How has the sustainable finance market responded to surging electricity demand, geopolitical tensions and shifting regulations?
Sarah Thompson: Despite the headwinds, the sustainable finance market didn't retreat – it recalibrated.
Sustainable assets under management grew to $2.7 trillion in 20251, and annual sustainable bond issuance reached $1.1 trillion2, on par with previous years.
Meanwhile, investors increasingly prioritized climate risk management, credible transition plans and projects capable of competing on economic fundamentals, signaling a maturation of the industry.
"Despite the headwinds, the sustainable finance market didn't retreat – it recalibrated.”
Sarah Thompson, Global Head, Sustainable Finance
How are surging electricity demand and geopolitical tensions impacting the energy transition?
Sarah Thompson: Increasing electricity demand will require significant additional supply from all energy sources alongside grid improvements. At the same time, trade uncertainty and geopolitical instability have prompted governments to focus on energy independence and economic competitiveness. Despite this reorientation, the goals of energy security and decarbonization are often complementary, with renewable and nuclear energy expected to meet all global demand growth through 20273.
Moses Choi: In the U.S., hyperscalers need access to base load power for AI data centres, and they need it as quickly as possible. They are investing in next-generation technology such as small modular nuclear reactors, advanced geothermal, long duration energy storage and natural gas facilities with carbon capture.
Natural gas is needed for flexibility, renewables for cost competitiveness, nuclear for reliable base load power, and massive grid infrastructure investment to tie it all together. Cleaner energy, in every form, becomes part of the solution.
Stefano Vitali: For Europe, electrification works as a solution to both climate change mitigation and energy security. The challenge is execution. Several countries are not on track to hit 2030 interconnection targets for Europe’s so-called energy highways, designed to allow electricity to flow where it’s needed.
Thompson: Canada’s government has a vision to become an energy and natural resources superpower. This includes investing in oil and gas alongside carbon capture and methane reduction, as well as renewables, integrated electricity grids, and vertically integrated supply chains for critical minerals.
“For Europe, electrification works as a solution to both climate change mitigation and energy security – the challenge is execution.”
Stefano Vitali, Head, Europe and Asia Pacific Sustainable Finance
Global defence spending has hit an inflection point – how are sustainable investors responding?
Vitali: Historically, the defence sector in Europe was largely avoided by sustainable investors. But we’ve seen a striking market response to the EU commitment to unlock €800 billion in defence spending by 2030. Defence equities have delivered some of the strongest returns we've seen over the past year. And in thematic funds, security attracted more inflows than AI in 2025. Defence is now a core portfolio consideration for European investors.
Data shows increased uptake of defence investments by sustainable funds, as well as the revision of some of the most stringent exclusions. This appears to be driven by a more nuanced understanding of security as a basic human right and a foundation for sustainable development, as well as an opportunity for engagement and stewardship.
“Security attracted more inflows last year than AI. Defence is now a core portfolio consideration for European investors.”
Stefano Vitali, Head, Europe and Asia Pacific Sustainable Finance
What kinds of investment opportunities are emerging in climate change adaptation?
Choi: Extreme weather now defines baseline operating conditions for businesses and communities worldwide. As a result, we are seeing investors across all asset classes treat climate adaptation as an essential part of capital allocation.
In fixed income and infrastructure, we see near term capital deployment opportunities. The market signal is clear: sovereigns and municipalities need to deliver resilient infrastructure, and corporates, especially power utilities, need to deliver on grid resilience. We see debt capital markets as critical enablers for mobilizing capital required to finance this infrastructure imperative.
In private markets, we are seeing green shoots that signal an emerging opportunity, with innovative early-stage solution providers poised for growth. And in public equity markets, investors are using quantitative tools to assess risk and opportunity, and they are beginning to integrate adaptation and resilience considerations into investment product design.
“We see debt capital markets as critical enablers for mobilizing capital required to finance resilient infrastructure.”
Moses Choi, Head, U.S. Sustainable Finance
