Despite political headwinds and market volatility, sustainability continues to gain traction globally, though with notable regional and sectoral divergence. Investors are reassessing risk and return in light of shifting policy environments, while corporations increasingly view sustainability as a driver of long-term value. The articles below highlight how capital is moving away from fossil fuels, toward renewables and resilience, and how businesses are adapting to both physical and transition risks in the evolving climate economy.
Generation IM’s Sustainability Trends Report 2025
Generation Investment Management’s annual report highlights both progress and setbacks in the global sustainability transition. Solar and battery storage continues to scale rapidly—with solar generation up 28% and clean energy investments now outpacing fossil fuels two-to-one—while political retrenchment in the U.S. has led to project cancellations and uncertainty, particularly in renewables and EVs. Electric vehicle adoption remains strong globally, led by China, but faces headwinds in the U.S. due to shifting policy and trade tensions. Decarbonization of buildings and industry lags, with green hydrogen losing momentum and persistent challenges in plastics and fast fashion. Food systems are under pressure from climate impacts and rising commodity prices, prompting calls for efficiency, rewilding, and dietary shifts. The report concludes that while the pace of change is insufficient to meet climate goals, the direction remains positive, driven by innovation, finance, and international cooperation. It emphasizes the need for systemic change and long-term policy alignment to accelerate progress.
Morgan Stanley’s Sustainable Reality: Sustainable Funds Deliver Strong Returns in 1H 2025
In its Sustainable Reality Report, Morgan Stanley found that in the first half of 2025, global assets under management in sustainable funds reached a record $3.92 trillion, up 11.5% from December 2024, with sustainable funds now accounting for 6.7% of total AUM. The majority of this growth was driven by strong performance, as sustainable funds delivered a median return of 12.5%, outperforming traditional funds by more than three percentage points. While net inflows to sustainable funds remained positive at $16 billion, they tracked below prior years, with European funds driving most of the inflows and the Americas seeing modest outflows. Sustainable funds outperformed traditional peers across all asset classes, particularly in fixed income, and 92% of sustainable funds posted positive returns in the period. Morgan Stanley’s report also notes that sustainable funds’ outperformance was largely attributable to their greater exposure to global and European markets, and that the sector continues to evolve in response to new regulatory guidelines and increased adoption of restriction screening.
Bloomberg NEF: Global Renewable Energy Investment Still Reaches New Record as Investors Reassess Risks
In its 2H 2025 Renewable Energy Investment Tracker, Bloomberg NEF (BNEF) found that global investment in new renewable energy projects reached a record $386 billion in the first half of 2025, marking a 10% increase from the previous year. This growth was primarily driven by strong activity in offshore wind and small-scale solar, even as asset finance for utility-scale solar and onshore wind declined by 13% compared to the first half of 2024. In the U.S., investment dropped 36% as developers responded to post-election policy shifts and tariff risks, while the EU saw a 63% surge, particularly in offshore wind, as capital reallocated from the U.S. to Europe. Small-scale solar projects gained favor due to their speed of deployment and insulation from regulatory changes. BNEF’s report highlights a growing preference for markets with stable revenue mechanisms and underscores the boom-bust cycles emerging in response to shifting policy landscapes.
Bloomberg: Wall Street Sees Decline in Dealmaking for Oil and Gas Clients
Wall Street’s top six banks have significantly reduced their financing of fossil fuel projects, with lending to oil, gas, and coal falling 25% to $73 billion through August 1, 2025, compared to the same period last year. This decline comes despite political pressure to support fossil fuels, as market forces and risk management are driving banks to decarbonize their portfolios, even as many have exited the Net-Zero Banking Alliance. Notably, Morgan Stanley saw the largest drop in fossil-fuel financing at 54%, while Wells Fargo, though still the largest lender, reduced its fossil fuel exposure by 17%. Analysts suggest that the actual composition of banks’ lending books, particularly the shift from fossil fuels to clean energy, is a more meaningful indicator of energy transition progress than public net zero commitments. The data reveals that market forces may be driving decarbonization more effectively than policy mandates, with investors increasingly scrutinizing the carbon intensity of lending portfolios.
