Sector spotlights

Energy transition hit by fossil fuel investment surge

The global energy transition is facing fresh headwinds. While renewable energy remains the leading destination for greenfield investment, a sharp resurgence in coal, oil and gas projects in 2026, driven by higher energy prices, geopolitical tensions and policy shifts in the US, underscores how politics and energy security are reshaping investment flows.

June 09, 2026
By Thomas Cowderoy

Greenfield FDI signals uneven path in global energy transition

Greenfield foreign direct investment (FDI) in renewable energy surpassed coal, oil, and gas in 2019, marking a broader shift in global investment patterns. Since then, the renewable energy sector has generally attracted higher levels of FDI than fossil fuels, although the gap has narrowed in recent years. Fossil-fuel investment has experienced several rebounds, including in 2018, 2022 and, notably, in 2026 to date, when FDI in coal, oil, and gas has temporarily outpaced renewable energy. In North America, these increases have coincided with the start of Donald Trump’s second administration and periods of geopolitical disruption, including the war in Ukraine and tensions in the Middle East.

Western Europe’s renewable investment has retreated sharply from its 2022 peak, while US fossil-fuel spending has climbed.

Greenfield FDI in renewable energy surpassed coal, oil, and gas globally for the first time in 2019. Renewable energy investment reached $133.6bn that year, slightly ahead of the $130.6bn invested in coal, oil, and gas. Between 2019 and 2025, renewable energy FDI remained consistently above 2019 levels, increasing by 50.8 per cent over the period. Investment peaked in 2022 and 2023 at $359.4bn and $363.8bn, respectively, reflecting strong investor appetite for clean energy projects during a period of high energy prices and policy support across major economies.

After these peaks, renewable energy FDI declined in both 2024 and 2025, with capital expenditure falling to $263.8bn and $201.4bn, respectively. Despite the decline, investment levels remained well above those recorded before 2020. By contrast, coal, oil, and gas FDI fell by 53.3 per cent between 2019 and 2025, declining from $130.6bn to $61bn. However, the sector experienced a temporary resurgence in 2022 and 2023, when total FDI rose to $121.3bn and $115.8bn, respectively, as higher energy prices improved returns across fossil-fuel markets.

The first quarter of 2026 has also seen a sharp rise in investment in coal, oil, and gas projects, with capital expenditure reaching $38.2bn. This compares with just $13.6bn in the first quarter of 2024 and $6.1bn in the same period in 2025. The increase suggests investors are responding to a combination of stronger profitability in fossil fuels, geopolitical uncertainty and policy changes in key markets, particularly the US.

Regional divergence

Western Europe and the US have experienced some of the largest changes in energy-related FDI in recent years. Renewable energy investment grew strongly between 2019 and 2025, rising by 153.9 per cent in Western Europe and 50.4 per cent in the US. Yet growth in coal, oil, and gas investment accelerated sharply between 2024 and 2025. In the US, coal, oil, and gas FDI increased by 649.9 per cent year-on-year, while Western Europe recorded growth of 82.2 per cent. This contrasts with renewable energy growth rates of 9.7 per cent in the US and 1.3 per cent in Western Europe over the same period.

The trend has continued into 2026. In both regions, coal, oil, and gas capital expenditure in the first quarter of the year has already exceeded total investment levels recorded in 2025. Nevertheless, renewable energy continues to outperform fossil fuels in Western Europe overall and remains one of the region’s strongest-performing sectors alongside real estate.

Since 2012, renewable energy has attracted significantly more greenfield FDI than coal, oil, and gas across both the US and Western Europe. In Western Europe, fossil-fuel investment has not exceeded renewable energy investment since 2012. Although coal, oil, and gas FDI increased sharply in the first quarter of 2026, total capital expenditure remained considerably lower than renewable energy investment, at $2.2bn compared with $15.8bn. Renewable energy, therefore, remains the leading sector in the region.

The US presents a different picture. Inward coal, oil, and gas FDI in the first quarter of 2026 exceeded renewable energy investment by around $30bn, marking the first time fossil-fuel investment has outperformed renewables since 2022. The shift appears linked to a combination of policy changes, geopolitical tensions and renewed investor confidence in domestic fossil-fuel production.

Donald Trump has called for ‘energy dominance’ in his second presidential term © Alex Brandon/AP

“Drill, baby, drill”

Policy changes under Donald Trump’s second administration have strengthened political support for coal, oil, and gas development while weakening support for renewable energy. The One Big Beautiful Bill Act, signed into law on July 4 2025, redirected federal policy towards traditional fossil fuels and rolled back several clean-energy incentives introduced under previous administrations.

The change in policy direction has already influenced corporate investment decisions. TotalEnergies has withdrawn from several offshore wind developments in the US, including projects at Carolina Long Bay and New York Bight, and redirected investment towards liquefied natural gas infrastructure, including the Rio Grande LNG and Alaska LNG projects. At the same time, the Department of the Interior agreed to pay EDP Renewables and ENGIE $885m to terminate offshore wind leases connected to the Golden State and Bluepoint Wind projects.

These developments suggest investors increasingly view US fossil-fuel projects as politically and commercially favourable in the short term, particularly as regulatory uncertainty surrounding renewable energy projects has increased.

Higher oil prices and energy security

Geopolitical tensions have also played a significant role in shifting investment patterns. The wars in Ukraine and the Middle East contributed to rising oil prices and renewed concerns about energy security. In May 2026, Brent crude traded at around $100 a barrel, with prices briefly surpassing $110 in April. Oil prices had not reached these levels since 2022.

Higher energy prices, combined with the closure of the Strait of Hormuz in 2026 and sanctions imposed on Russia after its invasion of Ukraine in 2022, increased pressure on governments to secure stable domestic energy supplies and reduce consumer energy costs. Rising oil prices also improved profitability across parts of the coal, oil, and gas industry.

Major energy companies reported strong earnings in the first quarter of 2026. BP reported profits of $3.2bn, while TotalEnergies recorded profits of $5.4bn. BP’s profits were 18.5 per cent higher than analysts had expected, while TotalEnergies’ profits rose 29 per cent year on year. Stronger profitability has coincided with increased capital expenditure in fossil-fuel FDI projects and greater political support for domestic energy production in the US.

A temporary rebound, not a reversal

Recent increases in coal, oil, and gas FDI are more likely to represent short-term spikes than a lasting reversal of the global energy transition. The rise in fossil-fuel investment appears driven by a combination of US policy changes, higher profitability in coal, oil, and gas markets, and geopolitical pressure to secure energy supplies and reduce consumer costs.

Despite the recent resurgence in fossil-fuel investment, renewable energy continues to attract substantially higher levels of greenfield FDI across most major markets. This suggests the longer-term shift in global capital towards clean energy remains intact, even if the pace of transition is proving uneven and increasingly shaped by political and geopolitical pressures.