Despite the headwinds of the US administration’s Big Beautiful Bill, clean energy stocks appeared to outpace the traditional energy sector amid growing demand from Asian investors
The US administration’s reversal of many clean energy incentives introduced as part of the Inflation Reduction Act was widely anticipated to pose major challenges for clean energy stocks. Indeed, some clean energy firms have faced a challenging year with share prices for firms like Orsted or Vestas dropping by close to 30% year to date.
However, in the first half of 2025, more widely diversified ESG and clean energy funds appeared to recover, according to new IEEFA research. The note, based on Morningstar data, highlights that global sustainable funds continued to draw strong investor interest in 2024, drawing in $31bn in net inflows. Markets turned more cautious in Q1, with sustainable funds reporting outflows of $8.6bn against an increasingly uncertain market environment and the introduction of the EU’s new SFDR rules.
Researchers at the IEEFA highlight an interesting pattern of regional divergence, with investors from the US remaining cautious, demand for sustainable funds slumped by 4% in Q1, while some Asian markets appeared to turn a corner, albeit from a much lower base.
While China has reported net outflows from sustainable funds for the past three years, it reported marginal inflows for the first time in Q1, amid growing investor demand for Chinese ETFS, which recorded RMB1.1 trillion (around USD153.5 billion) in net capital inflows in 2024, marking a historic high and a 104% increase from 2023, according to IEEFA .
Similarly, Taiwan has seen a stark growth of its ETF market, which is now the third largest in Asia, with sustainable funds reporting consistent inflows for the past two years.
Performance has been one reason for solid investor demand, Despite challenges for individual stocks, the MSCI World Selection Index (formerly the MSCI World ESG Index, renamed in February 2025) has kept pace with the broader market. Similarly, the The iShares Global Clean Energy ETF (ICLN US) returned 15.6% gains to investors year-to-date as of 27 June 2025, compared to 5% for the S&P500 index, and just 1.2% for the Energy Select Sector SPDR ETF (XLE US).
