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Trump’s backlash isn’t ‘game over’ for ESG investing

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A mobile billboard rolls past the U.S. Capitol on May 10, 2023.

Jemal Countess | Getty Images Entertainment | Getty Images

Investors have pulled money from so-called ESG funds in recent years, amid political backlash, high interest rates and other headwinds.

But analysts say the outlook and long-term investment thesis for the fund category, which stands for “environmental, social and governance,” are favorable.

President Donald Trump’s agenda “isn’t ‘game over’ for ESG investing,” Diana Iovanel, a senior markets economist at Capital Economics, wrote in a research note on Tuesday.

Demand for ESG investments “is here to stay” even in the face of political pressure, Iovanel wrote.

ESG outflows amid ‘anti-ESG backlash’

How is an ESG fund really built?

“I don’t think we really expected something different, because of the anti-ESG backlash in the U.S. and the political environment there,” said Hortense Bioy, head of sustainable investing research at Morningstar.

Critics call ESG a form of “woke capitalism” that sacrifices returns for the sake of liberal goals.

Advocates argue that ESG investing positions investors for higher long-term returns because companies that adopt such practices are poised to be more resilient, and therefore more successful, than peers.

Outflows follow years of steady growth

Two years of consecutive outflows — in 2023 and 2024 — followed years of steady ESG growth.

Investors have funneled a total $130 billion into U.S. ESG funds over the past decade, according to Morningstar. For example, investors pumped more than $50 billion into ESG funds in 2020 and almost $70 billion in 2021, a record high, according to Morningstar.

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Despite outflows, overall ESG fund assets grew slightly in 2024, to $344 billion, due to market appreciation, Morningstar found.

Investor demand also appears relatively high, especially among younger investors, analysts said.

About 84% of individual investors in the U.S. are interested in sustainable investing, according to a 2024 Morgan Stanley survey. Roughly two thirds, 65%, of respondents said their interest had increased in the prior two years.

Politics poses headwinds for ESG

But the political backlash against initiatives underlying ESG funds has intensified “very quickly” since President Trump was elected, Bioy said.

Within the first few days of his inauguration, Trump pulled the U.S. out of the Paris agreement, blocked subsidies for electric vehicles, pushed for more fossil-fuel production and started a “huge pushback” against diversity, equity and inclusion policies, Iovanel of Capital Economics wrote.

The Republican-led Securities and Exchange Commission on Thursday said it would stop defending a climate-change disclosure rule in court. The regulation required a baseline transparency around climate risks and greenhouse gas emissions from certain U.S. publicly listed companies.

There’s also uncertainty about the fate of the Inflation Reduction Act, a historic climate change mitigation law signed by President Joe Biden.

Even before President Trump’s second term, at least 18 Republican-led states had adopted “anti-ESG legislation,” prompting some large asset managers to “pare back” their ESG efforts, Iovanel wrote.

The number of ESG funds contracted for the first time ever in 2024 — to 587 from 646 in 2023, a 9% decline, according to Morningstar. That means asset managers made fewer options available for investors.

“It’s very tricky for any asset manager now to be selling ESG products,” Bioy said. “They don’t want to draw attention.”

Non-political headwinds

ESG funds have suffered from non-political headwinds, too, analysts said.

In fact, high interest rates have likely been more of a hindrance than politics, analysts said. High borrowing costs negatively impact sectors like clean energy more than others because they’re more capital-intensive, analysts said.

Performance has also lagged in recent years. For example, less than half — 42% — of sustainable funds ranked in the top half of their respective investment categories, according to a Morningstar analysis of investment returns.

It’s very tricky for any asset manager now to be selling ESG products. They don’t want to draw attention.

Hortense Bioy

head of sustainable investing research at Morningstar

Underperformance in recent years is partly due to high interest rates, analysts said.

Additionally, oil and gas prices boomed after Russia invaded Ukraine in 2022. The top 10 stocks in the S&P 500 that year were from the energy sector, for example. ESG portfolios that minimize fossil-fuel exposure looked like relative laggards as a result, analysts said.

However, performance was “very good” prior to 2022, Bioy said.

For example, the typical U.S. ESG stock fund beat returns of its peers by about 4 percentage points in 2020, according to a Morgan Stanley analysis. ESG bond funds outperformed by about 1 point that year, it found.

“Any investment and any ESG investment are no different — they go through lows and highs,” Bioy said.

