Investors reassess geographic spread of assets as mood shifts against the US, with domestic opportunities often favoured for sustainable infrastructure investments.
The world has become more dangerous, according to the three European Supervisory Authorities. Last month, their latest joint report on risks and vulnerabilities in the European financial system alerted investors to “transatlantic tensions” and volatility. Risk to financial institutions is “very high and rising”, a spokesperson for Securities and Markets Authority to Sustainable Investor. “We are in a rather unprecedented situation in terms of different types of risks materialising at the same time, and continuing uncertainty about further developments.”
Impact of dollar slide
Many investment firms had already taken action following the US dollar’s 11% slide in the first half of 2025. Asset managers and owners are revising – and in some cases withdrawing from – potential investments in the US, says Sahil Mahtani, Head of Macro Research at asset manager Ninety One. “Investors are much more likely and more willing to take a no-dollar currency risk because of what has happened to the dollar this year.”
Investors with more EU than US assets in 2025 would be better off, he points out. “Asset managers owning a cashflow stream from an EU infrastructure investment this year are up 10-12% relative to dollars just because they have the cashflow in euros. That is quite sizeable.”
Conversely, institutional investors – especially in Europe and Japan – have incurred significant losses on unhedged US equity positions this year. Ninety One research states a 2025 YTD unhedged allocation to the S&P500 was underperforming the Stoxx 600 by over 20 percentage points in euros on one occasion in mid-April, and on 1 August was underperforming by 12%.
Climate denial effect
From trade tariffs to Big Beautiful Bills and beyond, the whirlwind of policy actions taken by the new US administration this year make it difficult to precisely identify risk and return impacts for different institutional investors.
But policy positions in the US against climate targets, alongside hostile action towards offshore wind by Donald Trump, act as another factor prompting investment firm reviews, especially when it comes to ‘green’ or clean energy infrastructure. For instance, the US president instructed the US Treasury in July to terminate electricity production and investment tax credits for wind and solar facilities.
In August, he tried to stop construction on Revolution Wind, an Ørsted offshore project in New York. But Manuel Dusina, Head of Real Assets at UK-based asset owner Phoenix Group, indicates the impact on clean energy finance movements are overstated.
“The US is imposing restrictions on investment in the marine environment, restrictions that limit the growth of industry [in the US].” But the main opportunities are not in the US anyway, he suggests. “It is not a leader in this asset class. If you look at where investors are based, they are mainly European because the main developers are European.”
Likewise, other types of US renewables may remain worthwhile assets, he says, though the regulatory risk is greater than previously. Factors such as the stage of the investment, whether it is operational, and cleantech policies in individual states, will influence decisions to hold onto assets. “I would not call out solar or onshore wind [in the US]; they are faring OK,” he says.
The firm’s proportion of investment in varying countries has changed over the last few years, but for a variety of reasons, with currencies just one example. “We always need to be geographically diversified but must meet our economic returns if we invest in a particular jurisdiction,” emphasises Dusina.
However, he confirms the tables have turned for the US currency, with his team mainly making investments in the UK this year, compared to mainly outside the UK in 2023.
“This was driven by cross-currency swap rates between sterling, euro and the US dollar. That is now reversed. We find it less palatable for UK investors to invest outside the UK to the US for example.”
Inadequate returns
But the economics of the particular green infrastructure project come first and may prevail over country selection, Dusina suggests. International asset allocation shifts are commonplace, while politically motivated policy shifts on clean energy are not unique to the US.
For example, Ørsted halted a project in the North Sea in May, as did Vattenfall in 2023. Further back, developers switched investments following government reforms to renewable energy support in 2013 in Spain, and in Italy in 2010-2014.
“We need to be comfortable about whether we are getting compensated enough for the risk we are taking,” says Dusina. That has not been the case for renewable energy anywhere for both investors and project developers over the last ten years, he adds. Marine-based renewable power in Europe is a case in point for those considering switching continent. “Developers of UK offshore wind believe the return on equity is not sufficient.”
