The global push toward a greener economy is reshaping the way we allocate capital. Investors now seek not only financial returns, but also tangible environmental and social impact.

Green Horizon guides you through the principles, evidence, and strategies at the heart of this transformative movement.

ESG 101: Foundations of Sustainable Investing

Sustainable investing, also known as ESG or responsible investing, integrates environmental, social and governance factors into traditional financial analysis. It encompasses approaches such as ESG integration, negative screening, thematic investing, impact investing, and stewardship through engagement and proxy voting. Each method offers a distinct path to align portfolios with values and long-term value creation.

In 2025, ESG integration remains the dominant strategy, embraced by 77% of surveyed US investors. Negative screening excludes sectors like controversial weapons, tobacco, and fossil fuels, while thematic and impact strategies focus on purposeful areas like clean energy and social equity. Stewardship policies now cover 69% of US market AUM, demonstrating widespread commitment to active ownership.

Nearly half of sustainability frameworks reference the UN SDGs. Investors prioritize goals such as climate action, clean energy, and gender equality when designing portfolios that deliver both profit and purpose.

The Scale and Growth of Sustainable Assets

Global assets under management tied to ESG criteria are projected to swell to $33.9 trillion by 2026, exceeding 20% of total AUM. This monumental growth underscores a shift toward capital that considers long-term resilience as much as near-term gain.

In the United States, sustainable AUM grew to $6.6 trillion in 2025, representing 11% of the $61.7 trillion market. Although political headwinds have tempered some flows, 70% of US investors remain bullish on sustainability’s future, and environmental-themed funds continue to attract fresh capital.

This data reveals a landscape of asset growth with product rationalization and net outflows, where broad ESG vehicles face consolidation while environmental mandates spark inflows.

Performance and Financial Materiality

Evidence increasingly shows that sustainable portfolios can outpace their traditional peers. In the first half of 2025, sustainable funds delivered a median return of 12.5%, versus 9.2% for conventional funds—the largest outperformance since 2019. This rebound after underperformance in late 2024 highlights a cyclical, not one-way, performance narrative.

Private markets focused on climate solutions have demonstrated even more striking results. MSCI reports that low-carbon private assets generated cumulative returns of 123% over five years, compared to 57% in public markets for similar exposures. These ventures in renewable electricity, green mobility, and energy storage provide both diversification and growth, embodying renewable energy and energy transition value chains.

Overall, over $18 trillion in assets now adhere to ESG criteria, driven by a recognition that sustainability can enhance reputation, reduce risk, and fuel revenue growth. Indeed, studies show a strong relationship between sustainability initiatives and improved financial performance, via enhanced reputation, risk reduction, and revenue growth.

Investor Sentiment: Trends and Tomorrow

Institutional investors are doubling down on sustainable allocations. In a 2025 survey, 79% of asset managers and 86% of asset owners expect their sustainable AUM to rise in the next two years. North American owners lead with over 90% anticipating increases, closely followed by APAC and Europe.

• 67% of global investors plan to boost investments in energy infrastructure and demand management.
• Increasing emphasis on climate adaptation, biodiversity, and AI-related risks is reshaping due diligence.
• A growing minority acknowledges political challenges but believes sustainability’s fundamentals remain intact.

This resilient sentiment reflects confidence rooted in strong financial performance of sustainable investments and the enduring relevance of ESG objectives.

Charting Your Course: Practical Steps for Investors

Whether you are a seasoned asset manager or an individual investor, crafting a sustainable portfolio requires deliberate action. Here are key steps to get started:

• Define clear objectives aligned with specific ESG themes or UN SDGs.
• Choose a blend of strategies—ESG integration, thematic funds, and engagement—to balance risk and impact.
• Analyze performance records and fee structures to ensure competitive returns.
• Engage with fund managers and corporate boards to influence sustainable practices.
• Monitor progress through ESG ratings, impact reports, and stewardship updates.

By taking these measures, investors can pursue a journey that aims for significant evidence of competitive performance while driving environmental and social change.

The horizon of sustainable investing continues to expand, powered by innovation, regulation, and a collective desire for a thriving planet. As you chart your course, remember that every allocation is a vote for the future you wish to see.