Introduction

Sustainability themes continue to shape the global investment landscape, presenting significant opportunities and risks driven by economic and investment benefits. Against a backdrop of geopolitical instability, sustainability issues are increasingly critical for investors. The report identifies several key trends for 2026, including the escalating costs of physical climate risk, the rapid progression of the energy transition, the dual-natured impact of artificial intelligence (AI), and critical shifts within the Asian markets, alongside developments in the Health Care and Food Producers sectors.

Sustainable investment trends in 2026 – Overview

Physical climate risk is already imposing real costs on governments and corporates, with temperature anomalies now exceeding 1.5 degrees Celsius above pre-industrial levels. The energy transition is set to continue at pace, despite headwinds such as subsidy changes in the US and China. Asia is becoming the epicentre of climate activity, with China dominating clean energy manufacturing and India emerging as a new swing factor in global emissions. In the technology sector, AI is driving capital expenditure and a scramble for energy, while the Health Care and Food Producers sectors are increasingly viewed through the lens of Sustainable Development Goals (SDGs).

Physical climate risk – It’s happening

Evidence of accelerating physical climate risk is underscored by temperature anomalies already exceeding 1.5 degrees. The cost of physical climate risk for 2025 is estimated at $220 billion, with an estimated $28.3 trillion of global GDP at risk by 2050. Impacts are manifesting through heatwaves, cyclones, and water stress, particularly in highly populated areas. For example, the 2025 European summer heatwave is estimated to have cost approximately 0.5% of GDP. Infrastructure is also under pressure, evidenced by low water levels in the Panama Canal and heatwaves impacting power grids. Consequently, 34% of large and medium corporates are now incorporating adaptation measures into their transition plans, stimulating growth in the $1 trillion adaptation solutions market.

Energy transition – Still happening

The global energy transition continues despite geopolitical challenges. In the first three quarters of 2025, renewable energy production added 621 terawatt hours (TWh), dominated by solar power, while fossil fuel generation saw a slight contraction of 17 TWh. Between 2025 and 2030, global renewable capacity is projected to increase by 4,600 GW. Electricity demand is expected to grow by approximately 3.7% in 2026, driven by AI and the electrification of transport. Nuclear power is also gaining traction, with the FTSE Global Nuclear Power Index returning 63% in 2025. Additionally, electric vehicles reduced oil demand by approximately 1.3 million barrels per day in 2024, a figure expected to rise to 5 million by 2030.

Technology – Plethora of positives and negatives

AI remains a defining trend, with global AI-related capital expenditure expected to grow from $1.5 trillion in 2025 to $2.0 trillion in 2026. US data centres consumed 4.4% of electricity in 2025, a figure forecast to reach 12% by 2028. While AI drives significant energy demand, it also offers potential to reduce global emissions by 3.2 to 5.4 billion tonnes of CO2 annually by 2035 through process optimisation. However, the sector faces risks from cyber-attacks, with potential costs estimated as high as $10.5 trillion, and increasing governance complexity regarding regulatory fines and human rights rules.

Asia – It’s happening here

Asia is responsible for approximately 60% of global carbon emissions but also hosts the largest climate finance flows at 43%. China remains a dominant player, producing four out of five solar panels and batteries globally in 2024. Its recent pledge to cut emissions by 7-10% from peak levels by 2035 could materially alter global emission trajectories. India is emerging as a critical factor, seeing the largest projected energy demand growth to 2035. While 78% of India’s electricity currently comes from fossil fuels, the country has installed 200GW of renewables and targets 500GW by 2030. Japan is also implementing a $1 trillion GX energy transition plan to boost industrial competitiveness and energy security.

Beyond climate: Large SDGs, on which millions of lives depend, are seeing change and opportunity

The Health Care sector, valued at $10 trillion, accounts for approximately 10% of global GDP but has been one of the worst-performing industries over the last five years. Innovation tailwinds, such as GLP-1 drugs—market projected to exceed $130 billion by 2030—and AI in drug discovery, offer significant opportunities. Meanwhile, Food Producers face structural shocks from climate volatility and food inflation running at twice the rate of CPI. Agriculture accounts for 70% of global freshwater withdrawals, and climate change could cut staple crop yields by up to 7% per degree of warming. Sustainable investors are increasingly focusing on agri-tech and circular economy models to address these systemic risks.