Top of the Morning: Sustainable Investing - 10 expectations for 2025 and beyond
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Hi everyone, Dan Cassidy here. Welcome back to Top of the Morning on the UBS Market Moves podcast channel. For today, we will spend some time spotlighting the latest Sustainable Investing Perspectives publication. As you know, this is a monthly piece from the UBS Chief Investment Office for the first edition of 2025. The team explores 10 expectations for 2025 and beyond. I

So look forward to jumping through the publication a bit. Of course, we will not have time to hit on all 10. So do encourage you to pick up a copy of the publication from your UBS financial advisor or view the recent video from UBS studio. So a lot out there, something for everyone.

everyone, though, joining me here in studio. I'm glad to welcome back one of the publication's contributors, sustainable and impact investing strategist for the Americas with the UBS Chief Investment Office, Amantia Muhedini. Amantia, great to be with you. Our first conversation of 2025. So welcome back. Thank you very much, Dan. It's a pleasure to be here as always.

Absolutely. So, Amati, as we begin a new year, just a few days ago, we have a new administration in Washington, D.C. President Donald Trump, now in his second term as the 47th president, wasted no time within the first few hours. And now within the first few days, we've seen a lot of executive orders issued by the

President, many having to do with climate and energy in particular. Those have been taking center stage. So what have you picked up on from these executive actions? What are some takeaways you can share with us? Thanks, Dan. And indeed, we wrote our report at the end of last year. And very much in the report, we anticipated this outcome, right? President Donald Trump had already been elected. And it's been interesting to see how in the first

24, 48 hours already, he was able to sign and put into place a few executive orders. I'd say the one most immediately obvious and relevant one to the space of sustainable investing is the fact that the United States is again withdrawing from the International Paris Climate Agreement.

fast becoming only one of four countries in the world, together with Iran, Libya and Yemen, that are not members of the agreement. This was the exact same executive order that we saw in 2016, which was executed again within, I believe, a week or so of President Trump's first tour in the office.

A second one that is of note is the declaration of a national energy emergency. And this is around kind of an intention to really put energy security at the heart of this administration's policy agenda. And I'll just comment briefly on these kind of two highlights. And then maybe we go into what we expect the year to look like for broadly sustainable investing. So I'd say, yeah.

The exit from the Paris Climate Agreement has very significant symbolic significance.

And it does have practical significance as well. For example, the United States will no longer be required to publish its commitment to reducing its carbon emissions, call this nationally determined contribution. And also, it will likely be less transparent or not at all transparent on how it's doing on its trajectory on this reduction. However, this does not change the domestic economic activity happening around the

renewable energy growth or electrification, which are in fact the kinds of policies or economic activities that would lead to decarbonization. So I would want to distinguish between what the Paris Agreement requires in terms of reporting of nation states and the actual activities that will happen. I think a second important implication is the U.S. will no longer be part of the high-level annual negotiations.

and thus it's not a formal part of the agenda setting kind of mechanism of global nations on climate, as well as its financial contribution that primarily benefits emerging market countries now goes away. And we've highlighted and we think that's a challenge for emerging market nations. On the energy side, we think more focus on oil and gas, on natural gas in particular. But again, and I'm going to move here

swiftly to one of our first expectations, even with all of this focus on fossil fuel energy exiting the climate agreement, we still actually believe that a majority of the core economic policies that are driving renewable energy growth in the United States will remain in place. And that's because a large set of these government funding or fiscal incentives have already, number one, accrued

across the United States. And number two, they have benefited communities in both Republican and Democratic-led states, implying complex politics there and that the economics perhaps drive more the thesis around renewables than anything else. Well, Amantia, thank you for that recap and assessment in terms of what we know as of today, perhaps more to come.

in the days and weeks ahead. Talk to us a bit about the broader implications here for companies. I imagine companies will be having to adapt in some respects. Yes, of course. I mean, look, a trend that we already saw even preceding the November election of last year was what we've called a green hushing.

process. So if you recall, greenwashing was a concern that companies, investors, everyone are overstating what they're doing on environmental or social claims. Now, green hushing is the opposite of that, is understating what companies and investors alike are doing.

What we've seen has been a steady decrease of mentions of terminology such as environmental, social and governance or ESG or terminology around DEI, diversity, equity and inclusion. Now, while the terminology is decreasing, what we also have seen has been over the last years an embedding of a lot of these policies in company practice.

where they matter. In other words, if companies see a need to shift the energy mix of the energy they consume to also consume more renewable energy or if they want to decrease their carbon emissions, what we're likely to see is less marketing around it and more doing in terms of what actually matters.

This has an implication for investors. It means it may be more challenging to actually identify those companies that are doing the right thing for their business, but are not declaring it as loudly. So it's almost a flip side problem that we had perhaps two or three years ago. So this one will be an interesting one to watch.

So given some of the changing landscapes in this arena, what are some investor takeaways or calls to action? What do you and our chief investment office recommend? Of course. So we have two expectations here in terms of what will happen. Number one, we expect almost a retreat or a shift back from strategies which are labeled as ESG or sustainable investing light.

So the ones where sustainability is more of a tilt, again, kind of is more in that marketing realm versus fundamentally driving investment strategy. So shift back from that. That may also lead to asset outflows. So be prepared for more of those headlines in the year to come. A second expectation, we think investors will focus more on impacts.

looking to align their assets with areas that, one, make financial sense. This was always true. But two, focus more on real transparency and the real change in the world, primarily through private market investments, but also through thematic areas in public markets where you can clearly see that additional kind of change in, call it, the real world economy.

Amantia, this has been great. Thank you again for joining us today in studio, spending some time with our listeners, our advisors, our clients, sharing with them some of CIO's expectations when it comes to sustainable investing in 2025 and beyond. The first of many conversations we look forward to bringing our listeners and clients this year. So thank you again. Thank you, Dan. And we came out with 10 expectations. At the end of the year, we should score us.

Absolutely. We'll look forward to that. Again, today we've been joined by Amantia Muhedini, Sustainable and Impact Investing Strategist for the Americas with the UBS Chief Investment Office. As mentioned at the top, our conversation today ties right in to the latest Sustainable Investing Perspectives publication. Again, 10 Expectations for 2025 and Beyond.

a publication now available up on UBS.com forward slash CIO. Again, check out the video up on UBS.com forward slash studios featuring our other colleagues from the UBS Chief Investment Office. You can hear more on this topic from UBS studios on Dan Cassidy. Thank you for joining us.

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