Key climate and sustainability themes for 2025

The 2020s have often been referred to as the “decisive decade” for climate action—a pivotal time to make the necessary strides towards a sustainable future. As we move through 2025, progress remains uneven, shaped by geopolitical uncertainty, economic inequality, and financial shortfalls. There are reasons for optimism, however. Technological advances and growing corporate accountability offer promising avenues to accelerate progress towards our climate and nature goals. Five key sustainability themes in 2025 highlight both the challenges and opportunities in the global push for decisive action.

Key theme 1: Resilience of climate and industrial policy amid geopolitical uncertainties

A fragile global geopolitical landscape threatens progress in collaborative climate efforts. Political disruptions and the ongoing conflicts in Gaza, Ukraine, and Sudan are reshaping international priorities, raising concerns about the future of global cooperation on climate action.

The future of climate policy remains uncertain in the US after the re-election of Donald Trump. A second withdrawal from the Paris Agreement and a rollback of the Inflation Reduction Act (IRA) could hinder the country’s decarbonisation trajectory. However, most Americans support their country’s participation in the Paris agreement, and Republican-led states continue to benefit significantly from IRA investments. Trump’s ability to follow through on a climate rollback is therefore unclear. Nonetheless, fossil fuel markets will remain a priority, complicating US progress towards against any climate commitments.

Across Europe, political uncertainties in Germany, France, and other major economies could erode the bloc’s climate unity. The UK has set ambitious industrial policy, including support for hydrogen as a cornerstone for decarbonisation. However, the UK’s public coffers remain under financial strain, potentially limiting the new government’s push for industrial largesse.

Key theme 2: Addressing economic inequalities to achieve climate progress

COP29 underscored the inequalities of access to climate mitigation and adaptation solutions. While high-income economies can capitalise on green technologies for climate progress, developing nations struggle with limited access to funding, technology, and infrastructure—and often have important competing priorities, such as poverty reduction. Low-income nations cannot be expected to sacrifice much-needed improvements in living standards to achieve global goals without support. Africa, for example, faces disproportionate adaptation and mitigation costs compared to its GDP, amplifying the urgency of addressing these disparities. The unequal distribution of climate finance and technologies risks leaving the most vulnerable regions unprepared for accelerating climate impacts. International climate finance initiatives, discussed below, along with novel mechanisms such as debt-for-nature finance swaps could provide low-income countries with the fiscal space needed to prioritise climate resilience and green development.

Key theme 3: Climate financing and the Loss and Damage Fund

The New Collective Quantified Goal (NCQG) on Climate Finance, agreed at COP29 in 2024, aims to distribute $300 billion in climate funding from wealthier to developing nations annually by 2035. This builds on a previous target of $100 billion in climate finance, which was achieved for the first time in 2022. While the $300 billion commitment falls far short of the trillions required, it nonetheless signals growing attention on the need for redistributive measures to level the climate playing field.

The Loss and Damage Fund (LDF) aims to establish financial assistance to developing nations to help recover from extreme weather events and other climate impacts and is set to become operational in 2025. However, its exclusion from the NCQG raises questions about its long-term viability. Extreme weather events, such as devastating floods in the Sahel and parts of Asia, highlight the urgent need for such funds. Without new financial commitments, however, its potential impact may be limited.

On a positive note, private financial institutions are increasingly aligning with sustainability goals, channelling funds into low-impact or even nature-positive investments. Examples include sustainable financial assets, such as green bonds or carbon credits, as well as projects that aim to protect or enhance natural capital. Nature-positive investments help companies build resilience against climate impacts and can provide long-term profit opportunities. However, inefficiencies in funding mechanisms and the need to align private investment with equitable decarbonisation remain significant hurdles. The private nature finance market is growing but remains far short of the scale needed to complement public nature finance commitments.

