Key points:
- The energy crisis sparked by the US-Israel invasion of Iran has led 23 countries to announce clean energy measures, accelerating the transition to renewable energy sources and electrification.
- Over the course of the Iran war, clean energy equity funds outperformed oil and gas equity funds. On 5 May, the world’s largest single asset owner, Norges Bank Investment Management, announced it was on track to deploy 1% of assets in renewable energy by 2030. This suggests at least USD 12.6 billion in new investment, according to ZCA analysis.
- The new Climate Opinion Research Exchange (CORE) survey shows positive investor sentiment rising on renewables’ short-term returns: 14% of respondents ranked renewables top for one-year returns, up from 9% in the March 2025 survey.
- The CORE survey shows diverging investor views on the necessity of gas as part of the transition from coal to clean energy. In Asia, the region hit hardest by the second oil and gas crisis in five years, the perceived necessity of gas fell by 14% since the March 2025 survey, to the lowest level since polling began.
- The cost of capital for renewable projects varies significantly by region. Europe benefits from more liberalised electricity markets, strong institutional capacity, lower investment risks and supportive, long-term renewable policies and frameworks. This is reflected in CORE’s recent survey results: 79% of European investors say that climate change influences their investment strategy.
Conflict-driven profusion of clean energy commitments boosts investor confidence
Investment in the global energy transition has gained momentum in recent years, reaching a record USD 2.3 trillion in 2025, an 8% rise on 2024, according to BNEF.
However, since the US-Israel invasion of Iran on 28 February 2026, there has been a structural awakening to the geopolitical vulnerability of fossil fuel supply chains and to the resilience of renewables and electrification.
As of 1 May, 23 countries across five continents have made public clean energy and electrification announcements, including the fast-tracking of renewable projects, citing energy security concerns triggered by the second major oil and gas crisis in five years.
In late March, the UK government introduced rules requiring that all new homes in England be equipped with heat pumps and solar panels.
Just days later, Indonesia’s President Prabowo Subianto declared his commitment to deploy 100 GW of solar within the next three years, while the Philippines’ Department of Energy announced it would fast-track around 1.47 GW of renewable energy and storage by the end of April.
Multilateral development banks can support a friendly environment for renewables investment
A March 2026 survey on priorities for multilateral development bank (MDB) financing, carried out by ODI Global, found that most government officials in developing countries favoured investment in renewables when it came to supporting energy development.
When asked what type of energy they would prefer to invest in, 79% of the officials said solar photovoltaics, 54% hydropower plants, and 47% wind energy. By contrast, 3% favoured investment in coal and oil and 13% in gas power plants.
This appetite for renewables is already reflected in MDB financing. Between 2021 and 2024, MDB financing for clean electricity grew by an average annual rate of 32%. In 2024, USD 25.6 billion was invested in clean electricity, an increase of 37% from the previous year.
This is significant because MDB financing can mobilise private creditors, both directly and indirectly. It signals an investment-friendly environment by reducing political risk and credit risk, and can leverage MDB influence to shape government decisions and mitigate adverse events that could affect project outcomes.
Clean energy funds have outperformed oil and gas funds in the current energy crisis
Figure 1.
A review of selected clean and traditional energy exchange-traded funds (ETFs) incorporated in the US shows that clean energy ETFs are outperforming traditional energy ETFs as of early May, influenced by the challenges to global energy markets since the start of the Iran war (see Figure 1).1The selection aims to capture returns across the fossil fuel to clean energy spectrum using ETFs with differing index construction methodologies (market-cap weighted, equal-weighted, and thematic).
Oil and gas ETFs included: (1) Vanguard Energy ETF, which trUS-incorporatedacks the MSCI US Investable Market Energy Index consisting of US energy companies involved in the construction or provision of oil rigs as well as the exploration, production and refining of oil/gas products. (2) State Street Energy Select Sector SPDR ETF tracks the Energy Select Sector Index that invests in companies that develop & produce crude oil & natural gas, provide drilling and other energy related services. The holdings are weighted by market capitalization. (3) State Street SPDR S&P Oil & Gas Exploration & Production ETF replicates the S&P Oil & Gas Exploration & Production Select Industry Index, an equal-weighted index.
Clean energy ETFs included: (1) First Trust NASDAQ Clean Edge Green Energy Index Fund tracks the NASDAQ Clean Edge U.S. Liquid Series Index, designed to track the performance of clean energy companies in the US. (2) Invesco Solar ETF tracks the MAC Global Solar Energy Index which market cap weights securities in the solar energy industry including solar technologies in the entire value chain & related solar equipment such as power inverters/encapsulates. (3) iShares Global Clean Energy ETF tracks the S&P Global Clean Energy Transition Index which holds mid-cap energy, industrial, technology, and utilities stocks, weighted by market capitalisation.
