Sustainable Investing in 2026: Market, Regulation & Trends

By the end of 2024, German investors held 1,050 billion euros in funds under Articles 8 and 9 of the EU Disclosure Regulation, according to the fund association BVI. This means sustainable investing – also called ESG investing (Environmental, Social, Governance) – has evolved from a niche topic to a mainstay of wealth management.

Public funds dominate sustainable investment assets

Of the 1,050 billion euros, 764 billion euros are invested in public funds, representing almost three-quarters of total sustainable investment volumes. These figures show that sustainable investing is no longer the preserve of institutional investors alone, but is firmly established in private client business.

80% of asset managers expect sustainably managed assets to grow further over the coming two years. This expectation is based on increasing customer demand and tightening regulatory requirements.

EU Taxonomy defines what is sustainable

The EU Taxonomy Regulation establishes binding rules on which economic activities qualify as sustainable. A financial product can only be marketed as ecologically sustainable if it invests in activities that achieve at least one of the EU's six environmental objectives: climate change mitigation, adaptation to climate change, sustainable use of water resources, transition to a circular economy, pollution prevention, and protection of ecosystems and biodiversity.

At the same time, the investment must not significantly harm other environmental objectives and must comply with minimum social standards. This clear definition is intended to prevent greenwashing – the practice of marketing conventional products as sustainable without this being factually accurate.

Mandatory sustainability inquiry in investment advice

Since the introduction of BaFin regulations, advisers must ask their clients about sustainability preferences during the advisory conversation. Those who decide in favour of ecologically sustainable financial products receive targeted proposals that invest in economic activities according to the EU Taxonomy.

This mandatory inquiry has significantly increased the visibility of sustainable products in daily advisory practice. Investors who previously would not have actively inquired about ESG criteria are now systematically informed of appropriate investment options.

ESG Rating Regulation enters into force in 2026

With the ESG Rating Regulation, which is expected to come into force in 2026, the assessment of sustainability aspects will be further standardized. The regulation aims to improve the quality and comparability of ESG ratings, which represent a central orientation aid for investors.

To date, different rating agencies have rated the same companies differently, making selection difficult for investors. The new regulation is intended to create transparency regarding rating methodologies and prevent conflicts of interest at rating agencies.

Sustainable bonds heading for new record

For 2025, market observers expected a new issuance record for sustainable bonds. This trend continues in 2026. Sustainable bonds – including green bonds, social bonds and sustainability-linked bonds – allow investors to specifically finance projects with ecological or social benefits.

Climate-related investment strategies are becoming increasingly important. They consider climate risks in portfolio composition and align with the goals of the Paris Climate Agreement.

Long-term perspective in focus

The EU Action Plan on Sustainable Finance aims to reduce short-term corporate governance and excessive short-term thinking in capital markets. Instead, longer-term sustainability and return risks should be appropriately incorporated into the valuation of investments.

This approach reflects the fundamental principle of sustainable investing: companies that ignore environmental and social risks jeopardize their long-term business foundation and thus the returns of their investors. Sustainable investments should not only meet ethical standards, but also secure risk-adjusted returns over longer periods.

Alternative investment forms gaining importance

In addition to classic ESG funds, alternative investment forms are coming into focus in 2026. Photovoltaic investments, sustainable ETFs and litigation finance with ESG criteria are gaining attractiveness because classic savings products promise lower returns in an environment of stagnant interest rates.

This diversification reflects the maturity of the sustainable investment market. Investors are increasingly looking for products that meet return expectations while also delivering concrete ecological or social impact.