A strategy of a US think tank to roll back some of the climate change and DEI policies of government and business is controversial, and the author of this article claims that reversing these trends will damage impact investment. The article is sure to provoke debate.

Ahead of the November 5 election, the Heritage Foundation’s Project 2025 Policy handbook has been the subject of much discussion. If implemented, the plans laid out in Project 2025 would have a significantly negative effect on impact investing, as well as on the goals that all investors seek for their clients, the author of this article argues. 

Michael Lent (pictured), co-chief investment officer and founding principal of Veris Wealth Partners, argues that Project 2025’s policies would hinder impact investors from achieving goals such as being able to achieve net zero in terms of C02 emissions and achieve greater racial and gender equity. These are large claims, and readers may want to give their own responses on what is, after all, a political issue about the proper scope of federal and local government regulation of commercial activity. 

The editors welcome this article as a contribution to debate; the usual editorial disclaimers apply. If you agree or disagree with such content, please let us know and submit comments to tom.burroughes@wealthbriefing.com

The Heritage Foundation’s Project 2025 Policy Handbook has been much discussed during the lead-up to the 2024 general election. I believe, along with many other observers, that Project 2025 was developed to serve as the Trump administration’s playbook on governing if he is elected in November, despite the fact that Donald Trump and his campaign have repeatedly denied having any connection to Project 2025 (1).   

If implemented, I believe the plans laid out in Project 2025 would have a significantly negative effect on impact investing, as well as on the goals we seek to achieve as investors. While Project 2025 would not stop us from investing with impact, I believe that these policies, if enacted as written in the Playbook, would create headwinds and roadblocks in specific areas.

While some of the plans can take place through administrative fiat, others require passing legislation. The extent of its impact will depend on whether Republicans win the majority in Congress as well as the White House.  

I am outlining below some of what I consider to be the most disturbing aspects of the policies. There are several overarching themes in each section. These include proposals to significantly reduce regulation, make political appointments at many levels of the government – and firing subject matter experts already in those positions, the rejection of any attempts to limit climate change, and the ending of any program and grants to address diversity and equity.  

Project 2025 on the Environmental Protection Agency (EPA)
The section on the EPA proposes new policies that would weaken fuel standards, eliminate the office that handles compliance, dissolve the office of environmental justice, end civil rights, disband the office overseeing the distribution of Inflation Reduction Act grants to community-based organizations (2).      

According to the Center for American Progress (3), Project 2025 would:  

-- "Neuter the EPA’s ability to safeguard public health and protect Americans’ fundamental right to breathe clean air and drink safe water, pushing the EPA toward obsolescence; 

-- Dissolve unprecedented US climate, clean energy, and environmental investments that  are creating millions of jobs and cutting carbon and local pollution; and 

-- Reverse hard-won progress on protecting Americans from lead poisoning, dangerous forever chemicals, and soot pollution."

Project 2025 on the Securities and Exchange Commission (SEC)
The changes recommended by Project 2025 to financial regulation would reverse hard-won sections of Dodd-Frank legislation and restrict corporate reporting mandates by the SEC. Specifically, it calls for Congress to (4): 

-- “Prohibit the SEC from requiring issuer disclosure of social, ideological, political, or ‘human capital’ information that is not material to investors’ financial, economic, or pecuniary risks or returns. The proposed SEC climate change rule, which would quadruple the costs of being a public company, is particularly problematic.

-- Repeal the Dodd–Frank mandated disclosures relating to conflict minerals, mine safety, resource extraction, and CEO pay ratios.

-- Oppose efforts to redefine the purpose of business in the name of social justice; corporate social responsibility (CSR); stakeholder theory; environmental, social, and governance (ESG) criteria; socially responsible investing (SRI); sustainability; diversity; business ethics; or common good capitalism.”  

I believe these actions taken together would limit the ability of investors to receive valuable information from companies in a way that allows for proper comparisons on material ESG factors. Unless the SEC mandates reporting, investors rely on voluntary reporting from companies and in formats that vary.   