Domestic mandate
Nonetheless, new behaviour is perceptible, driven by the nationalist and protectionist tone set by the US government, according to Ninety One’s Mahtani. “Some national governments are intervening more in business and capital provision. Previously they didn’t want to.” The political mood legitimates a greater tilt towards domestic investment, he says. “It is forcing other governments to become more interventionist, and the capital/financial industry is being corralled to support that effort.”
In the UK, political involvement has been most visible from government warnings this year that it may mandate greater domestic investments by pension funds. This follows a voluntary agreement known as the Mansion House Accord. In an earlier measure, the UK government in 2023 set a target for 5% domestic investment by local government pension schemes.
Meanwhile, some EU-domiciled asset owners have been paying more attention to opportunities at home. Boutique asset manager Gravis Capital, with around £2 billion AUM concentrated on real assets and green infrastructure, says it has experienced more inquiries to that effect from clients such as family offices and sovereign wealth funds. The Republic of Ireland is a case in point.
“The Irish are very interested in what we have invested in Ireland, and what the percentage of Irish assets might be,” says Sam Slator, Marketing Director at Gravis. Similar requests were made in Spain over the summer, as well as further afield in Japan. “That kind of sentiment is coming much more to the fore.”
With the US dollar under pressure, Slator observes more investment institutions switching away from the US. “Canadian pension funds are more interested in European and UK assets, but Europeans are now much more open to investing in UK than a couple of years ago. This is because they simply don’t want to invest in the US,” she says.
Sovereign wealth funds shift their gaze
Data from the International Forum of Sovereign Wealth Funds (IFSWF) confirms growth in the domestic investment pattern, which is more perceptible for sustainable assets. It shows that domestic deal value reached its highest level in 2024, with domestic or regional deals now make up a growing share of sustainable investment activity. Cross-continental transactions fell to around 15% of the total in 2024.
“While there is a clear trend towards local and regional projects, we can’t always connect it to explicit government instructions,” says Enrico Soddu, the IFSWF’s Head of Analytics. “Anecdotally, we have heard of policymakers encouraging more domestic capital deployment, especially in infrastructure and energy transition, but this varies quite a lot by country.”
Source: Stern School of Business at NYU Abu Dhabi
North America remains the top destination for sovereign capital, according to the IFSWF, but has seen a significant fall in its share of investments meeting sustainable development goals. In 2021, approximately one third of sustainable investment value by SWFs was directed to North America. By 2024 the US accounted for only 15%.
Correspondingly, SWFs have redirected attention to markets closer to home. Domestic deal value has reached its highest level in years, as sovereign funds in Europe and the Middle East directed sizable funding into projects at home. Abu Dhabi’s Mubadala and the Qatar Investment Authority each committed nearly US$1 billion to domestic investments, while France’s sovereign fund deployed over US$300 million across eight local deals.
Meanwhile, nearly two thirds of all sustainable deal value in 2023 was allocated within investors’ home or neighbouring regions – a clear contrast from the more globalised dealmaking of earlier years. In 2024, this pattern held firm, driven by interregional partnerships grounded in geographic proximity and strategic alignment.
Rich pickings in Asia
The IFSWF data reflects a similar view held by Ninety One. “Since the global financial crisis, allocating to US assets has been the easy trade,” says Mahtani. “As 2025 unfolds, that consensus is being severely tested.” The asset manager notes the impact of Washington’s growing embrace of tariffs, a deteriorating fiscal position, and a more transactional foreign policy posture on US asset dominance.
The question is the range of opportunities elsewhere. Mahtani draws attention to “capex booms” in Saudi Arabia and India for plant, property and equipment. Meanwhile, he points out the artificial intelligence fizz is not just connected with the US, given many chip makers in East Asia and complex electrical equipment suppliers in Europe.
Defence in Europe is another growth industry, with energy security employed by many policymakers as an argument to justify investment in more clean power. “There are plenty of pretty rich pickings if you want to invest outside the US,” states Mahtani.
The European regulators’ warning is one of many likely to further prompt realignment. They noted “very high” risk before – most recently in early 2022 following Russia’s invasion of Ukraine. Danger is now business as usual.
