UK’s top sustainability themes in 2025

Investing.com -- In a report released Monday, Berenberg analyzed the United Kingdom (TADAWUL:4280)’s top sustainability themes for the year 2025, focusing on water management, building innovation, and energy pragmatism, among others.

The bank identified specific challenges and opportunities within these sectors and highlighted stock picks that could benefit from the UK’s sustainability efforts.

According to Berenberg, the UK has been underestimated by the markets due to political instability and diminished business confidence. However, with new government legislation and a shift in economic focus, the UK’s approach to sustainability warrants a second look.

Berenberg expects water management, next-generation buildings, and energy pragmatism to be pivotal in the UK’s sustainability landscape in 2025.

The UK faces significant sustainability challenges, including volatile energy pricing. The report notes that despite a £68 billion investment in grid upgrades, the UK may still rely on less desirable energy sources like gas to stabilize the electricity market. Berenberg’s top stock pick in this area is SSE (LON:SSE).

Furthermore, the UK must tackle sewage pollution across its rivers, with water utilities mandated to invest £104 billion in infrastructure upgrades.

“The UK water regulator, Ofwat, is forcing the country’s water utilities to spend £104bn on infrastructure – more than double its last budget between 2020 and 2025, while independent monitoring is getting funded, fines are becoming more meaningful, thus creating more legislation from the government,” Berebnerg notes.

Here, the bank highlighted Genuit Group PLC (LON:GENG) as a top stock pick.

Climate adaptation is another key theme, as the UK addresses flooding risks after the failure to meet the 1.5°C Paris agreement target in 2024. Berenberg named Marshalls PLC (LON:MSLH), Genuit, and Ashtead (LON:AHT) as favorite stocks for their roles in addressing climate-related challenges.

The report also touches on other sectors, including the potential alignment of UK carbon tariffs with the EU, the shift away from ultra-processed foods, and the modernization of building regulations.

Berenberg’s stock picks in these sectors include Spire (NYSE:SR) Healthcare Group plc (LON:SPI), Treatt PLC (LON:TET), Morgan Sindall Group PLC (LON:MGNS), Volution Group plc (LON:FAN), DCC plc (LON:DCC), and SSE.

Furthermore, the UK’s emphasis on producers paying for waste management, particularly in online retail, positions Currys PLC (LON:CURY) as a top pick.

The report also mentions the UK’s progress in transition investing, with the Sustainability Disclosure Requirements (SDR) providing a framework for transition funds.

Meanwhile, big tech and sustainability data are less critical themes for the UK, Berenberg notes, as the country aligns more closely with the US, prioritizing growth over sustainable AI. “Resource scarcity could threaten plans for AI growth zones,” the firm added.

Delays and bureaucracy have hindered the SDR’s effectiveness, challenging the development of sustainable funds.