Sustainability is here to stay. Here’s what you need to know about the trends that will shape strategy in a challenging year.
Authors: Lindsey Hall, Global Head of Thought Leadership, S&P Global Sustainable1, Co-Head, S&P Global Sustainability Research Lab Harald Francke Lund, Global Head of Sustainability Methodology and Research, S&P Global Ratings, Co-Head, S&P Global Sustainability Research Lab
Co-authors: Bruno Bastit, Beth Burks, Terry Ellis, Roman Kramarchuk, Jennifer Laidlaw, Rick Lord, Matt MacFarland, Paul McConnell, Paul Munday, Zoe Parker, Bruce Thomson, Esther Whieldon
For the past five years, we have written about the sustainability trends that S&P Global expects to drive business strategies in the year ahead.
This year, we’re taking a slightly different approach.
In 2025, we widen our view to reflect on the megatrends that will impact sustainability strategies. We’re doing this by asking: What is happening in the world that will affect sustainability? This shift reflects the sea changes we’re witnessing in sustainability conversations around the globe.
The question is how organizations can advance their sustainability strategies while navigating an increasingly fragmented world where the rules of engagement are changing.
Geopolitical unrest is reshaping trade, supply chains and international relations.Companies and countries are seeking to craft sustainability strategies that will succeed in this evolving landscape. Policymakers are well-aware of the impacts of climate change, but energy security, affordability and economic growth often take precedence. Although the general direction puts an increasing emphasis on sustainability — including in supply chains — we may see strategies reframed to account for these competing priorities in 2025.
Climate change is accelerating and is indifferent to politics. The physical impacts of climate change and the linked challenge of biodiversity loss are increasingly evident around the world — creating risks for global economies and populations. These impacts also create opportunities for those seeking to quantify, manage and solve these problems.
The energy transition is advancing, albeit unevenly. A decade after the Paris Agreement on climate change was signed, many companies in hard-to-abate sectors are not on track to meet their long-term net-zero targets, and some countries are prioritizing economic development over energy transition goals. At the same time, new technologies are emerging to facilitate the transition to a low-carbon economy and we are seeing conversations move from high-level goal-setting to action and implementation.
Many companies continue to dedicate resources to sustainability and climate strategies even as others walk back their messaging or pull back on their goals. Sustainability efforts have faced pushback in parts of the world even as some regulators and investors continue seeking increased disclosure of factors that will impact the long-term success of a business.
S&P Global surveyed sustainability, climate and energy transition leaders and analysts from across our business about the key trends that will drive strategies in 2025. The research that follows lays out the 10 trends that stood out — along with links to datasets, research, and further reading and listening to learn more.
1. POLICY:
Companies and countries will navigate a challenging new policy landscape and continued geopolitical uncertainty as they implement sustainability, climate and energy transition strategies.
2024 has been called the year of elections as people in over 60 countries headed to the polls. In 2025, these election outcomes will reshape the global landscape for sustainability, climate and the energy transition — with more elections on tap.
In the US, President-elect Donald Trump has promised a slate of deregulatory actions centered on "energy dominance," with plans to dismantle laws and regulations supporting climate change mitigation and environmental protection. However, we may see a strengthening of state and local policy alongside industry-led sustainability and climate initiatives, akin to what occurred during Trump’s first term.
While discussions of climate will remain politicized, we could see the focus shift toward helping communities prepare for and adapt to natural disasters as the physical impacts of climate change become increasingly evident. States across the US have been hit hard by climate hazards such as wildfires, hurricanes and flooding. Unavailability of property insurance for the homes and businesses impacted by these events is driving up costs — a topic that could resonate across the political aisle.
Some prominent companies have pulled back from their sustainability messaging, walked back their net-zero commitments or deprioritized low-carbon investments. Nonetheless, we broadly expect corporate sustainability practices to continue as companies that have invested in climate and sustainability in recent years take a “keep calm and carry on” approach. Rising demand from investors, consumers and younger generations for sustainable practices could also counterbalance political shifts.
Amid the increased instability, energy security and industrial policy will continue to play a heightened role in discussions about climate policy as countries seek to ensure access to reliable and affordable energy even in the face of conflict.
For companies, robust corporate governance practices will be more important than ever as businesses navigate complex regulatory environments, increased litigation risk, international standards and acceptable norms to avoid sanctions and reputational damage.
In 2025, the energy transition will be defined by a struggle between policy and market forces.
