The broader global economic and political realignments result in the polarization of sustainable investing across regions. The U.S. is retreating from environment, social and governance (ESG) commitments, Europe faces increasing regulatory and political ambiguity, and China is capitalizing on this uncertainty to establish itself as the global leader in a green economy. This geopolitical fragmentation will have profound implications for climate policy, economic stability, and international financial markets in the years to come.
The global investment landscape in 2025 is defined by both record-breaking growth in energy transition financing and an increasingly polarized geopolitical environment. Concerning energy transition, and according to BloombergNEF’s Energy Transition Investment Trends 2025 [1] (BNEF), investment in the low-carbon transition reached an all-time high of $2.1 trillion in 2024, driven by electrified transport, renewable energy, and power grid enhancements. However, the pace of growth has slowed compared to previous years, raising concerns about whether current efforts are sufficient to meet global net-zero emissions targets. Energy transition investment would need to average $5.6 trillion per year from 2025 to 2030 in order to align with the Paris Agreement and put the world on track for net-zero CO2 by 2050. This finding, based on BNEF, underscores the significant investment gap, implying that current funding levels amount to only 37% of the required annual investment to achieve the necessary trajectory.
Political shifts—particularly the return of Donald Trump to the U.S. presidency—have intensified the backlash against ESG principles. Trump’s administration has dismantled more than 70 climate and clean energy initiatives, significantly altering the trajectory of sustainable investing in the U.S [2].
Trump’s first-week executive actions have reversed many of Joe Biden’s climate policies, including the U.S. commitment to the Paris Agreement, restrictions on offshore drilling, and financial incentives for clean energy development. This shift has led to an exodus of major financial institutions from high-profile ESG alliances, including the Net Zero Asset Managers and Banking Initiatives. There is an increasingly cautious US investment landscape, where firms navigate legal and political risks rather than expand sustainability efforts. In January a US federal judge ruled that American Airlines failed workers relying on asset managers tainted by “ESG activism”.
The United Nations has confirmed that the US withdrawal from the Paris Agreement, officially notified to Secretary-General António Guterres, will take effect on January 27, 2026. This delay underscores the complexities involved in reversing international climate commitments and may provide an opportunity for future policy shifts [3]. The UN and future climate Conference of the Parties (COPs) are now expected to take on a different dynamic, as the absence of US leadership forces other nations to reconsider their strategies in global climate negotiations.
In contrast, Europe remains a stronghold for sustainability-focused capital, despite facing regulatory and political uncertainties following the beginning of the second Ursula von der Leyen term last December. Europe continues to integrate sustainability into investment strategies, although momentum has slowed. The European market accounts for 84% of global sustainable funds (which are open-ended funds and exchange-traded funds that incorporate ESG criteria), though renewable energy investment declined by 10% in 2024 due to regulatory uncertainty and decreasing subsidies [4]. Business leaders and national governments are pressing Brussels to scale back sustainability regulations, with France calling for a “massive regulatory pause” and Germany advocating a two-year delay to stricter corporate sustainability reporting rules. European Commission President has promised a far-reaching simplification of sustainable finance and due diligence rules, aiming to cut reporting requirements for larger companies by 25% and for small businesses by 35% [5].
China has emerged as the undisputed leader in energy transition investment, accounting for $818 billion—nearly two-thirds of global growth in 2024, and surging by 20% annually, a growth that surpassed that of the US, EU, and UK. The country’s aggressive push in industrial decarbonization, renewable energy, and electrified transport signals a long-term strategy to dominate the green economy. With China projected to peak fossil fuel consumption in 2025, five years ahead of schedule, its investment trajectory starkly contrasts with the policy reversals seen in the U.S. Additionally, Beijing-backed financial institutions have loaned nearly $57 billion to 19 countries, with the largest loans going to the Congo, Peru, Kazakhstan, and Indonesia, to secure control of critical minerals essential for clean energy technologies, further solidifying China’s dominance in the supply chain for electric vehicle batteries, solar panels, and other green technologies [6].
Emerging economies, however, face an even greater challenge. Many are struggling to interpret and respond to the shifting priorities of major economies, fearing that regulatory rollbacks in the U.S. and Europe could delay crucial climate financing. Countries particularly vulnerable to climate change, such as Bangladesh and island nations in the Pacific, are expressing concern that weakened commitments from major polluters will exacerbate their environmental and economic vulnerabilities. Additionally, developing nations are increasingly aware that access to green finance is becoming more complex as investment strategies in wealthier regions shift due to political uncertainties.
Meanwhile, scientific communities and environmental activists warn that reversing progress on climate policy could lead to devastating long-term consequences, as extreme weather events become more frequent and severe. With U.S. policy changes undermining international cooperation, climate advocates argue that the urgency of sustainable investments is greater than ever.
[1] BloombergNEF, Energy Transition Investment Trends 2025
[2] Chu, A. & Smyth, J. “Donald Trump wiped out dozens of Joe Biden’s climate initiatives in first-week blitz.” Financial Times. (January 30, 2025, link)
[3] EFE, UN Confirms U.S. Withdrawal from Paris Agreement
[4] Ross, A. “Can sustainable investing survive Trump 2.0?.” Financial Times. (January 17, 2025, link)
[5] Hancock, A. “Brussels under pressure to curb green agenda in response to Trump.” Financial Times. (January 26, 2025, link)
[6] White, E. & Ko, H. “Beijing-backed lending boosts China’s dominance in clean energy minerals.” Financial Times. (January 28, 2025, link)