The U.S. shifts its ESG policy: “A turning point or a step backward?”

• ​The U.S. is scaling back sustainability regulations, but notable opportunities remain in certain areas. ESG-supportive states, such as California, have introduced climate disclosure laws, while funding from the Inflation Reduction Act (IRA) continues to flow into ESG-opposing states like Texas. This reflects that ESG policy direction in the U.S. has not collapsed entirely but is instead diverging into two distinct paths.

• Global ESG capital is shifting away from the U.S. Europe's share of ESG equity funds has risen to 84%, while the U.S. has declined to 11%. Meanwhile, new green bond issuance in the U.S. has dropped by 66% (comparing January 2024 with January 2025). 
• Thailand needs to redirect its solar panel exports away from the U.S. market. Currently, Thailand exports around 2 gigawatts of solar panels to the U.S, accounting for 75.3% of its total production capacity. However, it is likely to lose price competitiveness due to anti-dumping duties that could be imposed at rates as high as 799.55%.

 
The U.S. has already stepped one foot out the door.
 
In summary, the U.S. is diminishing its role in shaping ESG policy and investment at the federal level from the first day of the new term. President Donald Trump signed an Executive Order to withdraw from the Paris Agreement, remove regulations governing electric vehicles (EVs), suspend offshore wind power development leasing, and expand concessions for oil and natural gas production. He also rolled back more than 30 regulations issued by the Environmental Protection Agency (EPA) to further liberalize domestic production of oil, natural gas, and coal. In addition to these regulatory changes, the government has withdrawn its commitment to international climate change funding and delayed UDD300 billion in clean technology loans under the Inflation Reduction Act (IRA).

However, the Energy Information Administration (EIA) still expects U.S. renewable power generation capacity to increase by 26.3% (from 121 GW to 153 GW) by 2025, led by Texas (11.6 GW) and California (2.9 GW). Under the base-case scenario, Kasikorn Research Center expects that projects already benefiting from incentives under the Inflation Reduction Act (IRA) will continue to move forward, while the Trump administration is unlikely to expand these programs or increase the funding envelope further.

In addition to changes in the U.S. government, there has also been a divergence of ESG investments in capital markets and the private sector. U.S. ESG equity funds recorded net outflows of USD19.6 billion in 2024, despite outperforming conventional funds in 2023 (12.6% for ESG funds compared to 8.6% for conventional funds). Investment funds have flowed into Europe, where policies are more supportive of ESG, while anti-ESG policies have intensified in the U.S. This trend has also spread to the bond market, with new U.S. ESG bond issuance decreasing by 66% between January 2024 and 2025.

Major Wall Street institutions such as JP Morgan and State Street have toned down their public ESG commitments through the Net Zero Banking Alliance (NZBA). However, analysts note that many U.S. companies continue to invest in low-carbon projects, albeit while avoiding the use of “green" or “ESG" labels to prevent backlash.

Kasikorn Research Center forecasts that investment in U.S. ESG projects will contract, except for projects allocated under the IRA or those already funded. This will hinder access to low-cost financing for clean energy projects, potentially slowing the production of clean technologies in the U.S. by 2029.

Policy polarization in the United States
 
In recent years, ESG has become a political issue in the United States, triggering a wave of opposition to green policies and sustainable finance across many states. Currently, 20 U.S. states (accounting for 34% of GDP) have adopted anti-ESG policies, while only 9 states (representing 36% of GDP) maintain ESG-supportive policies. This divergence has created uncertainty for businesses and investors, contributing to a slowdown in investment.

Democratic-leaning states such as California, New York, and Washington are likely to continue advancing ESG policies to offset the reduced role of the federal government. California has enacted legislation requiring companies with revenues exceeding $1 billion to disclose greenhouse gas emissions across Scope 1, 2, and 3, as well as report climate-related financial risks (SB 253 & SB 261). Meanwhile, New York has introduced stringent climate legislation targeting an 85% reduction in GHG emissions by 2050 and allowing its USD250 billion state pension fund to implement a net-zero plan by 2040. At the same time, Washington launched a carbon market in 2023, which has generated billions of dollars in revenue to support clean energy projects.

