Thematic investing – what are the most popular themes so far in 2025?

Thematic investing has been around for over 75 years. But thematic exchange traded funds (ETFs) are a more recent development.

Despite a record amount of money flowing into European ETFs in 2024, European thematic ETFs saw money flowing out for the first time in a decade.

However, there’s been a shift back towards thematic ETFs this year.

In the first half of 2025, net new money invested into European thematic ETFs was $8.73bn.

But before we look at which themes have attracted the most money from investors so far in 2025, what is thematic investing and how do thematic ETFs work?

This article isn’t personal advice. If you're not sure if a course of action is right for you, ask for financial advice. Remember, all investments can rise and fall in value, so you could get back less than you invest. Past performance also isn’t a guide to the future.

What is thematic investing?

Thematic investing helps investors find companies that could be part of long-term growing global megatrends.

Climate change, demographics and technological disruption are just a handful of megatrends that are shaping our future.

In the past, thematic investing has been a popular area for active funds, which aim to beat the returns of their benchmark. However, a number of thematic ETFs, which instead try to track the performance of a benchmark rather than beat it, have launched in recent years – offering investors a new way to invest in their favourite themes.

What are thematic ETFs and how do they work?

ETFs are a simple and low-cost way to access a range of investments. They tend to track the performance of an index like the FTSE 100 (the UK’s 100 largest companies).

Thematic ETFs are different to traditional ETFs. They aim to capture the performance of a chosen industry or trend rather than track a major market.

They usually track custom-made benchmarks, which are created to capture a particular theme like robotics for example. Researchers will often select the companies that are deemed suitable to be included in the index.

This can mean you’ll pay higher fees with a thematic ETF compared to an ETF tracking a major index.

What are the most popular themes in 2025?

Defence

Defence has been the most popular investment theme by far this year, taking in the lion’s share of new money invested into thematic ETFs.

In the first half of 2025, net new money invested into Global Defence ETFs and Europe Defence ETFs was $4.82bn and $3.05bn respectively.

Defence ETFs invest in sectors like aerospace, cybersecurity and military technology.

Military budgets have been rising around the world due to ongoing geopolitical tensions. Global defence spending reached a record high in 2024 and marked the highest annual rise since the Cold War period.

The first European Defence ETF was launched this year, driven by the large increase in European government spending on defence. NATO countries have recently agreed to raise defence spending to 5% of GDP by 2035, up from 2%.

Artificial intelligence

Artificial intelligence (AI) has dominated headlines in recent years and continues to be a leading theme in 2025.

AI ETFs invest in companies at the forefront of AI innovation in areas like AI data & infrastructure and AI software.

AI technology has advanced significantly, and its huge growth potential has made it a popular theme with investors. Global AI spending is expected to increase by 60% this year to $360bn.

From cloud computing to advertising and infrastructure investment, the world’s biggest tech companies are leaning hard into AI.

But it’s not just tech companies, AI has the potential to transform many industries like healthcare, finance and transport.

Clean energy

On the other hand, clean energy has been the least popular theme and clean energy ETFs saw net outflows of $307mn.

Clean energy ETFs invest in companies that produce energy from solar, wind and other renewable sources.

By investing in energy infrastructure, investors can support the development of society and minimise risks of energy scarcity.

Clean energy was one of the most popular themes after the pandemic, but investors have moved away from clean energy ETFs in recent years. Higher interest rates and uncertainty around future energy policies has been challenging for the sector.

What investors should consider when investing in thematic ETFs?

Thematic ETFs offer investors an easier and more diversified way to access a theme using expert research compared to investing in individual shares directly.

But they can be more volatile and less diverse compared to ETFs that track major markets, so they should only make up a small part of a well-diversified investment portfolio.

It’s also important to look at themes you think will perform well in the long term, rather than just what’s trending right now.

For investors interested in thematic ETFs, you can explore the ETF section of our website where you can easily search for ETFs by name, company or sector.