While short-term performance does not prove a permanent structural rotation into clean energy equities, it does suggest investors are reassessing the relative risk profile of clean-energy during periods of stress.
According to Morningstar data, ETFs linked to renewable energy attracted over USD 3 billion in April 2026, the largest monthly net inflow since January 2021.
While higher oil prices initially benefited energy companies, the sustained disruption to the Strait of Hormuz has created significant geopolitical uncertainty, recession fears and concerns about demand destruction from high prices, all of which have potentially limited gains in fossil fuel equities.
On March 31, US President Donald Trump announced that the Iran war could end in two to three weeks and told allies to “go get your own oil”. While this prompted market expectations that energy disruptions would ease, the oil and gas sector faced conflicting signals, potentially reinforcing the message that even with war-ending optimism, the fragility of fossil fuel supply chains had been exposed. This could reflect a structural shift in investor sentiment, highlighted by the rise in clean energy stocks.
Crisis-driven surge in clean stock investments not confined to US-incorporated funds
Positive performance of clean stocks was also evident in funds incorporated outside of the US. Storebrand Global Solutions, a fossil-free equity fund investing in companies contributing to UN Sustainable Development Goals, delivered a solid performance in the first quarter of 2026, broadly in line with the MSCI All Country World Index.2Storebrand Global Solutions’ portfolio is underweight in the US and overweight in Europe, China and India, meaning they have more exposure to these regions. Amid the volatile market backdrop, renewable energy was the best-performing portfolio theme, followed by grids and infrastructure.
The world’s largest single asset owner, Norway’s approximately USD 2.1 trillion sovereign wealth fund, has been unusually explicit about plans to expand its renewable investments. On 5 May 2026, Norges Bank Investment Management (NBIM) announced it is on track to reach 1% of assets in unlisted renewable energy infrastructure by 2030, with potential expansion to 2%, given market opportunities.
The 2030 target represents NBIM’s ambition to more than double the 0.4% investment in unlisted renewable energy projects it had made at the end of 2025. Based on the fund’s current value, meeting the 1% target would suggest at least USD 12.6 billion in new renewables investment.3By the end of 2025, the fund value was USD 2.1 trillion. Increasing renewable allocations from 0.4% to 1.0% represents a 0.6% rise, equivalent to USD 12.6 billion at that fund size. This is likely a conservative estimate as NBIM’s own returns data shows the fund has compounded at 6.6% per year since 1998 and over 8% annually over the past decade. If the fund continues to grow, 1% of a larger 2030 fund value would represent a larger capital deployment into renewables than today’s figures suggest.
The current oil and gas price shock may provide an energy security premium for renewables and alternative fuels, particularly for long-term investors, who can diversify by leaning into clean, domestic energy sources.4For large, diversified asset owners, this kind of allocation is not only about clean energy exposure. It can provide long duration infrastructure returns while also reducing wider portfolio sensitivity to fossil fuel price shocks over time.
Short-term investor sentiment has shifted towards renewables since the start of the Iran war
Since 2023, Climate Opinion Research Exchange (CORE) has been polling investors globally on their perceptions of the energy transition, including how returns and risks impact decisions on renewable and fossil investments.5The survey polls approximately 1,000 investors up to two times a year. These investors report working primarily in asset management, insurance, and banks (each 16%), endowment and education (13%) and private and public pension funds (each 11%) with organisational investments typically valued at USD 1 billion to 4.99 billion (24%), USD 5 billion to 9.99 billion (37%) and USD 10 billion to 49.99 billion (23%). These investors are divided into three regions: Asia, Europe, and North America and Australia.
Results from the March 2026 survey shed light on the changing views within financial institutions since the start of the war. Investors are more confident about short-term (12-month) renewable energy returns than in previous years, with 14% of investors ranking renewables top for returns over a one-year period, compared to 9% the previous year.6The 9% figure has been rounded to the nearest integer.
This significant rise in respondents from the March 2025 survey represents the largest jump among all energy sources. This marks a notable shift given longstanding investor concerns around renewables, including high costs of capital and interest rates.
Despite this notable growth in investor confidence, renewables are still ranked lowest among all energy types for short-term returns by CORE survey respondents. Conversely, when investors take a long-term view (10 years), renewables continue to have the highest perceived returns, with oil and coal consistently seen to have the lowest perceived returns (see Figure 2).
Figure 2.
