Treasury bars ESG funds from Trump Accounts in new 530A rules

The Treasury's proposed 530A guidance limits Trump Account investments to five low-cost broad-market ETFs, excluding all ESG funds.

The Treasury proposed guidance Thursday restricting Trump Account investments to five low-cost broad-market ETFs, barring ESG funds from the tax-deferred accounts for children that have drawn more than 7 million families since July.

"Every dollar in a child's Trump Account should be working toward that child's financial future, not diminished by unnecessary fees," Treasury Secretary Scott Bessent said in a statement. "Under President Trump's leadership, Treasury is putting simple, commonsense protections in place to help families keep more of their investment returns."

The proposed guidance for the 530A accounts requires an eligible index to measure a broad segment of the U.S. or global equity market using objective financial criteria and caps products at low expense ratios. The default investment is the State Street SPDR Portfolio S&P 500 ETF (SPYM), with the iShares Core S&P 500 ETF (IVV), Vanguard Total Stock Market ETF (VTI), State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM) and iShares Core S&P Total U.S. Stock Market ETF (ITOT) as alternatives. Bank of New York Mellon manages the accounts, and the tracking app was built in partnership with Robinhood.

The exclusion of ESG funds extends the administration's pushback against environmental, social and governance investing, a stance that could accelerate outflows from ESG products and pressure asset managers with heavy exposure. More than 2 million children are eligible for a $1,000 government seed fund, and philanthropic contributions including a $6.25 billion donation from Michael and Susan Dell have boosted the accounts.

A $1,000 Seed Fund and a $6.25 Billion Boost

The accounts, launched July 4, have enrolled more than 7 million families, with over 2 million children qualifying for the initial $1,000 government contribution. The $6.25 billion gift from Michael and Susan Dell, the largest single philanthropic contribution to the program, has expanded the pool of investable assets. "For a child investing over decades, even small differences in annual costs may have a meaningful effect on the amount available in adulthood," IRS Chief Executive Frank Bisignano said.

What the ESG Ban Means for Asset Managers

The guidance applies to future Trump Account trustees should a family transfer assets to a new custodian, extending the low-cost mandate beyond Bank of New York Mellon. The policy follows a broader federal retreat from ESG considerations that had already pushed several large asset managers to scale back climate-focused funds. Robinhood Chief Executive Vlad Tenev said the default of a diversified portfolio of the most prominent companies "has been a great way to start and has been very effective," while noting that more options could be discussed over time.

The proposed rules are open for public comment before final adoption, giving asset managers a window to assess how the exclusion reshapes the competitive field for the roughly $1,000-per-child seed capital and the philanthropic inflows that follow. For families, the constraint locks in a low-fee, broad-market approach that Treasury estimates will preserve a larger share of returns over a child's decades-long investment horizon.

This article is for informational purposes only and does not constitute investment advice.