Key theme 4: Opportunities and risks of artificial intelligence (AI) for sustainability

AI is a transformative technology that has gained significant momentum in the last few years with the emergence of large language models and other rapidly developing innovations. AI could have a role in advancing sustainability. However, any benefits of its potential applications must be balanced against potential risks.

Observers have proposed many opportunities to employ AI methods to reduce climate and nature impacts, including for improving the efficiency of the energy grid, optimising transport networks and supply chains, and monitoring conservation efforts. AI can also be used in climate modelling and frontier research to expand our understanding of climate systems and drive developments in weather prediction that may help mitigate some of the adverse social and economic impact of adverse weather events. However, these opportunities are theoretical at this point, and the scale of benefit they may provide remains to be seen.

AI is not without drawbacks, however. Training large AI models requires huge amounts of resources, including electricity, water, and critical minerals. Some companies are acting to mitigate the impacts of their resource use, for example by contracting with clean energy providers. However, fierce competition in the industry means that resource consumption is likely to grow in 2025. Moreover, the significant promise of AI for efficiency gains is not a panacea—efficiency can only get us so far without transformative step changes in technologies and behaviours. The so-called “rebound effect”—where efficiency gains lead to increased resource use—may also limit the long-term benefits of AI-driven solutions.

Key theme 5: Growing market expectations of corporate sustainability

Sustainability has long been part of corporate parlance. We are now seeing growing uptake of meaningful sustainability initiatives such as internal carbon pricing, sustainable procurement, and nature-based solutions. Voluntary reporting of climate and nature risks and targets has also expanded under frameworks such as the Taskforce for Climate-related Financial Disclosures and the Science-Based Targets Initiative. These developments have been driven in part by an acknowledgement that nature degradation presents material risks to business operations (and financial returns), which have catalysed the involvement of financial institutions in reducing corporate climate and nature impacts and risks.

Developments in corporate sustainability are being matched by more targeted regulation of climate and nature risk management. Regulators worldwide are building on voluntary standards to implement mandatory climate disclosures and pushing companies to move beyond “tick-box” compliance. These disclosures often extend to supply chains, revealing the interconnectedness of global industries and their reliance on natural systems. Notably, the European Sustainability Reporting Standards (ESRS) will be compulsory for all large companies from the 2025 financial year.

Emerging standards emphasise the dual materiality of corporate sustainability—how businesses both have impacts on, and are impacted by, climate and nature. This approach is reshaping corporate strategies and investments, reinforcing the reciprocal relationship between environmental health and business resilience.

Conclusion: Can the 2020s still be the decisive decade?

The 2020s began with hopes of rapid climate progress. The pandemic-induced slowdown in global emissions sparked what seemed to be a real step-change in awareness and ambitions, culminating in the lauded agreement to phase down coal production and fossil fuel subsidies at COP26 in Glasgow in November 2021. Yet progress slowed as attention naturally shifted to other concerns.

Mid-way through the decade, some of the momentum seen in the early 2020s seems to be waning. Global greenhouse gas emissions are projected to have reached new highs in 2024. Extreme weather events and record-breaking global temperatures have underscored the urgency of action. Advances in renewable energy, clean technologies, and sustainable policies provide opportunities for rapid change, but progress remains insufficient to meet the compounding challenges we face in this decade and those to come.

As the impacts of climate change on countries and businesses continue to unfold in 2025, translating the inevitability of climate impacts into a renewed sense of urgency among global leaders will be critical. Will 2025 be the year in which momentum towards a sustainable future becomes inevitable? Perhaps not, but one thing is clear: we will be one year closer to the point where decisive action will no longer be optional.

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This blog is one of the key pieces of our Key Themes 2025 series, where we share our thoughts on the key aspects shaping the outlook of global, regional, industry and city economies. To access more Key Themes 2025 reports, click here.

This blog is produced by our Economics & Sustainability team. Click here to get in touch with us and explore how we can help you unlock the power of economics for climate and sustainability insights, contact us.

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