In contrast, many Republican-leaning states are not only avoiding ESG initiatives but actively opposing them through policy measures. For example, Texas has penalized banks that “boycott" fossil fuels, while Louisiana and Florida have withdrawn state treasury funds from asset managers deemed “too green." These policy shifts have clearly slowed ESG investment. In 2023, among the 20 states with anti-ESG legislation, only three saw private-sector ESG bond issuance, as companies in these states significantly reduced capital investment in ESG-related activities.

The paradox of the IRA: USD128 billion for clean technology, yet 85% is concentrated in Republican-leaning states — is it sustainable?
 
The Inflation Reduction Act (IRA) was a key piece of legislation passed during the Biden administration in 2022. This USD369 billion package provided incentives for climate action and clean energy, sparking a surge in green manufacturing across the U.S. The law focused on using tax breaks and subsidies to stimulate private sector investment in clean energy projects. In its first two years, it resulted in over USD128 billion in clean energy projects nationwide and created over 90,000 jobs. The majority of this investment was concentrated in renewable energy, electric vehicles, batteries, and related supply chains.

Paradoxically, many states that strongly oppose ESG have become major beneficiaries of federal clean energy funding. Nearly 60% of the 334 newly announced clean energy and EV projects following the enactment of the Inflation Reduction Act (IRA) are located in Republican-controlled districts. These projects account for 85% of the total USD128 billion investment and 68% of newly created jobs (see the appendix for a state-by-state breakdown).

The misalignment between policy and investment-whereby states with anti-ESG policies benefit from federal climate programs-opens up strategic investment opportunities among investors and the business sector. This means that significant state-level investment opportunities remain in the U.S. (e.g., solar power supply chains in Georgia or EV manufacturing in Tennessee), even as federal ESG-focused funding and regulations decline. Of the 10 states with the largest manufacturing sectors, only two voted for Kamala Harris over Trump in the 2024 presidential election, suggesting that funds under the Inflation Reduction Act (IRA) are likely to continue flowing into clean energy production in these states.

What are the implications of the United States' policy shift?
 
Global capital focused on ESG will flow into Europe.
 
Access to ESG funding in the U.S. is likely to be constrained in the short term, particularly for equity-focused investments. Europe's share of ESG equity assets under management (AUM) has risen to 84% (USD2.7 trillion out of a total USD3.2 trillion), while the U.S. share has declined to 11%. This trend is expected to persist until uncertainty eases significantly or a major shift in U.S. policy occurs.

In the bond market, issuance of new U.S. green bonds has slowed significantly (down 66% between January 2024 and 2025), while China surpassed the U.S. in terms of cumulative green bond issuance for the first time in January 2025. This situation stems from the enactment of anti-ESG capital market legislation in several U.S. states, coupled with policy changes under the current administration. This will significantly hinder U.S. companies' access to low-cost ESG funds (due to the decline in Greenium).

In addition, the ongoing trade war and the likelihood of escalating trade tensions are expected to weigh on the U.S. manufacturing sector. Trade conflicts have already contributed to a slowdown in U.S. manufacturing. Meanwhile, upcoming regulations such as the European Union's Carbon Border Adjustment Mechanism (CBAM) are likely to further reduce U.S. exports to the EU. Although the initial impact is expected to be limited at around $4 billion, compared to the EU's total imports of $350 billion. However, Kasikorn Research Center anticipates that the United States may respond to the CBAM in a manner similar to that stance previously taken by the current administration toward the EU's Value-Added Tax (VAT) system.

 
U.S. green investment will become increasingly fragmented.

