Over the past few years, the impact investing industry has faced headwinds in the form of regulatory scrutiny and uncertainty, pressure from anti-ESG groups and critical headlines. We now appear to be in for not only a period of higher scrutiny but also a volatile regulatory environment that could create challenges for both investors and corporations.
Despite these challenges, evidence shows that investors continue to maintain their commitment to the value of impact investing, and thus far, investors and companies are quietly staying the course with their ESG (environmental, social, corporate governance) initiatives. We believe that this reflects the recognition that financial analysis that incorporates impact factors can enhance long-term financial resilience. Investments that are financially sound and also address environmental and social challenges — such as climate change, job creation, financial inclusion — can allow portfolios to be better positioned for long-term stability and growth, particularly as regulations, consumer preferences and market dynamics shift.
Below are what we think are key news and developments during the first quarter of 2025:
Pensions & Investments
U.S. asset owners, managers to change messaging but stay the course with sustainable investing
With a harsher policy and regulatory ecosystem surrounding sustainable investing, asset owners and money managers are expected to move to placing a greater emphasis on returns over the impact of their investing, experts said. However, they also said investors that have embraced sustainable investing will stay the course.
According to a survey by Cerulli Associates released in February, only about one in 10 asset owners that have incorporated ESG considerations into their investment decision-making in the past will cease to do so. Among that group, 34% said responding to the backlash was time-consuming and costly, 24% feared litigation and 14% said they felt pressure from stakeholders.
Regardless of whether asset owners have ESG-related policies or not, Kirsten Spalding, vice president, investor network at sustainable investing advocacy organization Ceres, said asset owners have to have “robust dialogues with their managers.” Spalding further noted that “[asset owners] have to make sure they understand how the manager is approaching a full range of risks, including environmental, social and governance risks.”
New York Times
How Trump’s Trade War Could Affect Energy & Climate
President Trump’s tariffs could threaten supply chains in the renewable energy industry and disrupt oil and gas markets. Though most industries are set to be affected, the U.S. energy sector, including fossil fuels and renewables, is particularly vulnerable to trade disputes.
Already, China has announced a new 15% tax on coal and natural gas imported from the United States, and a 10% tax on crude oil. Those levies could dampen U.S. exports. China’s tariffs could also slow global efforts to reduce planet-warming emissions. Tariffs on energy and oil and gas imports from Canada are expected to raise prices for U.S. consumers, potentially most significantly in the Midwest, New York and New England where consumers rely on electricity produced by Canadian hydroelectric plans.
A protracted trade war could also affect the complex supply chains involved in the production of solar panels, batteries, electric vehicles and wind turbines. The U.S. has become a major manufacturing hub for clean energy technologies, and many foreign corporations have invested in new facilities in the U.S. as well. Companies that have invested in building renewable energy facilities in the U.S. could be spooked by the sudden impediments to trade between the U.S., Mexico and Canada.
BloombergNEF
Global Investment in the Energy Transition Exceeded $2 Trillion for the First Time in 2024
Investment in the low-carbon energy transition worldwide grew 11% to hit a record $2.1 trillion in 2024, according to Energy Transition Investment Trends 2025, an annual report by research provider BloombergNEF (BNEF). Growth was driven by electrified transport, renewable energy, and power grids, which all reached new highs last year. While overall investment in energy transition technologies set a new record, the pace of growth was slower than the previous three years, when investment jumped by 24-29% annually. Continued growth is necessary given that the global energy transition investment would need to average $5.6 trillion each year from 2025 to 2030 in order to get on track for global net zero by 2050, in line with the Paris Agreement.
BNEF’s research showed that investment in mature technologies is growing globally, while investment in emerging technologies is struggling. Proven technologies like renewables, energy storage, electric vehicles and power grids drew $1.93 trillion, growing 14.7%. In contrast, investment in emerging technologies, like electrified heat, hydrogen, carbon capture and storage (CCS), nuclear, clean industry and clean shipping, reached only $155 billion, for an overall drop of 23% year-on-year.
Bloomberg
Trump’s Climate Whiplash
President Trump signed a series of executive orders in his first hours in office that represent a sweeping anti-climate agenda and seek to unravel former President Joe Biden’s policies and double down on fossil fuel extraction.
- President Trump signed an order directing the U.S. to withdraw from the Paris Agreement, the deal that nearly 200 countries signed to rein in greenhouse gas emissions to avoid catastrophic warming.
- President Trump directed agencies to “immediately pause” and review the spending of money on energy-related programs through the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, two major Biden-era laws.
- President Trump declared a national energy emergency. The executive order prioritizes fossil fuels, hydropower, biofuels and nuclear over other energy sources.
- President Trump ordered his administration to look into the elimination of subsidies and other policies supporting electric vehicles.
- The Interior Department ordered a 60-day halt in approval of leases, rights of way and other authorizations tied to wind and solar projects on federal lands and waters. In a separate move, President Trump signed an executive order that temporarily halts permitting for new offshore wind projects.
- President Trump immediately moved to lift a Biden-era ban on new liquefied natural gas export licenses. He also revoked offshore oil and gas leasing bans, though it’s unclear how soon new offshore lease sales would occur.
- President Trump overturned Biden-era executive orders directing federal agencies to further consider environmental justice in everything they do and revoked a 1994 Clinton-era executive order on the issue.
- President Trump dissolved the American Climate Corps, a program designed to get young people working in climate-related starter jobs across the country.
Axios
2024 was Earth’s hottest year on record, exceeding Paris target
Last year was Earth’s warmest on record, eclipsing 2023’s record and for the first time exceeding the Paris target of 1.5°C above preindustrial levels, the Copernicus Climate Change Service announced. According to Copernicus, an agency of the European Commission, each year in the last decade has been one of the 10 hottest on record. Global average surface temperatures in 2024 were about 1.6°C above pre-industrial levels and about 0.12°C (.22°F) above 2023’s record high. Data from U.S. centers, such as NOAA and NASA, show similar results.
The Paris Agreement’s target of holding global warming to 1.5°C above pre-industrial levels refers to a long-term, 20-to-30-year average, rather than a single year or two. The results for 2024, however, show that the world is already exceeding the barrier that diplomats set at the Paris climate summit in 2015, and the average of 2023 and 2024 falls above the 1.5°C threshold.
Morningstar
How Big Is the US Sustainable Investment Market? $6.5 Trillion, Trade Group Says
The size of the U.S. sustainable investment market is $6.5 trillion, accounting for 12% of the overall $52.5 trillion market dominated by conventional investing, according to a report by US SIF, the trade group for the U.S. sustainable investing industry.
US SIF defines sustainable investments as those specifically identified or marketed as sustainable or as environmental, social, and governance-related in SEC disclosures. The US SIF study made adjustments to avoid double counting between institutional investors and asset managers.
In 2022, US SIF reported that the U.S. sustainable investing market was $8.4 trillion. However, the numbers aren’t directly comparable, because the 2022 data relied on self-reports, while the 2024 data are based solely on publicly available information, which will allow better consistency in the future, according to US SIF.
