Investment managers appear to be following the science instead of political whims, with sustainable investing remaining in demand around the globe.
“Demand for green and sustainable funds appears to be sustaining despite political pushback against climate action, reflecting a shift toward a more fundamentals‑driven approach,” says Diya Iyer, investment and sustainability analyst at Davy.
Although anti‑climate and sustainable investing rhetoric, particularly in the US, has weighed on investor sentiment, it has not fully reversed the underlying structural trends, she says.
Despite an increasingly complex and polarised policy landscape, investor engagement with sustainable investing has remained broadly stable in recent years, with some ebbs and flows.
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“Regional divergence in fund flows highlights political and regulatory differences rather than a global retreat from the asset class. Asset owners and institutional investors continue to reinforce the resilience of the green and sustainable investing landscape, increasingly viewing climate change and other sustainability-related issues as material sources of long‑term risk and return rather than discretionary preferences,” she explains.
“Within the institutional space, a maturing track record, stronger risk management foundations and a focus on long‑term quality continue to underpin demand, leaving it structurally intact despite shifting political tides.”
Much of that is demand-driven.
“Historically, demand for responsible investing was largely concentrated among investors such as faith-based organisations, non‑profits, family offices, and university endowments. More recently, we have observed increasing demand from individual investors – driven by factors such as personal pensions and intergenerational wealth transfer – as well as from corporates, where responsible investing aligns with broader corporate social responsibility objectives, and other institutional entities.”
As a result, the investment options in this space are now far broader than they were a decade ago. “We continue to see a sustained expansion of product offerings across equity and fixed income strategies, alongside diversified multiasset solutions,” she says.
This ongoing demand is increasingly supported by a more streamlined regulatory environment. “We would expect that the forthcoming EU SFDR 2.0 [Sustainable Finance Disclosure Regulation], with its clearly defined criteria, will further accelerate product innovation, resulting in additional launches aligned with each sustainability‑related label,” says Iyer.
On the retail side, the market is also maturing.
“Green funds continue to hold their ground in Ireland’s retail market but the nature of demand is evolving,” says Nick Charalambous of Alpha Wealth, a financial advisory.
“What was once viewed as a values-led, ethical choice is now increasingly driven by economics. Retail investors are seeking exposure to structural growth themes such as the energy transition, grid infrastructure and the circular economy. ESG-screened [environmental, social and governance] options, particularly those aligned with frameworks like the Sustainable Finance Disclosure Regulation, have become close to a default in pension and platform-based investing, especially among younger cohorts,” he says.
In Ireland, investors usually choose from a limited list of funds offered through pensions and advisers, with options shaped as much by availability and regulation as by personal preference.
So far, while the US-led ESG backlash has generated headlines, it has had only a limited impact in Ireland, he says.
“European investors tend to interpret sustainability through a regulatory and risk lens rather than a political one, reinforced by frameworks such as the EU Taxonomy for Sustainable Activities. Its more meaningful effect has been to sharpen scrutiny – both investors and regulators are now far more focused on substance, with increased attention on what Article 8 and Article 9 funds actually hold and a broader pushback against greenwashing,” he adds.
“At the same time, macro conditions are strengthening the case for sustainable investing. Energy market volatility, Europe’s drive for independence, and the improving cost competitiveness of renewables are reinforcing the long-term investment rationale. For many Irish retail clients, the idea of relying on fossil fuels as a stable hedge is becoming less convincing in the current environment.”
Regulatory changes, including Markets in Financial Instruments Directive II sustainability preference requirements, mean investors are now routinely asked to consider ESG factors.
Still, most retail investors remain pragmatic, with returns, risk and fees dominating decision-making, and sustainability acting as “an important but secondary filter”, says Charalambous.
“While awareness is increasing, many investors still favour simple, diversified solutions, with detailed ESG methodologies often secondary to cost, clarity and overall portfolio fit.”
That said, the “green premium”, the traditional cost of opting for sustainable vehicles, has fallen.
“While sustainable funds historically carried slightly higher charges, increased scale and competition have reduced that gap,” he says.
“Many passive ESG funds are now priced in line with traditional equivalents and although some active or thematic strategies still command a modest premium, for most Irish retail investors, especially those investing through pensions, the difference in cost is now quite small.”
