Sustainable investments are currently facing challenges. The strong enthusiasm for sustainability and climate topics that existed before Covid, along with momentum driven by the energy supply gap and geopolitical tensions, seems to have waned. Have these priorities disappeared for good? Not according to Daniel Wild, Chief Sustainability Officer at private bank J. Safra Sarasin.
Sustainability trends remain intact
Despite short-term fluctuations, the fundamental drivers of sustainability remain unchanged, and the long-term ESG trend is still in place. Secular sustainability trends extend beyond political cycles, and forward-thinking companies continue to stay the course.
For example, major U.S. corporations have reaffirmed their commitment to climate transition plans. Amazon has explicitly stated its intention to maintain its sustainability strategy, while Apple remains aligned with the Paris Agreement goals. While some firms, including Walmart and a few financial institutions, have scaled back their climate goals in the U.S., this is not the case in Europe.
Understanding the backlash
The current backlash against sustainable investing stems from a combination of factors. Political shifts in the U.S. under Donald Trump, growing fatigue over ESG regulations —particularly in Europe— and the recent underperformance of some sustainable investment strategies have contributed to skepticism. High-conviction calls in renewable energy and the exclusion of sectors such as oil, gas, and defense have faced headwinds. However, these setbacks do not hold over a longer time horizon.
As a result, sustainable strategies have seen some outflows, mainly in the U.S., with some spillover effects in Europe. Fearful of political repercussions, large firms have adjusted their narratives or withdrawn from industry associations focused on net-zero commitments.
Commitment to climate transition
While industry group memberships and public pledges are important, real progress depends on concrete actions. Many companies that have exited climate alliances continue to implement their transition plans, now reporting under new regulatory frameworks rather than voluntary standards.
In the U.S., sustainability-related infrastructure projects funded by the Inflation Reduction Act (IRA) are expected to proceed. Many initiatives are already underway, and even ‘red states’ that supported Trump stand to benefit from these investments. Additionally, 24 governors have established the bipartisan U.S. Climate Alliance to promote impactful climate action.
A pragmatic path forward
Despite current challenges, these headwinds provide an opportunity to refine a more pragmatic and realistic approach to the green transition. Investors should remain focused on companies that align with long-term sustainability trends and demonstrate their commitment through concrete strategies and actions.
Bank J. Safra Sarasin maintains a long-term perspective, continuing to integrate ESG principles into its investment process—ensuring that investors can navigate these challenges with confidence.
