Looking at ESG investment trends for 2026 could help you identify opportunities that might be right for you. From a focus on greenwashing to climate action shifting to adaptation, here are five trends to consider when you’re reviewing your investments.

1. ESG investments could focus on pragmatism

Geopolitical tensions and changing policy, including in the US, created challenges for the ESG investment sector in 2025. To combat this, Morningstar (17 December 2025) predicts there will be a greater shift towards realism and pragmatism.

Morningstar noted that 2025 was on track to record the first net outflows from sustainable open-ended funds and exchange-traded funds since it began tracking the information in 2018. While the outflow was modest, it could trigger a renewed focus on demonstrable value.

Coupled with growing regulation, which we’ll cover later, investors could benefit from greater clarity about the impact of their portfolio.

2. Climate adaptation could present investment opportunities

Climate change has been one of the key issues ESG investors have been concerned about for years. While it remains a top priority for many, the approach is starting to change.

In the past, the focus was on mitigating climate change and investing in businesses that could limit global temperature rises. With more climate-related events happening globally, such as flash floods and intense heatwaves, the scope is expanding to incorporate climate adaptation.

Forward-thinking businesses will be considering how climate change might affect their operations, and for investors, this could present opportunities to invest in firms creating climate adaptation solutions.

3. Regulation will seek to limit greenwashing

Amid growing concerns about greenwashing – where companies misleadingly present themselves as being more sustainable or ethical than they are – regulation is being introduced.

Both the UK and EU have announced new regulatory frameworks to make ESG investments more transparent. This could make it easier for investors to identify which investments align with their ESG criteria.

From May 2025, the European Securities and Markets Authority (ESMA) guidelines for funds using ESG or sustainability-related terms in their names came into force. Drawing on shareholder notification information, the ESMA (17 December 2025) found that 64% of the funds reviewed changed their name, in most cases to avoid the use of ESG terminology. In addition, 56% of funds updated their investment policies to strengthen their sustainability focus.

As further regulation is introduced, increased transparency could aid investors even more.

4. The continuing rise of green bonds

Green bonds could provide a useful investment option if you want to include ESG factors while taking less risk than you typically take if you invest in equities.

According to data published by AXA Investment Managers (19 November 2025), in the last decade, the green bond market has grown from around €30 billion to €1.9 trillion (approximately £26 billion to £1.6 trillion).

Green bonds, which finance sustainable projects like renewable energy or water management, are expected to continue gaining traction.

While bonds are usually less risky than equities, levels of risk can vary. Before you invest, check the level of risk you’d be taking and assess if it aligns with your investment strategy.

5. AI will present a challenge for ESG investors

The use of AI has become increasingly widespread, and it presents an interesting challenge for ESG investors.

On one hand, AI can be highly energy- and water-intensive. In addition, it presents other potential issues, such as the spread of misinformation or data breaches. This means some investors wouldn’t consider AI as part of their ESG investment portfolio.

However, AI also has the potential to help solve some of the biggest challenges that ESG considers. For example, AI could create environmental maps that help manage climate risks or be used to improve healthcare.

As AI becomes commonly used in businesses, investors might need to consider how AI aligns with their ESG priorities.

Review your ESG investments in 2026

We can help you review your current ESG investment strategy to ensure it aligns with both your values and your financial goals. Please get in touch to arrange a meeting.

Please note:

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.