While clean technology continues to make significant inroads in the global energy system, 2025 looks set to present new challenges to growth. Greater geopolitical uncertainties are drawing some of the focus from decarbonization efforts toward energy security and affordability. Political agendas are increasingly hinting at an easing of clean energy targets in the face of continued economic pressure and geopolitical risks. And expectations for rapid growth in power demand, driven by data center expansions, have opened the door for an increasing rather than decreasing contribution from fossil fuels to electricity supply.
This tension between policy and market forces will be on display in the US, where the Inflation Reduction Act has led to an uptick in clean investment even as the country is the world’s largest oil and gas producer.
Clean technologies will still see new growth. We expect costs for solar, batteries and other components — largely driven by China — to continue falling, making renewables ever-more attractive in 2025, with or without policy support. That said, some renewable projects have struggled with profitability. Combined with potential policy change, this could undermine the confidence of investors in the coming year. Nuclear could also enjoy a rebound with renewed interest in its potential to offer low carbon base load electricity.
2025 will also see countries submitting new Nationally Determined Contributions (NDCs), the documents countries update every five years that outline their plans for lowering emissions in line with the goals of the Paris Agreement. With the lack of progress on mitigation aims at the UN’s COP29 climate change conference — particularly around the phaseout of fossil fuels — the scope of new climate targets will send a clear signal on the future pace of the energy transition.
Worsening climate hazards alongside more stringent disclosure standards will shine a light on adaptation needs.
Climate hazards are worsening in many regions and the impacts on economic growth will vary, and rise, without investments in adaptation. Countries, local and subnational governments, and companies face the prospect of more frequent and severe climate shocks.
Companies in particular face tightening disclosure standards globally and challenges associated with assessing and reporting the potential impacts from physical climate risks. Integrating these considerations into financial risk assessments can help companies protect assets, navigate regulations and build resilience to climate hazards. We expect that companies will increasingly shift their attention to addressing worsening climate hazards as disclosure standards and public scrutiny push companies to disclose their management of physical climate hazards and the inevitable gap between those reported exposures and the limited progress on actions being taken.
Entities with fixed assets and smaller operating footprints in highly exposed locations are likely to face an outsized share of economic losses, absent adaptation and resilience plans. Primary insurers will continue to face the increasing brunt of economic losses, which could leave those companies exposed over the medium term with increased costs passed to customers or availability of coverage reduced.
Efforts to standardize and support the comparability of adaptation and resilience investments — such as the Climate Bonds Initiative Resilience Taxonomy — will gain greater attention, particularly as countries look to submit National Adaptation Plans at the end of 2025.
We expect opportunities to emerge in financing adaptation and resilience activities, which may include new financial products, such as resilience bonds, and services tailored to support financial market participants in building resilience to climate hazards. We also expect increasing private sector interest to help fund the climate finance gap.
The climate finance gap is huge, but a focus on practical solutions coupled with increasing ambition levels could unlock meaningful private capital mobilization.
We see renewed pressure on stakeholders to find ways to address the widening climate finance funding gap. Among these efforts is the push to scale up blended finance by addressing well-known roadblocks. To attract institutional investors’ deep pools of capital with a generally lower tolerance for risk, the broader market view is that solutions could include the following:
Looking for standardization opportunities, replicable and scalable structures
Credit enhancement mechanisms
The High-Level Expert Group on Climate Finance estimates developing countries’ investment needs to address climate change and the energy transition at $3.2 trillion a year by 2035, excluding China. While the report suggests $1.9 trillion can be generated domestically, the remaining $1.3 trillion needs to come from external sources.
COP29’s climate finance goal of $300 billion a year by 2035 covers public money from developed countries, financing from MDBs and private capital mobilized by MDBs, leaving the additional $1 trillion to come from all other sources of finance. The new goal is larger than the previous one yet remains notably insufficient to address these investment needs. Hence, parties at COP29 called for a broader investment target of $1.3 trillion from all sources of finance. At the same time, many developing countries have intensified concerns about debt distress and the need for more grants and concessional capital alongside greater private sector involvement. While sustainability-labeled debt capital markets are expanding into emerging markets, not all projects can be funded solely using debt, underscoring the need for innovative financing solutions. After years of slow momentum, the focus on practical solutions and increasing in ambition levels could gradually unlock a material uptick in private capital mobilization, particularly for climate projects in developing economies.
International carbon trading will be boosted by agreements on Article 6 of the Paris Agreement reached at COP29 after several years of negotiations. These developments will offer the market clearer rules and will open the door for a mobilization of investments in carbon markets from countries around the world. They will also provide countries with mechanisms to cooperate to reduce carbon emissions to help achieve Nationally Determined Contribution goals. Specifically:
Article 6.2 sets out a system of national accounting for greenhouse gas emissions and permits countries to exchange emission reductions or removals through bespoke bilateral or multilateral agreements, providing clarity on how countries authorize the trade of carbon credits and how registries tracking this will operate.
