On November 5, 2024, millions of Americans will head to the ballots, where the presidency, 468 congressional seats (33 in the Senate and all 435 in the House), and 11 governorships will be contested. These outcomes may shape the future of the energy transition, with climate policies front of mind for voters and candidates alike.
Last month, Jefferies’ Sustainability and Transition team explored six key questions around the 2024 elections’ impact on the US energy landscape. This analysis was part of a broader series examining the interplay between politics and the global energy transition.
Continuing this series, the team’s latest report analyzes ESG performance during the presidencies of Donald Trump (R) and Joe Biden (D). Specifically, it explores how ESG heuristics performed against traditional counterparts and broader market benchmarks during each administration.
This analysis covers two distinct periods: (1) from President Donald Trump’s election to President Joe Biden’s election and (2) from President Biden’s election to the present. It’s important to note that these findings do not establish causality, as ESG performance is influenced by a multitude of factors beyond just politics and policy.
Jefferies analyzed seven heuristics focused on ESG and the energy transition:
- Four ESG and energy transition indices outperformed their broad market benchmark during President Trump’s tenure, while three underperformed.
- All seven ESG and energy transition indices underperformed vs their broad market index during the current Biden era.
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Invesco WilderHill Clean Energy ETF (PBW) vs. Invesco S&P 500 Equal Weight Energy ETF (RSPG) vs. S&P 500 (SP50)
- PBW tracks a modified equal-weighted index of US-listed companies involved in clean energy sources or energy conservation.
- RSPG tracks an equal-weighted index of US energy companies listed in the S&P 500.
- SP50 includes 500 leading companies in leading industries of the US economy.
Findings: During the Trump Administration, PBW saw the strongest performance and RSPG saw the weakest, with a delta in total return of 350.5 percent. During the Biden Administration, performance flipped: RSPG performed strongest and PBW weakest in a reversal of 309.8 percent.
iShares STOXX Europe 600 Oil & Gas UCITS ETF (SXEPEX) vs. SPDR S&P Oil & Gas Exploration & Production ETF (XOP) vs. STOXX Europe 600 (183660)
- SXEPEX tracks the performance of companies from the European oil and gas sector.
- XOP tracks an equal-weighted index of companies in the US oil and gas exploration and production space.
- 183660 includes 600 European companies representing all market caps.
Findings: During the Trump Administration, STOXX Europe 600 saw the strongest performance and XOP the weakest, with a delta in total return of 81.7 percent. Again, during the Biden Administration, performance flipped: XOP performed strongest and STOXX Europe 600 weakest in a reversal of 208.9 percent.
iShares MSCI ACWI Low Carbon Target ETF (CRBN) vs. iShares MSCI World ETF (URTH) vs. MSCI AC World (892400)
- CRBN tracks an index of stocks from global firms selected for a bias toward lower carbon emissions.
- URTH tracks a market-cap-weighted index of stocks that cover 85 percent of the developed world’s market cap.
- 892400 captures large- and mid-cap companies across developed markets.
Findings: During the Trump Administration, performance was essentially the same across all indices. Under the Biden Administration, URTH has seen the strongest performance and CRBN the weakest, with a delta of 8.3 percent.
MSCI Global Alternative Energy (MS700750) vs. iShares Global Energy ETF (IXC) vs. MSCI AC World (892400)
- MS700750 includes developed and emerging market companies that derive 50 percent or more of their revenues from alternative energy products and services.
- IXC tracks a market cap-weighted index of global energy companies.
- 892400 captures large- and mid-cap companies across developed markets.
Findings: During the Trump Administration, alternative energy saw the strongest performance and IXC the weakest, with a delta in total return of 146.2 percent. Under the Biden Administration, performance flipped: IXC saw the strongest performance and alternative energy the weakest, with a delta of 202.6 percent.
Invesco Solar ETF (TAN) vs. iShares Global Energy ETF (IXC) vs. MSCI AC World (892400)
- TAN tracks an index of global solar energy companies selected based on the revenue generated from solar-related businesses.
- IXC tracks a market cap-weighted index of global energy companies.
- 892400 captures large- and mid-cap companies across developed markets.
Findings: During the Trump Administration, TAN saw the strongest performance and IXC the weakest, with a delta of 337.5 percent. During the Biden Administration, IXC saw the strongest performance and TAN the weakest, with a delta of 207.2 percent.
SPDR MSCI USA Gender Diversity ETF (SHE) vs. S&P 500 (SP50) vs. MSCI USA (984000)
- SHE tracks a market cap-weighted index of US companies promoting gender diversity while exhibiting a high proportion of women across all levels of their organization.
- SP50 includes 500 leading companies in leading industries of the US economy.
- 984000 measures the performance of the large- and mid-cap segments of the US market.
Findings: MSCI USA saw the strongest performance under the Trump Administration and SHE the weakest, with a delta of 21.3 percent. During the Biden Administration, the S&P 500 saw the strongest performance and SHE the weakest by 19.7 percent.
iShares MSCI USA ESG Select ETF (SUSA) vs. S&P 500 (SP50) vs. MSCI USA (984000)
- SUSA tracks an index of US companies with high ESG factor scores, as calculated by MSCI.
- SP50 includes 500 leading companies in leading industries of the US economy.
- 984000 measures the performance of the large- and mid-cap segments of the US market.
Findings: During the Trump Administration, SUSA saw the strongest performance and S&P 500 the weakest, with a delta in total return of 6.7 percent. Under Biden, performance flipped: the S&P 500 saw the strongest performance and SUSA the weakest, with a delta of 9.1 percent.
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Again, these findings do not establish causality, as the factors impacting ESG performance during any given period are multifarious. That said, today’s political parties diverge significantly in their approach to the energy transition and related policies. With so many elections slated for this November, there is no question that 2024 will be a critical year for ESG.
For the full report, and more coverage of ESG performance, follow Jefferies’ Sustainability and Transition team.
