the action of firms incorporated outside of the state or even the country.

The states of Illinois and Washington proposed legislation similar to the CCDAA in recent years, and while neither of these proposals were signed into law, they are indicative of the appetite at the state level to fulfill the spirit of the SEC climate disclosure rules’ intentions.

The immediate case-in-point of States’ reaction to a Trump Presidency comes from New York state.

Following a stymied 2023-2024 effort to establish climate reporting, the State Senate has introduced Senate Bill S3456 in its 2025-2026 session to establish “the climate corporate data accountability act requiring certain business entities within the state to annually disclose scope 1, scope 2 and scope 3 emissions" alongside a “climate accountability and emissions disclosure fund.”

Similar to local BPS policies, there is a possible future where climate reporting policies at a local level will require a national shift in companies’ approach to their environmental impacts.

European Trends in ESG Reporting

As state legislatures seek to extend their reporting influence domestically, the European Union’s Corporate Sustainability Reporting Directive (CSRD) is likely to require ESG disclosures from American companies. CSRD requires disclosure in accordance with the European Sustainability Reporting Standards (ESRS) that “cover the full range of environmental, social, and governance issues, including climate change, biodiversity and human rights.”  

Similarly to California’s CCDAA, CSRD requirements are not restricted to companies within the European Union. Fiscal year 2028 is the expected start date of reporting requirements for “Third-country undertakings which have a significant activity on the territory of the Union should also be required to provide sustainability information.”

Functionally, this means that US-based companies with assets or significant business impacts in Europe will need to disclose their emissions and climate-related data in accordance with the law.

The Market’s Reaction: America First – For the Second Time

President Trump first announced that the United States would “cease all implementation” of the Paris Climate Accords… on June 1, 2017. The 2025 Executive Order for Putting America First in International Environmental Agreements is being met with a response familiar to the one it generated nearly eight years ago.

Michael Bloomberg has set the tone for philanthropy’s response with regard to the Paris Accord. Bloomberg Philanthropies (and other climate funders) have agreed to fund the United States’ portion of the United Nations Framework Convention on Climate Change secretariat's budget following the Executive Order. Exactly as Bloomberg did in 2017.

Michael Bloomberg and then California Governor Jerry Brown built their own coalition during President Trump’s first term in the form of  America’s Pledge, “an initiative to track and report US non-federal climate commitments, ensuring the world could monitor US progress as if it were still a fully committed party to the Paris Agreement.” The commitment from this non-governmental pledge can once again be seen in the reactions of American companies at Davos 2025 with their overwhelming sentiment that “companies will continue to pursue profitable climate initiatives…even if some of them no longer frame them as climate initiatives.”  

As María Mendiluce, CEO of the We Mean Business Coalition stated, “There is a lot of noise, but the market fundamentals still stand.” The business strategy surrounding ESG will continue to be made by investors, state and local governments, and an international regulatory landscape.

Then and now, sustainability is moving forward as an integrated business strategy – regardless of who holds Executive Office.

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THE RE TECH APPROACH

RE Tech Advisors recognizes the demands and disorder associated with regulatory compliance. Our Policy & Compliance and Reporting & Frameworks teams take care to track, analyze, and provide insights on the latest changes in the sustainability sector.

RE Tech takes the approach of addressing climate risk at both the portfolio level and the asset level. We work closely with clients to identify policy impacts across their portfolios and support data readiness to simplify the compliance process. Our proprietary sustainability management platform, Trove™, allows us to account for impacts as quickly as new policies come to fruition. We evaluate fines facing affected assets from various regulations and prepare compliance action plans to improve energy and carbon performance.

Our holistic method integrates the nuance from local building policies along with the broadness of state, federal, and international disclosure requirements into our clients’ ambitious sustainability strategies.

None of RE Tech Advisors LLC, their respective affiliates or their respective employees, directors, officers, contractors, advisors, members, successors, representatives or agents makes any representation or warranty as to the accuracy or completeness of this Memorandum, and shall have no liability for any representations or warranties (expressed or implied) contained in, or for any omissions from or errors in, this Memorandum or any other written or oral communications transmitted to the recipient. Recipients of this Memorandum should not construe the contents hereof to constitute legal, tax, regulatory, financial, accounting or other advice. Any recipient of this Memorandum should seek advice from its own independent tax advisor, legal counsel and/or other advisor with respect to such matters.