Although the reshoring of solar panel manufacturing to the United States has tripled production capacity (from 14.5 GW in 2023 to 42.1 GW in 2024), the retreat from federal policy leadership, along with the contradictions embedded in the Inflation Reduction Act (IRA) law, will require businesses to take a more strategic approach in deciding where to invest within the U.S. For example, EV battery manufacturers may face a critical choice: whether to build new plants in low-cost states that offer subsidies under the Inflation Reduction Act (IRA), even if those states have an anti-ESG stance, or to focus on states with cleaner power grids and more supportive environmental policies.

Many original equipment manufacturers (OEMs) of renewable energy are opting for this approach primarily due to cost considerations, leading to rapid expansion in Republican-leaning states. Texas and Georgia are at the forefront, solar module production capacities of 8.6 and 8.4 GW, respectively, in 2024. OEMs often manage reputational risk by using terms such as "energy security" and "US manufacturing independence" instead of "green" or "ESG." However, the U.S. remains heavily reliant on imports of solar wafers and cells, with no new wafer manufacturing plants expected to open in 2024.

Downstream solar installation capacity in the United States is concentrated in 15 states, accounting for 80% of total solar capacity, with California and Texas leading the way. On average, Democratic-leaning states have a higher share of renewable energy in their power mix (31.9%, compared with 23.2% in Republican-leaning states). Combined with state-level net-zero emissions targets, this suggests that solar modules manufactured in Republican-leaning states are likely to be deployed in power generation facilities located in Democratic-leaning states. Large states such as Texas and Florida are also expected to benefit from their high-capacity volumes, regardless of political alignment.

Therefore, the flow of funds tends to vary depending on which areas support green supply chains. Original equipment manufacturers (OEMs) will follow IRA subsidies into Republican-leaning states to produce low-cost solar modules, which are then supplied to Democratic-leaning states that support ESG and have a higher share of renewable energy consumption.

Strategic plan for Thailand

The fundamental demand for green technologies in the U.S. continues to show strong growth, which is encouraging. The U.S. remains heavily reliant on imports, with 55 GW of solar modules imported in 2024 out of a total installed capacity of 63 GW.

However, although ASEAN countries are the United States' primary source of imports, accounting for as much as 88%, they have been adversely affected by anti-dumping and countervailing duties (AD/CVD).

These tariffs are extremely high—reaching up to 3,403.96% for Cambodia, 799.55% for Thailand, 542.64% for Vietnam, and 168.80% for Malaysia—and would be added to the currently proposed 10% tariff. Such measures would drive up the cost of U.S. imports of solar cells from ASEAN to uncompetitive levels, except in the case of Malaysia or for companies that receive exemptions. Currently, imported solar modules in the U.S. are priced at around USD0.10 per watt, compared with domestic production costs of approximately USD0.31 per watt.

Thailand exports solar cells to the United States, accounting for 75.3% of Thailand's total exports, or more than 2 GW in 2024. Under the baseline scenario, Thai solar cell exports to the US are expected to decline in the short term due to the implementation of new anti-dumping/corruption-voltage (AD/CVD) duties. Thai manufacturers will need to seek alternative export markets, most likely in Europe (where 98% of solar modules are imported from China). However, circumventing anti-dumping and countervailing duties (AD/CVD) duties will be difficult. For example, sourcing wafers from non-Chinese sources may be challenging, as 98% of global supply originates from China, and exporting through third countries before reaching the U.S. is unlikely to be as effective.

In addition to solar energy technology, Thailand is the world's second-largest exporter of air conditioners, with an export value of approximately $7.9 billion in 2023, behind China's $22.3 billion. Investing in environmental certifications-such as the U.S. “ENERGY STAR" rating for air conditioners-would create opportunities for Thai heating, ventilation, and air conditioning (HVAC) exporters to position their products as solutions that support U.S. climate goals or enhance energy efficiency.

For Thailand's EV and auto parts industry, the impact of U.S. policy changes is expected to be limited, as exports to the United States account for only 2.6% of the total.

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