MSCI: What are the Biggest Climate Tech Investing Trends?

Energy transformation is hailed as a significant investment opportunity by experts at Morgan Stanley Capital International (MSCI), a leader in investment data and analytics.

The firm's report, 6 Sustainability & Climate Trends to Watch in 2025, aims to steer investors through the upcoming challenges and opportunities.

In the foreword, Laura Nishikawa, MSCI Head of ESG and Climate R&D, writes: “The latter half of this decade will bring profound shifts, driven by geopolitics, disruptive technology breakthroughs and environmental challenges.”

Laura adds that the report does not focus on the rising tide of regulation this year, because “an intense focus on compliance and disclosure runs the risk of overshadowing the critical investment opportunities and challenges we’re here to address”.

Facing a transformative landscape

As echoed in other 2024 year-end reports in the sector, MSCI predicts a complex environment for investors.

The transformation of the energy system marks a promising area for investments.

Laura says: “Investors will need to contend with the sweeping effects of the energy transition on users and suppliers of energy, the escalating impact of climate-related events and new risks associated with the widespread adoption of AI across every sector of the economy.”

But she remains positive, adding: “Such unprecedented change brings unprecedented opportunity.

“The energy system transformation presents one of the most significant investment prospects of our time, with strong returns anticipated by many investors in low-carbon energy, green transportation and energy storage solutions, especially in private markets.”

Despite not focussing this year on compliance and disclosure rules, Laura says MSCI will continue to monitor sustainability and climate regulations.

“But ultimately, our mission remains focused on tackling the pressing, real-world investment challenges that drive your long-term success.”

Unveiling opportunities and navigating risks

One of the report's highlights is the search for solutions within the energy transition sector.

As global investors worry about meeting their net zero targets, focus is shifting towards accelerating the real economy's embrace of sustainable practices.

However, there are uncertainties about how and where these changes will unfold, despite strong commitments to increase renewable energy capacity and improve energy efficiency.

The urgency of adapting to climate change is another crucial point raised in the report.

With the intensification of extreme weather events, it's becoming increasingly important to manage climate-related risks effectively.

Equity markets might provide opportunities to invest in companies offering solutions for resilience and adaptation.

MSCI also reflects on the evolution of sustainability risks within global equity markets.

The predominance of technology giants has reshaped these markets, broadening the spectrum of sustainability risks, including social concerns related to data security and human capital.

Emerging technologies and governance shifts

The report discusses the tightening scrutiny over the use of artificial intelligence (AI) in business.

As the early excitement over AI subsides, demands for return on investment and accountability in data usage are climbing.

MSCI foresees a potential reckoning for AI, highlighting the importance of robust data management foundations for the next phase of AI deployment.

An interesting development in corporate governance emerged in the 2024 proxy season, according to MSCI.

Shareholders significantly pushed for binding majority voting for directors, indicating a shift towards aligning governance practices with global standards.

This movement may signal a long-term trend, reshaping shareholder rights and corporate governance.

Lastly, 2025 might be a pivotal year for carbon markets.

Following turbulence, there are signs of improvement in market quality, coupled with emerging demand sources such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

These developments could significantly influence the trajectory of carbon markets.

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