The International Energy Agency (IEA) reported global clean energy investment is on track to increase to $2.2 trillion in 2025, more than double the amount being spent on fossil fuels – a record-breaking year for renewables, with solar and wind projects expanding at unprecedented speed, according to the report.

This isn’t happening by chance. The shift is being driven by a combination of forces: falling costs for renewable technologies, rising awareness of climate risk, and, increasingly, a desire for energy security. In Europe especially, recent energy price spikes and supply disruptions have made it clear that clean energy isn’t just good for the planet; it’s also essential for economic stability.

For individual investors, this creates both risk and opportunity. As energy systems shift and policies evolve, your investment portfolio may be more exposed, or more aligned, than you realise.

Climate-related financial risks generally fall into two categories:

1. Physical Risks:

These are the direct effects of climate change, such as:

• Floods, wildfires, heatwaves, and storms
• Long-term shifts in rainfall, sea level, or temperature

These events can cause damage to infrastructure, increase insurance costs, and disrupt business operations, impacting the value of companies and funds.

2. Transition Risks

These arise from the shift to a low-carbon economy. They include:

• New regulations, such as carbon pricing or emissions limits
• Technological disruption, such as cheaper clean energy outcompeting fossil fuels – the International Renewable Energy Agency (IRENA) reported in 2024 91% of all newly commissioned renewable electricity was cheaper than the cheapest fossil fuel option, with solar PV and onshore wind being respectively c. 41% and 53% cheaper than the lowest-cost fossil fuel alternative
• Changing consumer behaviour or reputational risks

Companies that fail to adapt to this transition could face falling demand, rising costs, or stranded assets, where assets lose value unexpectedly or prematurely due to external pressures such as those related to the climate transition. One example of stranded assets would be buildings with poor energy performance that may fail to meet tightening energy efficiency rules thus devaluing the asset. On the other hand, other companies may thrive by moving early to adapt to the energy transition.

Energy Security Is Reinforcing the Transition

In Europe, energy security has become one of the biggest reasons governments are accelerating the rollout of renewables. The war in Ukraine exposed just how dependent many countries were on imported fossil fuels, and how vulnerable that made them to price spikes and supply disruptions.

This push toward clean energy isn’t just good for the climate, it’s also about resilience, cost control, and reducing exposure to global shocks. And that has real implications for investors.

What Can You Do as an Investor?

You don’t need to be a sustainability expert to make informed choices. As a retail investor, you now have tools that can help you align your portfolio with both the risks and opportunities of a changing energy and climate landscape.

• Use Your Sustainability Preferences

When you receive investment advice, you can choose to express your sustainability preferences as part of the suitability process, for example:

• Investing in companies or funds that promote environmental and social objectives
• Avoiding/monitor sectors that are poorly positioned for the transition

This gives your relationship manager a clearer picture of what matters to you, and ensures your investments reflect both your values and awareness of climate risk while meeting your financial objectives.

• Ask the Right Questions

You can also ask:

• How your investments are exposed to climate or energy risks
• Whether your portfolio includes companies adapting to the transition
• How your investment provider considers long-term resilience when managing your money

While more investors are looking to factor climate risk into their investment decisions, the availability of well-labelled, climate resilient products is still an evolving area. Your relationship manager will be able to advise on product availability, once all other aspects of suitability assessment have been taken into consideration.

By considering your sustainability preferences during suitability assessment, asking informed questions you can potentially reduce climate related risk in your portfolio.

Written by Carolina Agarita-Cala, Head of Sustainability, Cantor Fitzgerald Ireland