Investors look to increase sustainability exposure but flag key risks
Over 90% of EMEA investors plan to maintain or raise allocations to ESG or sustainable investments over the next 12 months, according to a Capital Group study, but investors also flagged geopolitical risk, economic growth and policy changes as top headwinds to these potential allocations.
The Capital Group ESG Global Study 2025 gathered the views of 1,130 global investors on the role of ESG in the investment process, drivers behind evolving approaches to ESG, and various ESG-related topics during May and July 2025.
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It found global ESG adoption has fallen slightly to 87%, down from a high of 90% in 2023 and 2024, but 92% of investors said they plan to maintain or raise allocations within the next year.
Investors were particularly focused on fixed income and private markets, from a sustainable finance perspective. Globally, the share of respondents implementing an ESG approach in fixed income has jumped from 64% in 2024 to 70% this year, while 48% of respondents globally now apply ESG approaches in private markets – the highest level since the ESG Global Study began in 2021.
Almost 60% said companies with credible transition plans can outperform over the long term, and six in 10 investors have a strong conviction in investment opportunities tied to energy transition, followed by clean water (52%) and health (51%). EMEA (66%) investors are most attracted to energy transition opportunities. Some 63% of EMEA investors also prioritise nature in a responsible investment policy, and two-thirds have either invested or plan to invest in thematic funds that address nature-related issues.
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The energy consumption of artificial intelligence (AI) was cited as a top ESG risk over the next two to three years by 73% of global investors – a sharp rise from 54% last year. Further, 58% of respondents see AI’s energy-intensive nature as a significant challenge to energy transition, while 56% indicated AI could fuel innovation to accelerate energy transition.
“This year’s ESG Global Study highlights the enduring role of ESG in the investment process as investors continue to evolve their approach. The consideration of ESG issues in fixed income and private markets are also gaining traction,” said Jessica Ground, global head of ESG at Capital Group. “As the AI boom continues, investors are more alert than ever to the environmental risks posed by AI – especially around energy use and water consumption. At the same time, they’re exploring how AI can drive innovation and accelerate progress on energy transition.”
This article first appeared on Portfolio Adviser