Adaptation and artificial intelligence are among key themes being flagged for sustainable investing in 2026, as the industry responds to climate, geopolitical and technological developments, with expectations for green, social and sustainable bond issuance modest.
The ESG backlash from some quarters continues to frame thinking, with developments in investments adding a concrete dimension to such rhetoric: as Morningstar found, 2025 was the first year in which annual outflows for global ESG-focused open-end funds and exchange-traded funds experienced annual outflows, since it began tracking the universe in 2018.
According to Hortense Bioy, head of sustainable investing research at Morningstar, realism and pragmatism are the name of the game.
“In 2025, new standards emerged, strategies were redefined, scopes broadened, and narratives were reframed around growth opportunities, security, and resilience,” she said. “In 2026, the priority will be for the industry to demonstrate the tangible value of sustainability considerations and to drive innovation.”
However, Morningstar also flagged reasons for optimism, citing a Morgan Stanley Institute for Sustainable Investing survey that found 88% of global individual investors to be interested in sustainable investing, with the younger generation showing the greatest interest. And 86% of asset owners are expecting to increase allocations to sustainable investments in the next two years.
Indeed, amid the retreat of headline initiatives such as the Net-Zero Banking Alliance, responsible asset owners have stayed the course, according to Amundi’s 2026 responsible investment outlook.
“Recalibration of climate coalitions did not translate into a retreat from sustainability,” said the firm. “Instead, it reinforced a more demanding phase of stewardship from asset owners, reallocating misaligned mandates in extreme cases.”
One way in which strategies are being steered is towards adaptation, as net-zero targets becoming increasingly challenging, and weather and long term climate impacts intensify. According to Crédit Agricole CIB, all sectors will increasingly need to prioritise asset adaptation and resilience, because no sector will remain immune to the rising risks and impacts of physical climate change.
“As the impacts of climate-related events intensify, climate adaptation and supply chain resilience are moving to the forefront, with physical risks set to become a material cost driver across global sectors,” said Damien de Saint Germain, head of credit research and strategy at Crédit Agricole CIB. “For credit markets, this dynamic will imply a more selective approach to sustainability and ESG.
“In turn, higher investor scrutiny of transition pathways, 2030 climate targets credibility and climate adaptation strategies will pave the way to greater differentiation between leaders with robust execution capacity from laggards facing rising regulatory, cost and execution risks.”
Artificial intelligence is seen impinging on the sustainability landscape in more ways than one. Morningstar highlights the increasing recognition among investors that AI is highly energy and water intensive. For example, it expects data centre power demand to triple by 2030 in the US, with only 25% of the incremental load met by renewables and the remainder supplied by natural gas (60%) and nuclear energy (15%) – with investors raising questions over the credibility of climate commitments from the likes of Amazon, Meta and Alphabet.
Meanwhile, Amundi flags the way in which AI is redefining responsible investing itself alongside society.
“AI is improving sustainability analysis, speeding data ingestion and adding new qualitative insights, but also risks widening social gaps and workforce disruption, especially in ageing exposed sectors,” it said. “Opportunities are likely to be found in integrated health/care platforms, robotics/automation for labour scarce services, and age inclusive digital infrastructure.
“2026 will also crystallize AI regulatory fault lines, such as ethics and regional divergence, forcing investors to shift capital toward socially and economically useful use cases.”
Against the overall challenging backdrop, it is perhaps no surprise that green, social and sustainable bond issuance also faced a tough year in 2025, struggling to show any year-on-year growth. However, Crédit Agricole CIB expects a rebound in 2026 to low-single-digit growth, driven by a sharp increase in redemptions, to around €870bn-equivalent.
“To this end, European Green Bond volumes are also expected to grow further.”
The French bank expects sustainability bonds to maintain the positive dynamic of last year and more social bond issuance. The sovereign, supranational and agency (SSA) market is meanwhile expected to remain the backbone of the market, contributing around 57% of supply, with sustainable non-financial deals expected to stabilise at around 20% after three years of decline.
