1. Political dynamics as a catalyst for sustainability
A key trend for 2025 is the ongoing political shifts in both the US and the European Union (“EU”), which will leave their mark on sustainability efforts across the globe. In the US, despite shifting political winds, market dynamics like the decreasing cost of renewable energy and increase in electric vehicle infrastructure will persist. Similarly, the EU’s “simplification agenda” could result in more streamlined regulations that push corporates and investors to focus on strategic sustainability, irrespective of the various acronyms and frameworks used to define it. While developments in the US and EU have disappointed many in the sustainability space, connecting sustainability to value creation and preparing for a climate transition are expected to remain key drivers.
2. Sustainability as a driver of financial value
In this evolving environment, it is imperative that the connection between sustainability and financial value creation be made clear. Historically, sustainable finance often operated in parallel with traditional finance, with sustainability initiatives seen as ‘nice to have’ but not always central to financial performance. This is changing. In 2025, we expect a deeper integration of sustainability goals into the core financial metrics that drive investment decisions. This includes clearer alignment between ESG factors and financial returns, encouraging greater investment in sustainable assets, technologies, and projects.
3. The role of AI, technology, and new financial instruments
Finally, the accelerating power of AI, technological advancements, and the introduction of new financial instruments are poised to open new frontiers. AI is already being leveraged to optimise energy efficiency, monitor supply chains, and analyse climate-related risks, enabling more precise and data-driven investment decisions. Additionally, new financial products, such as transition bonds and sustainability-linked loans, will offer investors and corporates the flexibility to finance sustainability projects in a way that aligns with their financial and environmental goals.
One area where we expect significant growth is in transition finance, which is designed to help companies that are not yet low carbon but are making tangible steps towards decarbonisation. While many sustainable finance instruments have primarily focused on already green activities, transition finance aims to bridge the gap by supporting companies in their journey to a more sustainable future.
Transition finance instruments are gaining traction globally, with notable developments in both the public and private sectors. For example, the EU is set to reform its Sustainable Finance Disclosure Regulation (“SFDR”) to include a "transition" labelling for funds, offering greater clarity to investors seeking transition-focused investments. In the UK, the “Transition Finance Market Review,” published in October 2024, highlights the potential £1 trillion boost to the economy from transition activities. Japan, having issued the world’s first sovereign transition bond in February 2024, is planning a substantial issuance over the next decade.
Our role in navigating these changes
We are committed to supporting businesses and investors as they navigate the evolving landscape of sustainable finance. Our team of experts can help design and implement bespoke sustainable finance instruments tailored to specific investor needs, ensuring that the transition to a more sustainable economy is financially viable and impactful.
In summary, 2025 is poised to be a pivotal year for sustainable finance. With the combination of political shifts, the growing recognition of sustainability’s financial value, and the advent of AI and innovative financial instruments, we are entering a new era of investment opportunities. Transition finance, in particular, is set to accelerate, helping businesses bridge the gap between current operations and their future sustainability goals.
Download the 2025 Sustainable Trends Outlook report
Explore the key trends driving sustainability. Download our 2025 Sustainable Trends Outlook report to stay informed on market developments.