Investor survey shows fall in perception of natural gas as ‘necessary’ for the transition to a net-zero future
Concurrently, global investor opinions around the role of gas in the energy transition are changing. Total CORE survey respondents agreeing with the statement “investing in the natural gas sector is a necessary part of the transition away from coal to cleaner energy sources” dropped from 62% in March 2025 to 54% a year later.
This shift is particularly salient in Asia, the region which has been most exposed to gas shortages and price hikes during the March 2026 survey period. The proportion of respondents in Asia agreeing with the statement fell from 62% to 48%, an all-time low for this region since CORE polling began.
Investors put a premium on renewables projects in lower-risk, established economies
A number of factors influence investors’ decisions on the attractiveness of renewable energy projects, where financing costs are especially important. Wind, solar, storage and grid investments typically have high upfront costs and low operating costs, so the cost of debt and equity can materially affect project economics.
Investors will generally require higher returns where they perceive higher project, policy, currency or country risk. In lower-risk markets, stable regulatory environments, credible offtake, and reliable grid access can reduce the cost of capital and make renewable projects easier to finance.
This is often summarised through a project’s weighted average cost of capital (WACC), which blends the required returns of debt and equity investors. In the context of repeated fossil fuel shocks, this financing question becomes increasingly strategically important.
If clean energy, grids and electrification are seen as reducing exposure to recurring energy price volatility, they may become more attractive to long-term investors beyond their project-level return potential.
Regional differences in the cost of capital affect investment decisions
The cost of capital for renewables varies significantly between regions (e.g. Europe and Asia), influenced by lenders’ understanding of the financial, institutional and legal conditions.
The differences are even more pronounced at the country level – the cost of capital can be up to seven times higher in emerging and developing economies than in established economies such as the United States or Europe.
These differences are the result of investors demanding high-risk premiums in return for finance. In January 2026, the cost of capital for renewable energy in emerging markets, including those in Asia, was estimated to be 12.95%, while in Europe it was 5.02%.
Renewable projects have high initial capital costs, but very low operating costs. The cost of capital for a project can therefore have a significant impact on the cost of producing electricity – for example, it can account for 20-50% of the levelised cost of electricity (LCOE) generated by utility-scale solar.
Advanced economies such as those in Europe tend to have more liberalised electricity markets which allow independent generators to sell their power easily, strong institutional capacity, lower investment risks and supportive, long-term policies. As a result, the private sector is more likely to invest in renewables in these markets than in other country groupings where public investment is relied on more heavily.
Regulatory frameworks can either support or hinder renewables investment
For renewable energy projects, an investor’s risk assessment must factor in the ease of connecting to the electricity network in the relevant country, the structure and ownership of the electricity system, how projects will sell their output, and the broader policy and regulatory environment affecting the viability of the project.
Europe, and the EU in particular, have the advantages of comparatively stable institutions and clear, long-term regulatory frameworks, which reduce investment risk and therefore also reduce the WACC.
These frameworks include the Renewable Energy Directive, which sets a binding target of at least 42.5% of renewables in the overall energy mix by 2030, and the European Climate Law, which commits the bloc to becoming climate neutral by 2050.
This means that investors have a stable, long-term framework to operate in, increasing their confidence that their investments will be viable. The March 2026 CORE survey reveals that 79% of European investors say that climate change influences their investment strategy.
In contrast, financial markets in emerging economies are likely to be less developed than in Europe. Furthermore, many of the companies that would buy the output of renewable generators in Asia are state-owned utilities with a lower credit rating than their often government-backed counterparts in Europe.
Many countries in ‘emerging Asia’ face a ‘developmental trap’ where institutional inertia and technological lock-in favour maintaining investment in fossil fuels rather than switching to renewables.
Other risk factors in emerging and developing countries include weak grid infrastructure and uncertainty about support mechanisms for renewables. The IEA argues that this is particularly acute in the ASEAN region, where renewables costs are comparatively high, as are financing costs and project risks.
However, the volatile price fluctuations in oil and gas markets may prompt investors to shift to a lower discount rate for renewables projects, as they are expected to have a lower volatility of returns than the sector average.
Vietnam’s biggest private conglomerate has scrapped plans to build the country’s largest LNG plant in favour of a renewables and storage project, citing rising geopolitical risks instigated by the Middle East conflict. In the current energy crisis, investors may actively recalibrate risk premiums and shift capital to more stable projects.
Note: A version of this briefing previously stated renewables experienced the largest positive change for one-year returns across all fuel sources. That referred to percentage growth rate; however, for clarity’s sake given a similar uptick experienced by gas in percentage point terms, that statement has now been omitted.
