Investment in renewable energy is gaining momentum, with fund managers channeling more resources toward clean energy projects as opposed to fossil fuels. This shift marks a significant movement in the financial landscape as funds prioritize sustainable energy solutions.
According to BloombergNEF’s analysis, for every dollar spent on oil, gas, and coal projects by public market funds, 80 cents were allocated to renewable energy sources such as solar and wind by the end of 2025. Although this ratio has been increasing, it has not yet reached the level necessary to achieve net-zero emissions.
The Energy Supply Fund Ratio (ESFR) 2026 report from BNEF highlights the growing capital flow into clean energy by asset managers. While fixed income and private market funds generally show higher ratios, they contribute less to total energy spending compared to listed equity funds.
The ESFR gauges the capital expenditure (capex) directed towards low-carbon assets compared to fossil fuels by funds. The report includes data from over 85,000 exchange-traded, mutual, and private market funds, forming part of BNEF’s Energy Supply Ratios suite, which monitors the climate progress of financial entities.
Shift Toward Renewable Energy Intensifies
The recent ESFR analysis reveals an increase in the clean energy to fossil-fuel capex ratio to 0.8, up from 0.73 at the start of 2024. This upward trend signifies a growing preference for clean energy investments among public-market pooled investment vehicles.
A significant factor driving this trend is the upsurge in low-carbon capex in portfolio companies, particularly in power grid investments, amounting to $36 billion in fund-enabled capex.
Vanguard and BlackRock lead in enabled energy capex within public market funds, surpassing the combined total of the next ten largest managers. Despite European and Asian asset managers having higher ratios, their enabled capex remains significantly lower than their American counterparts.
Impact of Tracker Funds on Investment Decisions
Large, diversified funds tracking broad stock indexes hold the majority of fund capital supporting energy investments. Notably, S&P 500 tracking funds account for half of the top 10 largest funds by enabled capex. However, the S&P 500 ratio declined in 2025 due to index changes, such as the inclusion of Expand Energy and the exit of Enphase Energy, affecting managers’ influence on ESFRs for passive funds.
Investors have access to high-ratio funds, typically thematic strategies, but these represent a smaller capital pool. Despite this, fund inflows have increased since 2025, indicating growing interest in these investments.
Preference for Clean Energy in Credit and Private Markets
Fixed income funds exhibit a stronger inclination toward clean energy investments than equity funds, with credit funds enabling $1.2 low-carbon capex for every dollar in fossil fuels. Lower-carbon companies often incur more debt than fossil-fuel companies to finance upfront costs for projects like wind and solar farms. In contrast, equity funds have a lower ratio of 0.7.
Private markets provide the cleanest investment portfolios, boasting the highest ESFRs at just over 1.2. Institutional ESFRs in large private managers vary widely, offering investors a wider range of options than those available in public markets. Newer funds are increasingly oriented towards clean energy, with ample capital available for investment, supporting higher ESFRs in private markets compared to other asset classes.
Original Story at about.bnef.com