On paper, January 2026 should have already been the final nail in the coffin for sustainable investments when President Donald Trump’s administration captured Venezuela's Maduro and signalled its intention to tap the world's largest oil reserves. Furthermore, according to the Financial Times, Commerce Secretary Howard Lutnick told delegates at a Davos dinner that the world should focus on coal as an energy source rather than renewables.
This followed an already bruising 2025, when the US administration rolled back key climate commitments and dialled up the "drill, baby, drill" rhetoric.
But AI’s near-insatiable appetite for electricity has meant that the market is building what it needs and much of that will be powered by renewables – regardless of what Washington says. Real estate company JLL predicts that global data centre capacity will nearly double from 103 gigawatts (GW) to 200 GW by 2030. Hyperscalers are allocating US$1 trillion in capital expenditure between 2024 and 2026 alone.
Even the EIA is banking on renewables
The US Energy Information Administration's (EIA) latest Short-Term Energy Outlook confirms the direction of travel. Solar generation is forecast to increase by 21% in both 2026 and 2027, supported by 69 GW of new capacity. Coal-fired generation falls by 9% this year. Natural gas is projected to stay flat.
Figure 1. Projected change in US power generation in 2027 from 2025 levels (TWh)
Source: Energy Information Administration, Short-Term Energy Outlook, January 2026.
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This isn't wishful thinking from climate advocates. It's the US government's own statistical agency projecting that incremental power capacity will overwhelmingly come from renewable sources. Energy infrastructure has emerged as the critical bottleneck, with the average wait time for a grid connection in primary data centre markets now exceeding four years. Speed to power has become the primary criterion driving site selection, ahead of location and cost. Renewables are faster to connect and increasingly cost-competitive.
A global story
The US projection plays to the wider narrative that investment into the energy transition is still very much alive and growing. All three regions – the Americas, APAC and EMEA – posted positive growth rates in 2025, although within this the picture varied. The EU and US grew at 18% and 3.5%, respectively, while China saw its first decline in transition investment since 2013. 2025 also marks the second year where investment into the clean energy supply (US$1.29 trillion) exceeds investment into the fossil fuel supply (US$1.19 trillion).
Figure 2. Global energy transition investment by sector, 2005–2025
Source: BloombergNEF, January 2026.
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What 2025 told us
The market already rewarded this shift. Clean energy returned over twice the MSCI World last year, propelled by AI's power needs and global grid electrification. Crude posted negative year-end performance. Copper, a key metal for electrification and data infrastructure, gained more than 40%, reflecting the structural shift toward transition investing.
Meanwhile, dedicated ESG and climate models had their best year since 2019. Investing in a labelled ESG fund didn't guarantee outperformance, but systematically integrating climate and ESG factors did – and these factors proved especially defensive during periods of geopolitical stress such as Liberation Day. As 2026 starts on a news volatility high, committed responsible investors may continue to appreciate these characteristics.
We expect some interesting new products on the back of new regulation and a new-found climate pragmatism. In Europe, the newly announced changes to the Sustainable Finance Disclosure Regulation (SFDR) may remediate the lack of enthusiasm for Article 9 products and spur some innovation across the current Article 8 universe. While Morningstar expects the new Transition (Article 7) category to remain small, this new product reflects the market shift from emissions reductions to more impactful transition finance. We expect fewer Article 8 fund launches and a continued move away from stringent Article 9 in 2026, as asset managers prepare for the new product categories.
Looking ahead
Long-term structural trends – AI mass adoption, electrification, grid constraints – are demand-driven, not policy-dependent. Climate remains the dominant investment subtheme, with committed allocators increasingly adopting a pragmatic stance: seeking exposure to the transition without compromising on returns.
While the political hammer may be loud, the market, it seems, isn't listening.
Author Jason Mitchell, Co-Head of Responsible Investment at Man Group and Pauline Vaskou, an RI Specialist at Man Group.
All data sourced from Bloomberg unless otherwise stated. Past performance is not indicative of future results.
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