AI-driven energy demand flips ESG investments into a mainstream infrastructure play in 2025

Investors are rapidly shifting their view of clean energy from a niche ESG allocation to a core economic strategy, as the rise of artificial intelligence and data centre expansion reshapes global power needs.

ESG lost its shine after too many companies “green washed” their businesses to attract socially and environmentally conscious investment money in the shape of the so-called green bonds. It was more or of a fad than a thing, but interest in climate compliant investments has resurged as the demand for power surges on the back of the AI revolution and makes green energy a mainstream investment.

Despite political setbacks in the US and Europe, capital has flowed into green assets at record levels in 2025, with global green bond and loan issuance reaching $947bn so far this year, Bloomberg reported on December 24.

“Green investments are increasingly becoming viewed as core infrastructure and industrial plays, not just niche ESG trades,” Melissa Cheok, associate director for ESG investment research at Sustainable Fitch, told the newswire. “Capital is likely flowing toward areas with clear revenue visibility, policy backing and structural demand such as grid upgrades and renewables tied to electrification.”

Driving the shift is a nearly 4% rise in global electricity demand, led by AI computing, cooling systems and industrial electrification. Investors are responding to the structural nature of that growth, betting on energy infrastructure as a long-term earnings driver rather than a values-based allocation.

The switch has been helped by the collapse in the price of producing green energy. The cost of generating solar and wind power has tumbled to become the cheapest source of power on the planet. That has also changed the attitudes of governments, especially in emerging markets, which have moved renewable energy strategies from the periphery of their power strategies to the centre.

Previously, emerging markets like India, Uzbekistan, Vietnam, and South Africa, adopted green energy projects at the coaxing of their development bank partners, but once the financials became available, they quickly expanded those programmes. The biggest additions of renewable generating capacity in 2025 were made in Emerging markets in 2025, according to the International Energy Agency (IEA) and BloombergNEF.

India, for instance, surpassed 175 GW of renewable capacity in 2024 and has one of the world’s fastest-growing clean power sectors

China has become the Global green energy champion and is still the world’s largest single market for renewables. India is expected to add 30–35 GW of new capacity in 2025, with heavy investment in solar and wind. And Latin America, especially Brazil and Chile and Southeast Asia, have also seen record-setting tenders and installations. Uzbekistan has overcome its initial reluctance and become the Green energy champion of Central Asia.

These trends are changing the nature of investors in the more developed markets. Green equity markets have outperformed broader benchmarks for the first time in four years. Clean-energy indices compiled by S&P Dow Jones and WilderShares have risen 45% and 60% respectively in 2025, outpacing the S&P 500, though both remain below their 2021 peaks.

In fixed income, the so-called “greenium” — lower yields on green bonds compared to conventional equivalents — has become especially pronounced in Asia-Pacific, where issuers in November enjoyed discounts of more than 14 basis points, according to BloombergNEF. China led with a record $138bn in green bond issuance this year, and debuted its first sovereign green bond in London.

Asia-Pacific corporations and government-linked entities raised $261bn in green debt — a 20% increase year-on-year — backed by China and India’s state-led renewables push. Globally, the market for outstanding green bonds has grown at a compound rate of 30% over the past five years and now accounts for 4.3% of all fixed income instruments, according to LSE Group research.

BNP Paribas and Crédit Agricole were the top underwriters of green bonds in 2025. Crystal Geng, ESG research lead for Asia at BNP Paribas Asset Management, said easing interest rates and refinancing needs could lift global green bond sales to as much as $1.6tn in 2026.

The laggard in these changes is the US. President Donald Trump has rolled back clean energy subsidies and climate legislation in the US, while European governments have eased environmental rules in response to competitiveness concerns. Yet the underlying economic momentum behind electrification and infrastructure investment appears to be outweighing policy risks.

“Green energy is no longer just about sustainability,” said Cheok. “It’s becoming fundamental to the global industrial transition.”