Responsible investing trends to watch in 2025

According to a recent survey,¹ almost 80% of both asset managers and asset owners anticipate that assets under management (AUM) in responsible investing will rise in the next two years. Additionally, the survey found that when asked to rank specific environmental and sustainable solutions, investors across North America, Europe and the Asia Pacific region prioritize investment in renewable energy, energy efficiency and climate adaptation.

Advancing energy transition financing

Deloitte identified financing for corporate decarbonization as an area that could see significant growth in the future, and the green energy transition could represent a $50 trillion investment opportunity in the decades ahead.² As reported by Bloomberg, investment in the energy transition worldwide grew 11% from a year earlier and hit a record $2.1 trillion in 2024.³ Although green bonds represent a small portion of the overall bond market, they continue to be vital in supporting the energy transition going forward.

A shift toward private equity

Global investors are redirecting their attention to the energy transition, particularly focusing on opportunities provided by private markets. MSCI research found that, over the past five years, a portfolio of private investments in renewable energy, electric vehicles and energy storage generated a 123% return, vastly outperforming the 57% return from similar publicly traded companies. Furthermore, MSCI found that private low-carbon investments grew faster, at a 17% annual rate versus the 12% return for public companies.⁴

Environmental impacts of AI

The growth of artificial intelligence (AI) also is having an increased environmental impact, including rising energy demand for data centers and accelerated water usage for cooling purposes. Investors may focus more on the social risks associated with AI, such as data integrity and privacy concerns. Using biased or low-quality data to train AI models can skew outcomes and affect performance. Additionally, the tightening of privacy regulations is limiting access to data, and new, AI-specific laws are likely to be introduced in response.

Evolution of the voluntary carbon market

At the 2024 United Nations Climate Change Conference (COP29), significant progress was made with the approval of international carbon market standards, which enables the formal exchange of carbon credits between nations and businesses.⁵ This development could mark a pivotal moment for carbon markets in 2025. MSCI forecasts that the voluntary carbon markets could grow from $1.5 billion in 2024 to $35 billion by 2030 and potentially reach up to $205 billion by 2050.⁶

Fragmented landscape of ESG disclosures

Environmental, social and governance (ESG) disclosure requirements vary by region, with the European Union’s Corporate Sustainability Reporting Directive (EU CSRD) demanding more robust disclosures compared to U.S. and Canadian equivalents. This inconsistency in regulation might create uneven opportunities for investment analysis by investors and consumers of ESG data. Companies without robust ESG disclosures could face pressure from institutional investors to enhance their reporting.7 In conclusion, with increasing regulatory pressures, technological advancements and environmental challenges, responsible investing remains top of mind for investors.