ESG is investing, ‘not philanthropy’

But it’s the long term, not the short term, where ESG investing is poised for clear outperformance, analysts say.

McKinsey research found that companies with C-suite leaders “who chase growth without considering how their strategies could impact people, the planet, and their firm’s long-term sustainability” are less likely to “lead their companies to full growth potential,” the consultancy said in a 2023 analysis of the 10,000 largest global companies from 2016 to 2022.

The goal of ESG investing is to reduce a portfolio’s long-term risk, said Jennifer Coombs, the head of content and development at the U.S. Sustainable Investment Forum, known as US SIF.

Money managers who oversee ESG portfolios also don’t aim to sacrifice investment returns for the sake of pursuing an environmental or social agenda, Coombs said. Instead, they generally believe that investing according to ESG principles ultimately boosts risk-adjusted returns for long-term investors, she said.

“This is investing,” Coombs said. “It’s not philanthropy.”

“Sustainability takes a long time,” she said. “It’s long term. And that’s the whole idea.”

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Personal Finance

Court blocks DOGE access to sensitive personal Social Security data

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A person holds a sign during a protest against cuts made by U.S. President Donald Trump’s administration to the Social Security Administration, in White Plains, New York, U.S., March 22, 2025. 

Nathan Layne | Reuters

A federal judge has once again blocked Department of Government Efficiency staffers, operating inside the Social Security Administration, from accessing sensitive personal data of millions of Americans.

U.S. District Judge Ellen Lipton Hollander on Thursday granted a preliminary injunction to block the so-called DOGE from further accessing sensitive personal data stored by the agency. As a result, DOGE will have to comply with certain legal requirements when accessing SSA data. The order applies specifically to SSA employees who are working on the DOGE agenda.

The lawsuit was brought by the American Federation of State, County, and Municipal Employees; the AFL-CIO; American Federation of Teachers and Alliance for Retired Americans.

They are represented by national legal organization Democracy Forward.

The plaintiffs argue DOGE’s actions violate the Privacy Act, Social Security Act, Internal Revenue Code and Administrative Procedure Act.

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Defendants in the case include the Social Security Administration; the agency’s acting commissioner Leland Dudek; SSA chief information officer Michael Russo and/or his successor; Elon Musk, senior advisor to the president, and DOGE acting administrator Amy Gleason.

The order blocks the agency and its agents and employees from granting access to systems containing personally identifiable information including Social Security numbers, medical records, mental health records, employer and employee payment records, employee earnings, addresses, bank records, tax information and family court records.

DOGE and its affiliates must also disgorge and delete all non-anonymized personally identifiable information in their possession or control since Jan. 20, according to the order. They are also prohibited from installing any software on Social Security Administration systems and must remove any software installed since Jan. 20, the order states. In addition, the defendants are blocked from accessing, altering or disclosing the agency’s computer or software code.  

Gov. Youngkin on DOGE cuts: Needed to happen but trying to help find a path for those who lose jobs

“The court’s ruling sends a clear message: no one can bypass the law to raid government data systems for their own purposes,” said Skye Perryman, president and CEO of Democracy Forward, in a statement.

“We will continue working with our partners to ensure that DOGE’s overreach is permanently stopped and that people’s rights are protected,” Perryman said.

The injunction does allow DOGE staffers to access data that’s been redacted or stripped of anything personally identifiable, if they undergo training and background checks.

A temporary restraining order, which was issued by Hollander on March 20, is vacated and superseded with this order. The Trump administration had unsuccessfully appealed the temporary restraining order.

“We will appeal this decision and expect ultimate victory on the issue,” White House spokesperson Elizabeth Huston said in an email statement. “The American people gave President Trump a clear mandate to uproot waste, fraud, and abuse across the federal government. The Trump Administration will continue to fight to fulfill the mandate.”

The Social Security Administration did not respond to CNBC’s request for comment.

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Personal Finance

Education Dept. to resume collections on defaulted student loans

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The headquarters of the Department of Education on March 12, 2025 in Washington, DC.

Win McNamee | Getty Images

The U.S. Department of Education announced Monday that its Office of Federal Student Aid will resume “involuntary collections” on May 5 for federal student loans that are in default.

Collections will be made through the so-called Treasury Offset Program, which can reduce or withhold payments from the government — such as tax refunds, Social Security benefits, federal salaries and other benefits paid through a federal agency — to satisfy a past-due debt to the government.

