Sustainable investing is no passing fad

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Wealth BuildingInvestment Strategies

3 June 2025  I  4 mins read

After moderating a panel discussion recently on sustainable investing, I walked away both reassured and reinvigorated.

The conversation underscored a clear takeaway: while political leadership – especially in major economies, can influence the pace of change, the structural drivers behind sustainable investing remain intact and are increasingly global in scope.

Policy shifts and long-term momentum  

Changes in government policy, whether in the US, Europe or Asia, can impact the near-term operating environment for clean energy and sustainability-linked sectors. For instance, new trade measures and industrial strategies are being implement in various countries, sometimes introducing complexity for technologies such as solar panels or electric vehicles. While these may slow near-term deployment and increase costs for clean energy projects, they also underscore just how central sustainability-linked sectors have become to national economic competitiveness and energy security.

Such shifts may lead to greater localisation of supply chains and increased investments in domestic clean energy capabilities, sparking new waves of domestic investments as companies seek to reduce dependency on foreign supply chains. This evolution is reshaping – but not reversing the global sustainability agenda. In fact, the push for economic resilience and self-sufficiency may ultimately accelerate investments into sustainable infrastructure across the regions.

Large-scale policy frameworks, such as the European Green Deal and the Japan Green Transformation initiative, are funnelling substantial capital into climate-related sectors. In the US, the Inflation Reduction Act (IRA), is playing a similar transformative role – directing hundreds of billions of dollars into clean energy, manufacturing and climate resilience over the next decade. With its embedded incentives and bipartisan economic benefits, the IRA is helping to catalyse investments and innovations across both red and blue states, reinforcing the structural shifts underway.

Investors are watching these developments closely, but they aren’t standing still. Many continue to allocate toward climate and sustainability opportunities based on sound economics, long-term risk mitigation, and structural market trends.

The structural drivers are stronger than ever

Urbanisation and population growth are driving global electricity demand, which is expected to double over the next 20 years. Meeting this demand will require more energy of all types, but renewable energy, particularly solar and wind – stand out as the most cost-effective.

Today, solar and wind energy are the cheapest sources of new electricity in most of the world, making it the preferred choice for new capacity, according to BloombergNEF. As a result, global investment in renewables is nearly twice that of fossil fuels.

Another powerful driver is the rapid rise of AI. AI models are extremely energy- and water-intensive. For instance, generating a 100-word email with OpenAI’s GPT-4 model can consume the equivalent of a 500ml bottle of water and enough energy to power 14 LED light bulbs for an hour according to a study conducted by the Washington Post in collaboration with the University of California, Riverside. With AI adoption growing worldwide, this is increasing the demand for energy-efficient data centres and low-carbon infrastructure solutions globally.

Sustainability is here to stay

Across markets – from Asia to Europe to the Americas – investors are integrating Environmental, Social and Governance (ESG) factors not out of political alignment, but because the financial materiality of climate risk, evolving regulatory frameworks, and consumer preferences are undeniable. Many companies are also accelerating their own transitions, integrating ESG into their risk management frameworks and net zero strategies.

Governments are reinforcing this momentum through supportive frameworks. Whether it’s the EU taxonomy and carbon pricing, Singapore’ Green Plan 2030, or China’s Carbon Neutrality plan, public policies are aligning with long-term sustainability goals. This convergence of public and private capital is a key enabler of the transition.

Sustainable investing has become increasingly accessible as awareness grows and more investment solutions become available. Beyond simple exclusions, investors today are also considering the following approaches to sustainable investing:

• ESG integration: Process of considering ESG factors alongside financial considerations in investment decision-making, potentially enhancing risk-returns of investments.
• Thematic investing: Focused on sustainability-related areas such as renewable energy, circular economy, or water solutions. These are often satellite strategies that complement core holdings.
• Impact investing: Targeting measurable environmental or social outcomes, such as emissions reduction or biodiversity protection.
• Transition alignment: Building portfolios that benefit from the shift to a low-carbon economy, including companies enabling or adapting to the transition.

Final thoughts: Aligning with a changing world

For investors looking to begin or deepen their sustainable investing journey, the key is clarity. Define what you want to achieve – whether it’s managing risk, capturing growth, or contributing to real-world change. Then choose the right mix of tools, whether that’s core ESG integration, thematic strategies, or impact-oriented solutions.

Sustainable investing isn’t a passing trend. It is a reflection of a world in transition, in our economy, environment, and society. Regardless of political cycles, the transition is underway, and investors who recognise this early will be better positioned for long-term success.

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