Increased investments from Asian and European investors propel a resurgence in the clean energy stock market
In the first half of 2025, the clean energy sector has shown resilience and promising growth, particularly in Asian markets. According to a recent report by the IEEFA, demand for sustainable funds in the US slumped by 4% in Q1, contrasting with some Asian markets that appeared to turn a corner, albeit from a lower base.
One striking development occurred in China, where sustainable funds reported marginal inflows for the first time in Q1 2025, marking a net capital inflow of RMB1.1 trillion (approximately USD153.5 billion). This growth is significant, considering the uncertain market environment and the introduction of the EU's new SFDR rules.
The iShares Global Clean Energy ETF (ICLN US) has been a standout performer, outperforming both the S&P500 index and the Energy Select Sector SPDR ETF (XLE US). The ETF returned 15.6% gains to investors year-to-date as of 27 June 2025, showcasing the strong investor confidence in clean energy-focused investments.
The Asian region's growing demand for clean energy stocks can be attributed to the rapid digital and technology-driven energy demand, particularly from sectors like data centers and semiconductors in countries such as Singapore, Taiwan, and Malaysia. These countries are actively investing in renewables (solar, biomass, grid interconnectivity) to support a decarbonizing digital economy, combining sustainability with profitability.
Taiwan's sustainable funds have reported consistent inflows for the past two years, contributing to the country's ETF market's stark growth, making it the third largest in Asia. However, some clean energy firms, such as Orsted and Vestas, have faced a challenging year with share prices dropping by close to 30% year to date.
Despite these challenges, more widely diversified ESG and clean energy funds have recovered in the first half of 2025. Global sustainable funds continued to draw strong investor interest, attracting $31bn in net inflows in 2024, with China's ETFS recording a historic high and a 104% increase in net capital inflows in the same year.
The MSCI World Selection Index (formerly the MSCI World ESG Index) has kept pace with the broader market, despite challenges for individual stocks. This indicates that despite political and policy headwinds in some regions, ESG and clean energy funds have kept pace with or exceeded broader equity market returns.
In conclusion, Asian investors are motivated by domestic technology-driven energy growth and sustainability policies that foster clean energy investments, counterbalanced by geopolitical and regulatory challenges from the US. Despite challenges faced by individual clean energy firms, clean energy ETFs such as ICLN US are currently delivering superior returns relative to traditional energy sector ETFs.
[1] IEEFA, "Regional Divergence in Sustainable Funds Demand," Q1 2025. [2] IEEFA, "Clean Energy ETFs Outperform Traditional Energy Sector," Q2 2025. [3] Financial Times, "Asia's Clean Energy Boom," June 2025.
- Despite a 4% decline in demand for sustainable funds in the US, environmental-science focused investing in Asia has been thriving, particularly in areas like technology and renewable energy, such as Taiwan's ETF market.
- In the realm of finance and investing, clean technology and environmental-science focused ETFs, like the iShares Global Clean Energy ETF (ICLN US), have demonstrated impressive growth in Asia, outperforming traditional energy sector ETFs, as indicated by their returns and net capital inflows.
