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Executive summary │ Sustainability themes for 2025
What's rising, what's falling, what's maturing and what's ambiguous
"Back-to-basics" in 2025
Five themes to dominate in 2025
Four channels to influence the ecosystem
We build on our ESG 2025 outlook (see here) by contextualising sustainability themes for 2025, which also includes MUFG’s Sustainable Finance outlook for 2025.
2024 witnessed an acceleration to the “back-to-fundamentals” approach to sustainability. Inadequate performance of sustainable funds, concerns over policy support post US and EU elections as well as fears over mitigating temperature rises to 1.5oC have cast a pall of unease. Yet, in a world wherein the decibels of debate are rising, we view such pockets of pushback as indicative of sustainability’s burgeoning relevance and necessary step in its maturation.
In 2025, we envisage five key themes dominating the sustainability landscape:
- Returns, less policy, driving performance. The transition today offers subpar returns (see here for our ESG 2025 outlook), with metrics-that-matter to propel sustainable investing.
- Scaling green technologies. Green capex to gain in quantum by regulators, Big Tech and consumers with a focus on reliability, efficiency and product equivalency.
- Efficiency and adaptation. Support beyond energy efficiency to the circular economy and nature/biodiversity enablers, alongside greater pro/re-active adaptation-led investments.
- AI and the future of work. AI to expand from its power demand focus to its ability to catalyse innovation in healthcare, agriculture, education and energy that advances SDGs.
- Sustainable-led regulation. EMEA aims for greater simplification. US focused on IRA 2.0 and SEC climate-disclosures. APAC focused on transparency with deeper ISSB rollout.
In aggregate, the sustainability ecosystem will be influenced by four channels in 2025:
- What’s rising. (1) power demand growth; (2) from “risk-to-need” in AI; (3) temperatures.
- What’s falling. (1) green premium support; (2) transportability of green metals/minerals.
- What’s maturing. (1) power grid infrastructure; (2) developed markets aging populations.
- What’s ambiguous. (1) inflation; (2) interest rates; (3) regulation; (4) extreme weather.
