Investor interest, primarily hailing from Asia and Europe, propels a resurgence in clean energy stock holdings
Asian Investments Shift Towards Clean Energy: A Rapidly Accelerating Trend
Asian investments in clean energy stocks are experiencing a significant surge, driven by a combination of domestic policy incentives and external regulatory pressures. This shift, which has been gaining momentum over the past few years, is transforming the region's energy landscape.
Taiwan's ETF market, including sustainable funds, has been a key contributor to this trend. Over the past two years, it has seen consistent inflows, making it the third largest ETF market in Asia. The Taiwanese market's growth, in turn, has fueled solid investor demand in sustainable funds.
One of the reasons for this strong investor demand is the performance of the iShares Global Clean Energy ETF (ICLN US), which returned 15.6% gains to investors year-to-date as of 27 June 2025. Despite a cautious approach from US investors, the demand for sustainable funds has remained robust, albeit with a 4% slump in Q1 2025.
However, not all clean energy firms have enjoyed a positive year. Some, such as Orsted and Vestas, have faced challenging times, with share prices dropping by close to 30% year to date. Nevertheless, the clean energy sector has outpaced the traditional energy sector amid growing demand from Asian investors in the first half of 2025.
China, a global leader in clean energy investments, has reported historic high net capital inflows to its sustainable funds in 2024, marking a 104% increase from 2023. China's Belt and Road Initiative (BRI) has shown a complex investment mix, with green energy investments reaching USD 9.7 billion in the first half of 2025, while fossil fuel investments, especially in natural gas and coal mining, remain significant.
Southeast Asia, despite needing $190 billion annually up to 2035 to meet its climate goals, has only managed to invest $32 billion in 2023. However, deals like the Philippines’ $15 billion renewable energy agreement with UAE’s Masdar indicate growing momentum in the region.
Energy storage technology is rapidly being integrated across Asia to enhance clean energy deployment, supported by regional policies and partnerships. This scaling up of energy storage is crucial for balancing growing renewable capacity.
The MSCI World Selection Index, formerly the MSCI World ESG Index, has kept pace with the broader market despite challenges for individual stocks. Its performance is a testament to the continued investor demand for sustainable funds, even in a more uncertain market environment caused by regulatory changes, such as the EU's new SFDR rules introduced in Q1 2025.
The US administration's reversal of clean energy incentives introduced as part of the Inflation Reduction Act has posed challenges for clean energy stocks. However, the Asian market, with its robust policy frameworks, national targets, and technology-specific incentives, is expected to continue its rapid transition towards clean energy.
In conclusion, Asian investments in clean energy stocks are accelerating rapidly, driven by both domestic policy and external regulatory pressures. While investments in traditional energy, particularly natural gas as a transition fuel and ongoing coal mining, persist, the region is adopting a pragmatically balanced energy transition strategy.
Investors in Taiwan's ETF market have demonstrated a strong preference for sustainable funds, as these investments have delivered solid returns, such as the iShares Global Clean Energy ETF (ICLN US) which returned 15.6% to investors as of 27 June 2025. On the other hand, certain clean energy firms like Orsted and Vestas have faced challenging times, with share prices dropping by close to 30% year to date.
In contrast to the US administration's reversal of clean energy incentives, which has presented challenges for clean energy stocks, the Asian market, with its robust policy frameworks, national targets, and technology-specific incentives, is anticipated to continue its rapid transition towards clean energy, mirroring the surge in investments observed in environmental-science sectors.
