Five Issues for sustainable Investors in 2026

The world is increasingly characterized by geopolitical tensions, rapid technological disruption, and ongoing energy uncertainty. This forces sustainable investors to look beyond the traditional ESG pillars, writes Ronald van Genderen.

Climate mitigation, social inclusion, and good corporate governance remain essential for ESG investing, but on their own they are no longer sufficient. Here are five issues for sustainable investors in 2026.

1. Defense: broadening the sustainability lens

Few sectors illustrate shifting priorities as clearly as defense. Since Russia’s invasion of Ukraine in 2022 — and the further rise of geopolitical uncertainty following Donald Trump’s return as US president — national security has returned to the top of the political agenda. More than a hundred countries have increased their military spending.

Historically, defense was largely excluded from ESG portfolios due to its association with violence and ethical controversy. This stance is being reconsidered by a growing group of sustainable investors. Exposure to the defense industry within European sustainable equity funds has tripled over the past three years, from an average of 0.6% at the start of 2022 to nearly 2% by mid-2025.

This shift does not mean a relaxation of ESG standards, but rather a heavier responsibility. Companies directly involved in weapons production generally receive high ESG risk scores, mainly due to risks around corporate integrity, product governance, and environmental impact. Suppliers of technology, logistics, and infrastructure also require careful assessment. The challenge for sustainable investors lies in finding a balance between the societal importance of security and a consistent commitment to transparency, accountability, and ethical conduct.

2. AI: disruptive and promising, but complex

AI is developing rapidly and has a profound impact on the economy and society. Companies compete for technological advantage, but this development also brings new ESG challenges. Beyond CO2 emissions, water usage, data privacy, and labor conditions, digital sovereignty is becoming increasingly important: the degree to which states maintain control over their digital infrastructure, data, and technological standards.

As AI systems gain greater influence over public opinion, economic decision-making, and security, risks around misuse, lack of transparency, and manipulation increase. Information integrity is central here. The World Economic Forum ranked disinformation and misinformation as the largest short-term risk worldwide for the second consecutive year, due to their undermining effect on trust, governance, and social cohesion. For sustainable investors, this means governance criteria for AI companies need to be sharpened.

3. Energy independence: a pillar of sovereign resilience

Energy has always been a core theme in sustainable investing, but recent events have painfully exposed the vulnerabilities of energy dependence. The war in Ukraine and the subsequent energy crisis forced governments to confront the interconnection of energy security, economic stability, and national sovereignty.

Europe still imports around 58% of its energy. Russian gas supplies have largely been replaced by imports from other countries, especially the United States, which supplied nearly 45% of European LNG imports in 2024. The EU’s commitment to purchase $750 billion of US energy products over the next three years underlines how geopolitics continues to shape energy flows.

At the same time, Europe is accelerating the transition to clean energy. In 2023, investments in clean energy were more than ten times higher than in fossil fuels. Investments in power grids are also increasing, but the challenge remains large: more than $600 billion is estimated to be needed by 2030 to modernize grids and fully integrate renewable energy. Investors play a key role by allocating capital to renewable energy, storage, smart grids, and interconnections.

4. Climate change: the ultimate stress test for sovereigns

Climate change is no longer an abstract risk. Record temperatures, extreme weather events, and biodiversity loss are already causing significant economic damage. In the first half of 2025, global losses from natural disasters amounted to $162 billion, with the United States alone accounting for $126 billion.

Investors are increasingly looking at physical risk, transition risk, and adaptation risk. Especially the latter — the degree to which companies and infrastructure are resilient to climate shocks — remains underexposed. Capital allocation toward climate-resilient infrastructure, ecosystem restoration, and adaptation strengthens long-term stability. Additionally, investors can drive better reporting on emissions, transition, and adaptation plans through engagement.

5. Limits to country exclusion

Finally, the question arises of how far country exclusions can and should go. Sustainable investors regularly exclude countries that do not meet minimum standards for democracy, rule of law, and human rights. Often, this concerns markets with limited investment impact, such as Iran, North Korea, and Russia.

It becomes more complex when dealing with countries with large capital markets. The actions of the United States under President Trump — for example toward Venezuela — raise questions about compliance with international law. Yet few investors would use this as a reason to avoid the world’s largest stock market. That dilemma becomes more concrete as geopolitical tensions escalate further, for example if the US were to intervene militarily to annex Greenland. For sustainable investors, this is not a theoretical exercise but a fundamental question about consistency, credibility, and pragmatism in ESG policy.

Sources: Morningstar, belegger.nl, Micheile Henderson