Project 2025 on the Department of Housing and Urban Development (HUD)    
Project 2025 calls for the Department of Housing and Urban Development (HUD) to (5): 

-- Repeal climate change initiatives;  

-- Eliminates the Housing Supply Fund; 

-- Repeal affirmatively furthering fair housing regulation, and any other uses of special-purpose credit authorities to further equity; and  

-- Adds work requirements and limited periods of eligibility. 

Taken together, I believe these changes would limit the ability of HUD to ensure fair housing standards are being met.  

Project 2025 on the Treasury Department
Overall, Project 2025 calls for the reversal of what they call “racist equity agenda” but are in fact equitable and climate-related financial-risk agenda. If implemented the recommendations would:  

-- Stop funding of the IMF, World Bank and OECD who provide critical funding to under-resourced countries; 

-- Repeal sections of the Dodd Frank laws including those ensuring the financial stability of large financial institutions as well as the organized process of liquidation if necessary;   

-- Privatize Fannie Mae and Freddie Mac, making it more expensive to purchase homes; 

-- End all DEI activities; and 

-- Withdraw from the Paris Accords and support the oil and gas industry. On this point, Project 2025 states: 

“The next Administration should use Treasury’s tools and authority to promote investment in domestic energy, including oil and gas. It should reverse support for international public- (and private-) based efforts promoting Environmental, Social, and Governance and Principles for Responsible Investment both of which have badly damaged US energy security.” (7)  

Taken as a whole, I believe that the recommendations will, if enacted exactly as written, reduce oversight, potentially increase financial instability, increase deficit through lower corporate taxes and estate tax, eliminate renewable energy tax credits, and attempt what little is being done to address inequity based on race and gender.

Looking to 2025 and beyond
If implemented, I believe that Project 2025’s policies would hinder impact investors from achieving a variety of critical goals including achieving net zero, supporting climate solutions, supporting under-resourced communities, and achieving greater racial and gender equity. I also believe that these policies are likely to create greater financial instability and lessen investors’ ability to receive uniform data on climate issues and diversity.   

While these policies, if implemented, would create obstacles for impact investors by creating an unfavorable policy and regulatory environment, our firm believes there will continue to be investment opportunities in the areas of climate solutions, community wealth building, sustainable and regenerative agriculture, and gender and racial equity. There will be even more compelling economic, social and environmental reasons to invest if these policies are implemented. At Veris, we aim to continue seeking the best opportunities in each of our impact themes no matter what the outcome will be in November.      

About the author

Michael Lent is a founding principal and Co-CIO of Veris Wealth Partners. He is a Certified Investment Management Analyst (CIMA®) with 30+ years of experience delivering financial planning and investment consulting services to high net worth families, family offices, and foundations. Prior to Veris, he co-founded the New York office of Progressive Asset Management, the first full-service broker/dealer to focus on socially responsible investing. Lent served as chair of the board of directors of US SIF, The Forum for Sustainable and Responsible Investment. In addition, Lent is a member of the Investments & Wealth Institute™.

Footnotes:

1, https://thehill.com/homenews/campaign/4765917-trump-denies-link-project-2025/

2, Project 2025 Environmental Protection Agency Chapter 13 

3, https://www.americanprogress.org/article/project-2025-would-make-it-easier-for-big-corporations-to-dump-dangerous-toxins-that-poison-americans

4,  Project 2025 Security and Exchange Commission  Chapter 27

5, Project 2025 Department of Housing and Urban Development Chapter 15

6,  Project 2025 Department of Treasury Chapter 22

7,  Project 2025 Department of Treasury Chapter 22

Disclaimer

The information contained herein is provided for informational purposes only and should not be construed as the provision of personalized investment advice, or an offer to sell or the solicitation of any offer to buy any securities. Rather, the contents including, without limitation, any forecasts and projections, simply reflect the opinions and views of the author.

All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change without notice. There is no guarantee that the views and opinions expressed herein will come to pass. Additionally, this document contains information derived from third party sources. Although we believe these third-party sources to be reliable, we make no representations as to the accuracy or completeness of any information derived from such third party sources and take no responsibility therefore.