“American taxpayers will no longer be forced to serve as collateral for irresponsible student loan policies,” U.S. Secretary of Education Linda McMahon said in a statement. “The Biden Administration misled borrowers: the executive branch does not have the constitutional authority to wipe debt away, nor do the loan balances simply disappear.”

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The Department has not collected on defaulted student loans since March 2020. After the Covid pandemic-era pause on federal student loan payments expired in September 2023, the Biden administration offered borrowers another year in which they would be shielded from the impacts of missed payments.

More than 5 million borrowers are currently in default, according to the Education Department, with another 4 million borrowers in “late-stage delinquency,” or over 90 days past-due on payments.

All borrowers in default will be notified via email by Office of Federal Student Aid in the next two weeks, the Department said. These borrowers can contact the government’s Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan, or sign up for loan rehabilitation

Borrowers who remain in default will be subject to “involuntary collections” and may eventually face administrative wage garnishment, the Education Department said.

“Borrowers who graduated during the pandemic may have no experience with loan repayment, so it is important to educate them about the process, including their rights and responsibilities,” said Higher education expert Mark Kantrowitz.

“Payment is due even if you are dissatisfied with the quality of the education you received,” he said.

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Magic number to retire comfortably is $1.26 million in 2025: report

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Phoenix Wang | Moment | Getty Images

There’s been a persistent gap between how much money savers are putting away and how much they think they will need once they retire.

Yet this year, many Americans are scaling back their expectations.

For 2025, the “magic number” to retire comfortably is down to an average $1.26 million, a $200,000 drop from the $1.46 million reported last year, according to a new study from Northwestern Mutual, which polled more than 4,600 adults in January.

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“Americans’ ‘magic number’ to retire comfortably has come down,” John Roberts, chief field officer at Northwestern Mutual, said in a statement. Inflation has receded, Roberts said, and as a result, people are adjusting their outlook.

The 2025 figure is roughly in line with estimates from 2023 and 2022, which were $1.27 million and $1.25 million, respectively.

However, that retirement goal is still high, Roberts added, “far beyond what many people have actually saved.”

‘Magic number’ vs. average retirement balances

Last year, positive market conditions helped propel retirement account balances near new highs. 

As of the fourth quarter of 2024, 401(k) and individual retirement account balances notched the second-highest averages on record, boosted by better savings behaviors and stock gains, according to the latest data from Fidelity Investments, the nation’s largest provider of 401(k) savings plans.

The average 401(k) balance was $131,700 in the fourth quarter, while the average IRA balance stood at $127,534, according to Fidelity.

No access to a 401(k)?

However, since then, U.S. markets have whipsawed. As of April 21, the S&P 500 is down roughly 10% year-to-date, while the Nasdaq Composite sank more than 15% in 2025. The Dow Jones Industrial Average pulled back 8%. 

“The 2025 stock market has not spared many savers,” said Winnie Sun, co-founder and managing director of Sun Group Wealth Partners, based in Irvine, California. “Your portfolio is likely lower than it was before the new year.”

Why retirement confidence is sinking

Workers today are largely on their own when it comes to their retirement security, which has also taken a toll on retirement confidence. “Notably, the current generation of retirees could be the last to use predictable sources of income such as pensions as the primary way they fund retirement,” Rita Assaf, vice president of retirement offerings at Fidelity Investments, said in a statement.

“The shift toward relying on retirement savings heightens the importance of grounding yourself in a financial plan as early as you can,” Assaf said.

Retirement rules of thumb

According to Fidelity, there are a few simple rules of thumb for retirement planning, such as saving 10 times your earnings by retirement age and the so-called 4% rule for retirement income, which suggests that retirees should be able to safely withdraw 4% of their investments, after adjusting for inflation, each year in retirement.

Other experts say there is no magic number for a retirement savings goal, but setting aside 15% of your yearly salary before taxes is a good place to start.

If your retirement date is still years away, “meet with an experienced financial advisor as soon as you can to evaluate your future income needs and put together a strategy sooner rather than later,” said Sun, a member of CNBC’s Financial Advisor Council

Alternatively, if your retirement date is soon, “make sure your emergency fund is funded, tighten your spending, look into establishing a HELOC [home equity line of credit] if you have equity in your home as an emergency line, look for ways to bring in supplemental income while you can, and importantly, meet with an advisor to make sure you have a full picture of retirement will look like for you,” Sun said. 

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