Article 6.4 establishes a framework for a UN-led global carbon market, clarifying guidance on methodologies, rules and processing that would allow for registering projects and issuing and trading carbon credits. These developments set the stage for greater use of these flexible mechanisms.
Against this backdrop, most developed nations will continue looking to compliance carbon markets to offer effective and efficient approaches to lower emissions. Carbon prices are also being globalized through inclusion of maritime emissions from shipping involving EU ports into the EU’s Emissions Trading System (ETS) — the EU-wide cap and trade emissions trading scheme — and through continued phase-in of the Carbon Border Adjustment Mechanism (CBAM), which puts a carbon cost on imports of goods from certain sectors based on carbon intensity and carbon prices within the exporting country.
Developing nations — including major, growing economies such as Brazil, India and Mexico — are designing and implementing carbon markets as key channels of climate finance. China, the world’s largest compliance market in terms of coverage, will expand into additional sectors in the coming year. The Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), a program designed to address global aviation emissions, advances implementation but also faces risks regarding demand, supply and policy. Key corporate players, including those in the tech sector, seek to lead on robust carbon solutions.
On the voluntary carbon market side, 2025 will look for confirmation that key stakeholder initiatives that seek to rebuild faith in the quality of carbon credits — such as the Integrity Council for the Voluntary Carbon Market, an independent governance body — are making a difference.
Companies will increasingly incorporate nature into their sustainability strategies as they recognize the links between biodiversity loss and climate change.
The UN’s biodiversity-focused COP16 gathering in Cali, Colombia, in October 2024 put biodiversity in the global spotlight. In 2025, we expect companies, policymakers and other stakeholders to take more concrete measures to tackle nature in tandem with climate. We also expect to see an expansion of financial instruments supporting biodiversity, including blue bonds — debt that finances marine and ocean-based projects — as well as nascent efforts to create a biodiversity credit market and an increasing role for biodiversity in nature-based carbon credits. The compounding risks that entities face from biodiversity loss and worsening climate hazards highlight the importance of nature-based solutions (NbS).
In 2025, standard-setters will turn their attention to the development of biodiversity-related disclosure standards. The International Sustainability Standards Board (ISSB) included biodiversity in its 2024-2026 work plan with a view to potentially develop a biodiversity-focused financial accounting standard. Amid growing recognition of the importance of integrating natural capital into private sector decisions, an increasing number of companies will adhere to the Taskforce on Nature-related Financial Disclosures (TNFD), framework for businesses to manage and disclose nature-related risks and dependencies.
COP30, the UN climate conference, will convene in the Brazilian Amazon in November 2025, casting a spotlight on the importance of biodiversity and nature-related risks. All eyes at the conference will be on whether emerging markets and advanced economies can agree on future pathways for economic development that support nature.
Amid growing geopolitical, regulatory and climate challenges, companies will face increased pressure on sustainable supply chain management practices.
Election results from 2024 in the US and around the world have prompted new political uncertainties, including the potential for a ramp-up in protectionist trade practices that could test the sustainability of companies' supply chains. Changes in trade policies may require companies to pivot to new suppliers or have fewer suppliers to choose from, which could complicate due diligence and engagement efforts. Moreover, supply chain constraints could drive up the cost of products and make it harder for companies to ensure access and affordability, including in emerging markets.
Although supply chains face growing uncertainty, many companies are still in the early stages of adopting policies that could reduce that risk, according to a report by S&P Global Sustainable1. For example, only about 17% of companies assessed in the 2023 S&P Global Corporate Sustainability Assessment (CSA) have public processes for screening new suppliers for sustainability-related risks. Fewer than half of assessed companies (44.5%) have a publicly available supplier code of conduct.
Tension over what constitutes a just and equitable energy transition — and who pays for it — will continue to play out on the global stage in 2025
A just transition can mean different things to different stakeholders, but at its core is the acknowledgement that climate change and the efforts undertaken to combat it have real impacts on people in developed and developing countries, and those impacts can be outsized for people with limited means, resources and income. Managing negative impacts on people — for instance, job displacement or increased energy costs — is therefore a crucial element to maintaining the policy momentum required to advance a fair and inclusive transition to a low-carbon future.
As the physical risks of climate change accelerate, there will be outsized impacts for many emerging markets and developing economies, creating greater urgency to pursue a low-carbon transition. But as developed countries press to decarbonize the global energy system, emerging markets and developing economies face the significant challenge of developing domestic resources to meet increasing needs for affordable and accessible energy. Failure to address the growing climate transition and adaptation investment needs of these countries could heighten long-term economic and social risks locally and globally.
