This article is from the Good Guide to First-Time Investing 2025, available to download free here.
When we invest, our money has an impact on the world around us – for good or for bad.
If we invest in companies that pollute the planet or exploit workers, we’re making these problems worse. But if we invest in companies that are developing new technologies to combat climate change or creating jobs in the green economy, we’re helping to build a better future for everyone.
With the effects of climate change becoming increasingly intense, and political shifts in the U.S. undermining net zero commitments, choosing to invest in the kind of world we want to live in is more important than ever.
But sustainable investing isn’t pure altruism. At Liontrust, we believe it is also a smart financial strategy for the long term. Here’s why.
Sustainable investing still makes sense in a Trump world
Donald Trump winning a second term as U.S. president may feel like a major setback for climate action and green business.
His views are almost exactly opposite to the philosophy of sustainable investors. He is anti: mitigating climate change, wind turbines, electric vehicles, diversity initiatives, and sceptical of some key areas of medical science.
Meanwhile his “Drill, baby, drill!” mantra is set to unleash a wave of new oil and gas – just as the world faces an impending global warming disaster. Trump’s rhetoric, and the resulting headlines, certainly isn’t helpful to those of us who feel urgent climate action is needed for the benefit of everyone.
But, the good news is that the key driving force behind sustainable industries is not politics – it’s economics.
When companies deliver cost-effective solutions to the world’s biggest problems, they will be adopted at pace – regardless of the political backdrop. These companies are well placed to experience significant growth over the long term, fuelled by demand for their products, that investors can profit from.
While it’s true that Trump opposes most clean energy policies, it’s hard to imagine the U.S. energy transition grinding to a halt as a result. Just look back to his first term from 2017 to 2021. Solar and wind industries grew healthily, even as federal policies prioritised fossil fuels.
Meanwhile, the use of coal (which he wanted to ‘make great again’) diminished dramatically as it could not compete economically with renewable energy and natural gas. Despite his best efforts, Trump will find it hard to change the upward trajectory of the renewable energy sector. Even in Texas, a Republican oil-producing state, solar capacity grew eight-fold in just five years to 2024. Renewables in the U.S and globally will continue to benefit from declining costs, advances in technology, and growing consumer demand.
On this side of the Atlantic, Europe is more determined than ever to transition to green energy and end its dependence on foreign fuel sources such as Russia. European countries now invest 10 times more in clean energy than in fossil fuels.
A strong long term outlook for sustainable investing
There is also momentum behind other sustainable themes that we believe ‘good’ investors can gain from. These include the race to find cost-effective treatments for cancer, overcome pollution in our water supplies, and protect our online data.
The companies delivering solutions to these major problems are likely to generate profitable growth that isn’t hindered by politics. Presidents and prime ministers come and go, but there is no let-up in scientific progress or innovation as companies compete to deliver the best solutions.
At Liontrust we believe the companies that will thrive are those that improve people’s quality of life, increase the efficiency with which we use scarce resources and enhance the safety of human activities.
For example in healthcare, early diagnosis of cancers dramatically reduces the number of people who will die from the disease. For colorectal cancer, this is estimated to be a three-fold reduction. Companies providing these services save money and save lives.
Important sustainability trends are set to remain intact for decades to come. Investing should always be for the long term (think five to 10 years at least), so it’s important for investment portfolios to reflect the constants, not only what is likely to be temporary.
In fact, political change can provide potentially profitable opportunities for investors. Concerns about Trump’s second term have weighed heavily on the price of some stocks, which means they can look undervalued compared to the wider market. The Liontrust Sustainable Investment team sees this as a rare chance to invest in some high-quality sustainable companies while their value is low.
Investing sustainably, through a trusted and experienced fund manager, is the only way to be sure that our money is being used to help build a sustainable future.
So while there are short-term challenges for sustainable investing, the longer-term direction of travel remains unchanged. In fact, at Liontrust we’re excited for what lies ahead.
