Why the energy transition isn’t over

The latest gloomy news on environmental progress saw the Net-Zero Banking Alliance shut down after a member exodus. The group, founded in 2021 by, the now Canadian Prime Minister, Mark Carney, said a string of banks had pulled out since President Trump’s election victory last November. This may not sound like an auspicious start to Good Money Week, but investors need to look beyond the current spate of difficult headlines because the reality is much more encouraging.

Setbacks in the sustainability cause

The sustainability cause has suffered a number of well-publicised setbacks in recent years, from a climate sceptic in the White House, to rebellions on diversity and inclusion. If governments have decided these problems don’t need solving, it hurts sentiment towards companies that provide solutions to them. 

The end of the Banking Alliance is just one of a number of uncomfortable headlines. Ripping up the UK’s sustainability legislation has been firmly on the agenda at the Conservative Party Conference, while US-exposed clean energy groups are facing headwinds as government funding is pulled from renewable energy companies. Orsted may be the most high profile example, with its share price down 35% for the year to date*. 

Private investor sentiment remains positive

However, a recent AIC survey showed that UK investors are defying this gloomy trend: it found that sentiment towards ESG investing has seen a ‘moderate improvement’ among UK private investors, particularly among younger investors and parents. Donald Trump’s anti-ESG drive appears to have made private investors more positive about the approach**. 

The clean energy sector has borne the brunt of recent weakness and here, there are clear signs of improvement. While there are outliers such as Orsted, the iShares Global Clean Energy Transition ETF, seen as a bellwether for the clean energy sector, has delivered a significant turnaround since the start of the year***. 

Read more: Earth Overshoot Day nears

Energy transition progress

Partly, this is just share prices catching up with reality. Deirdre Cooper, manager on the Ninety One Global Environment fund, points out: “While headlines declare setbacks and political headwinds, the data tells a different story: the energy transition has not reversed, it is just taking a different path to the one we expected. Global energy investment is set to reach a record US$3.3 trillion in 2025, with clean-energy technologies attracting US$2.2 trillion, twice the US$1.1 trillion flowing to fossil fuels.”

However, she admits that the story has changed: “The transition we thought we might have – largely policy-driven, with developed markets leading the way because they could afford to implement change first – has been turned on its head. With surging total energy demand – particularly due to data centres and artificial intelligence – and decelerating policy momentum, developed markets are transitioning more slowly than expected, and going forward in a more additive way. Nevertheless, the opportunities for decarbonisation solution providers remain abundant: more total energy demand means more demand for decarbonisation technologies, even as part of an ‘all-of-the-above’ energy solution.”

Peter Michaelis, head of sustainable investment and manager of the Liontrust Sustainable Future Managed fund, says it is important to resist the narrative that it is all too difficult and society should just give up on effecting environmental change. He points out that significant environmental problems have been solved by a concerted effort from science, government and society. He gives the example of ozone depletion. “This was a global environmental problem that has been solved by businesses replacing CFC with HCFCs.”

“We believe that our best chance of successfully dealing with these monumental challenges is to back companies that can innovate and widely distribute new ways of doing things. Change can be dramatic. For instance, few people even 10 years ago would have predicted that UK electricity in 2024 would have been over 50% renewable.” 

Challenges and opportunities in the energy transition

There are still major challenges in the energy transition – electricity grid systems, for example, are ill-equipped to cope with the rise in energy demand. But adaptations are being made. Equally, the impact of climate change won’t disappear because politicians wish it away.

It is important to note that investing for good is not just about climate change mitigation, but brings in a whole range of different areas. Share prices elsewhere haven’t seen the same highs and lows as the clean energy sector, but performance data shows that investors don’t have to give anything up to invest with a sustainability overlay. The MSCI World Selection index (formerly MSCI ESG Leaders) has kept pace with the broader MSCI World index**** over the long term in spite of the weakness of clean energy companies.

New frontiers for sustainability

This includes some exciting and fast-growing areas. The Liontrust funds, for example, are investing in cybersecurity firms. There have been a range of high profile cyberattacks on a range of major companies – Jaguar Landrover has seen car production shut down after a cyberattack. M&S Click and Collect was suspended for 15 weeks after a cyberattack. The cost and disruption from these attacks drives demand for cybersecurity solutions.

Peter says: “Cyberattacks pose one of the greatest threats to businesses, governments and individuals. From ransomware to data theft, digital breaches are now routine and costly, with some incidents, like that at M&S, leading to estimated losses of £300 million. Sustainable investment in cybersecurity addresses two fronts: supporting companies offering advanced protection tools and engaging with businesses to ensure robust governance around cybersecurity.”

Peter also invests in companies that help build more resilient infrastructure, ensuring that it can resist extreme weather events, or making equipment used to better monitor or control the increasing extremes in our environment; or providing insurance solutions that helps mitigate these risks effectively.

Looking past the negative headlines

Investing with a sustainability lens can also help ensure that investors gravitate to companies that are managed responsibly. This is an important discipline at a time when markets are frothy. Peter points out that while good governance doesn’t tend to grab headlines, but when it goes wrong, it can go very wrong. There are catastrophic incidents such as those at Enron or Wirecard, where investors lose all of their capital. Good governance, on the other hand, “fosters ethical behaviour, improves risk management and aligns management incentives with shareholder value.”

Investors need to look through some of the negative headlines on investing sustainably. The US government may have turned unfriendly, but there is still plenty of momentum in the energy transition and share prices appear to be reviving. Equally, investing for good can lead to other areas of growth in the global economy, overlaid with corporate governance discipline. Doing good with your money still makes sense.

Read more: Should you consider ESG factors when building your portfolio?

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*Source: Google Finance, 6 October 2025

**Source: AIC, 29 September 2025

***Source: iShares by BlackRock, 3 October 2025

****Source: index factsheet, 30 September 2025