We expect this tension over what constitutes a just and equitable energy transition — and who pays for it — to unfold throughout 2025 in the run-up to COP30 in Brazil.
In 2025, we also expect to see rising recognition from the public and private sector of the important role that Indigenous peoples and local communities play in decisions about preserving nature and halting biodiversity loss. This builds on the momentum of the UN’s biodiversity-focused COP16 conference in 2024.
Discussions about a just transition, and more broadly, how climate change and biodiversity loss impact people, also have implications for the private sector. Social factors such as accessing a qualified workforce, maintaining strong community relationships, and safeguarding supply chain labor rights amid new regulations are material issues in many sectors and will influence whether the ambitions of the transition can be met. As the race to access the raw materials required to power the transition heats up, for instance, maintaining local social and political buy-in will grow increasingly critical.
The need to balance AI’s energy use against its utility as a climate tool will grow more urgent.
As AI becomes more integrated across different industries in 2025, the debate around the pros and cons it brings to sustainability will grow more urgent. AI has the potential to radically improve energy efficiency and resource use, and it has become a key tool in emissions and land-use measurement and climate scenario analysis — use cases that show its potential benefits from a sustainability perspective.
On the other hand, the datacenter infrastructure that AI computing workloads rely on represents an already-large and quickly growing source of electricity demand, and much of that power will come from fossil fuel-burning power plants. As a result, even as companies, scientists and policymakers explore how to use AI to make progress on climate goals, doing so may come at the cost of increasing emissions.
We expect datacenter energy use to continue rising in 2025, and AI will be a big driver of this growth. Developers will continue to seek renewable power agreements or on-site sources of clean energy, including nuclear power in some cases, as Microsoft did in September 2024 with an agreement to source power from restarting a reactor at the Three Mile Island facility. A new generation of nuclear reactors called small modular reactors (SMRs) could also be a solution, though they are not expected to be commercially available in the near term. Sourcing low-carbon energy will also depend on the speed at which such clean capacity can be added. In lieu of enough available low-carbon energy, datacenters will continue to rely on on-demand, continuous power from fossil fuels, primarily natural gas.
While the direction of travel for AI-driven energy use is clear, quantitative data on how AI is helping companies decarbonize remains more limited as emissions-heavy industries are still in the early days of putting the technology to use. As AI adoption grows in 2025, we could start to see more evidence of the benefits the technology can bring.
Jurisdictions around the world will continue to push for consistent and comparable sustainability reporting, but concerns about heavier reporting burdens for companies may slow adoption.
In 2025, momentum will be strong for global harmonization in sustainability reporting as an increasing number of jurisdictions adopt sustainability-related disclosure standards. The two leading standard-setters — the Global Reporting Initiative (GRI) and the International Sustainability Standards Board (ISSB) — are focusing on interoperability and collaboration. Such initiatives to improve disclosure will likely enhance the quality and the comparability of climate-related information and other sustainability topics globally.
2025 also marks the first time that certain companies will report under the EU’s Corporate Sustainability Reporting Directive (CSRD). This initiative is aimed at harmonizing companies' sustainability reporting by requiring them to publicly disclose information about sustainability issues according to the concept of “double materiality,” which considers financial materiality and impact on society or the environment.
Convergence between standards will proceed as the international standard-setters like the ISSB and jurisdictions like the EU seek to align their disclosure standards. However, we also expect to see pushback on regulatory overload and skepticism about the usefulness of reporting. In the EU, discussions about a potential consolidation of the CSRD with the Taxonomy and Corporate Sustainability Due Diligence Directive (CSDDD) will continue as the EU seeks to cut red tape to boost competitiveness. In the US, political resistance and legal challenges to the Securities and Exchange Commission’s proposed climate disclosure rules may delay their adoption.
Special thanks to our contributors: Atul Arya, Alexandra Dimitrijevic, Liz Bachelder, Kevin Birn, Erin Boeke Burke, Christa Clapp, Patrice Cochelin, Dan Daley, Florence Devevey, Jaspreet Duhra, Chris Frank, Pierre Georges, Lotte Griek, Betty Huang, Conway Irwin, Bertrand Jabouley, Xavier Jean, Chris Johnson, Paul Kurias, Cathy Lai, Hsin-Ying Lee, Sophia Lin, Nicole Lynch, Matt Mitchell, Anna Mosby, Hiroyuki Nishikawa, Alejandro Rodríguez Anglada, Francesca Sacchi, James Salo, Christina Sewell, Cornelis theunis Van der lugt, Carina Waag
