The Influence of Geopolitical Risk on Sustainable Investments: How Sustainable Investors Navigate an Increasingly Uncertain Geopolitical Landscape

Abstract

Geopolitical risk (GPR) has returned as a top concern for sustainable investors, with recent international conflicts and political instability underscoring the urgency of understanding its impact. Yet, many institutional investors lack a framework to systematically measure and manage GPRs within their portfolios, owing to, among others, the qualitative, complex, and unpredictable nature of these risks. At the same time, sustainable investments play a critical role in advancing the green transition, making it essential for investors to navigate GPR effectively to maintain and accelerate these vital capital flows. Despite growing recognition of GPR's relevance, academic research has predominantly focused on quantitative correlations with market outcomes, neglecting the interpretive and institutional processes through which investors assess GPR and that affect their decision-making. This thesis aims to fill this research gap by exploring how GPR influences sustainable investments. Adopting a qualitative approach, it draws on sensemaking and neo-institutional theory to examine how investors perceive, assess, and respond to GPR. Empirical data were gathered through a GPR mapping exercise, a scenario-based workshop, and semi-structured interviews with sustainable investors and geostrategic consultants. The findings reveal that GPR influences sustainable investments not only through its direct material effects, but also through the meanings investors construct around GPR events and threats. This thesis contributed theoretically by providing a more context-sensitive, institutionally grounded, and forward-looking application of sensemaking theory, and practically, by identifying how investors can effectively assess, mitigate, and leverage GPR. These insights are particularly timely as the investment landscape becomes increasingly shaped by geopolitical uncertainty.