Understanding the US shift away from DEI and ESG frameworks

We are witnessing a profound structural shift in how the United States interacts with both its domestic priorities and the international community. A series of landmark moves has signalled a pivot away from collective, multilateral action in favour of a path defined by local authority and independence. 

While this ‘unwinding’ of social and environmental governance is framed as a return to foundational principles, it arrives at a moment of deep global interconnectedness. This raises a critical question: As the US moves to simplify its regulatory environment, will it find itself more agile and resilient, or simply more exposed? Policies can be unwound, but the physical and social realities they address are not so easily dismissed.

Withdrawing from international organisations 

In January 2026, the Trump administration issued a presidential memorandum directing the US to withdraw from 66 international organisations, signaling a definitive shift toward isolationism. Most notably, the US is exiting the UN Framework Convention on Climate Change (UNFCCC) and the Intergovernmental Panel on Climate Change (IPCC), the world's leading bodies for climate diplomacy and science.

Labelling these entities as promoters of “radical climate policies” that threaten national sovereignty, the administration plans to redirect billions in funding toward domestic infrastructure and border security. This move makes the US the only nation outside the UNFCCC. However, because the convention is a Senate-ratified treaty, the president's authority to withdraw unilaterally faces imminent legal challenges, leaving the future of US climate diplomacy in high uncertainty.

Texas redefines DEI

In a parallel move, Texas Attorney General Ken Paxton issued a significant legal opinion declaring many Diversity, Equity and Inclusion (DEI) frameworks unconstitutional. By interpreting equal protection clauses strictly, the opinion argues that race- and sex-based preferences, including those used in Historically Underutilised Business (HUB) programs, violate the law.

This perspective is mirrored at the federal level. A recent Executive Order has moved to phase out DEI preferences in federal contracting, requiring firms to certify that their practices are entirely merit-based. For many organisations, these developments mean that programs once considered standard are now being re-evaluated for potential legal and regulatory risk.

Oversight of proxy firms

The government is also cracking down on the financial firms that help drive environmental and social investing. Citing concerns that Glass Lewis and Institutional Shareholder Services (ISS), which together control over 90% of the market, prioritise “radical political agendas” like DEI and greenhouse gas audits, the order mandates a multi-agency investigation.

The SEC is now tasked with enforcing anti-fraud rules against these ‘foreign-owned’ firms and assessing if they should register as investment advisers to ensure fiduciary compliance. Simultaneously, the Federal Trade Commission is directed to investigate potential antitrust violations and deceptive practices. This regulatory pressure marks a significant pivot, forcing proxy advisors to retreat from standardised ESG guidelines toward more fragmented, client-specific frameworks. For corporations, this shift likely means a more complex and less predictable proxy season ahead.

While policy can be rewritten, the underlying challenges of a changing climate and a diversifying society remain. This institutional shift toward sovereignty provides a temporary shield from certain mandates, but it does not resolve the physical and social pressures that originally gave rise to ESG and DEI. Ultimately, the success of this strategy hinges on a difficult question: can a single nation simplify its administrative state without losing the essential tools needed to navigate global reality?

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