Responsible investing has continued its shift from the sidelines into the mainstream. Over the course of 2025, investors have had more ways than ever to align their money with their values, while navigating a rapidly evolving landscape.

Here are five key themes that stood out this year:

1. Real-world impact over appearances

This year, investors continue to place greater emphasis on tangible environmental and social outcomes. Rather than avoiding high-emission industries altogether, many funds channelled capital into companies working to decarbonise, recognising that transition requires engagement as well as exclusion. The emphasis has been on supporting tangible change, not just optics. As a number of companies have had decarbonisation targets in place for a while, engagement has started to focus on progress and tying capital expenditure to these commitments.

2. ESG backlash

The ESG backlash has emerged as a defining tension globally in investment markets, with some policymakers and investors questioning the financial relevance of ESG frameworks and whether they support unbiased investment decisions. In regions like the US, political division has led some companies to walk back from their Diversity, Equity and Inclusion (DEI) targets and plans for lowering emissions.  What is becoming evident however, is that a lot of companies are continuing with these plans but calling them something else or not reporting publicly on this activity.  It’s also important not to forget that the US operates state-by-state, and California and New York are still very much focused on ESG. While we continue to see divestment from ESG-labelled funds in the US and Europe, New Zealand is bucking this trend with positive inflows. 

3. Shifting regulations

Globally, regulators are tightening rules on what qualifies as a “sustainable” or “green” fund, aiming to curb greenwashing and provide investors with greater clarity. In Australia, the Federal Court issued Active Super with a penalty of $10.5 million after ASIC showed it misled members by claiming to exclude gambling, coal and Russian-linked firms while still investing in companies like SkyCity, Whitehaven Coal and Russian entity Gazprom. The case underscores the regulatory focus on greenwashing and the need for managers to ensure their claims match reality.

We also saw proposed amendments to the mandatory climate-related disclosure regime in New Zealand. The proposed changes would mean fewer organisations would have to file climate statements, including managers of investment schemes like KiwiSaver.

4. AI and tech under the microscope

The explosive growth of artificial intelligence (AI) in 2025 has raised tough questions around governance, ethics, and environmental impact. Investors are becoming more vocal – questioning companies on data privacy, fairness, and the environmental footprint associated with training large AI models. A single AI query can consume 10–50 millilitres of freshwater, depending on the model, and Google’s Iowa data centre alone used 1 billion gallons of water in 2024. The rise of AI has driven a boom in hyperscale data centres, prompting growing concern about the environmental consequences of AI as its adoption accelerates. We have also seen the use of AI-generated deepfakes increase noticeably, heightening concerns about how fabricated content can spread. This trend has brought renewed attention to the ethical responsibility of companies and regulators to ensure safeguards that preserve trust and transparency while allowing innovation to progress.

5. Modern slavery legislation in focus

In 2025, modern slavery has become a bigger focus for responsible investing in New Zealand. There’s growing concern about how workers are treated in global supply chains. For investors, this means fund managers are paying closer attention to human rights issues - not just climate and environmental impacts - when deciding where to invest. This year, 28 New Zealand based institutional investors came together through Responsible Investment Association Australasia (RIAA) and the Investors Against Slavery and Trafficking Asia Pacific (IAST APAC) calling for the introduction of the country’s first modern slavery legislation. They used their collective power to urge the government to adopt a strong, future-ready legislation that meets global standards.

Looking ahead

As 2025 draws to a close, responsible investing has become both broader and deeper. With stronger rules, better data, and multiple responsible investment options, investors are better enabled to align portfolios with their values while still earning returns. The challenge for 2026 and beyond will be to keep driving meaningful outcomes. Responsible investing isn’t just about feeling good - it is about managing risk, delivering returns, and driving global change without compromising performance.