Top 7 Sustainable Finance Predictions for 2025
In the last decade, as we’ve been experiencing extreme weather events due to climate change, the financial industry has started to rethink how it invests its assets. With energy security becoming a top priority and sustainable finance facing challenges in the US, big players like Bank of America and Citigroup have even left investment climate alliances. As we venture into 2025, how will the world of sustainable finance play out? Here are seven predictions for what to expect this year in sustainable finance and ESG investing.
In the US, sustainable investors are gearing up for some changes. With Paul Atkins leading the Securities and Exchange Commission (SEC), who isn’t big on ESG investing, we could see a shift in regulations. One of the first targets will likely be shareholder rights, making it tougher for investors to bring up environmental and social issues at corporate meetings.
We might see some changes in climate disclosure as well. A regulation requiring companies to reveal their carbon emissions might be rolled back, but states like California and Europe are already taking action. Additionally, rules allowing pension trustees to consider ESG issues in investment decisions might come under scrutiny but will likely face legal challenges.
Collaborations like the Climate Action 100+ shareholder network could see some backpedaling due to policy changes and the changing political climate. While there was an increase in ESG resolutions from investors in recent years, support has seen a decline. But going forward, we might see fewer but stronger ESG proposals that garner more support from asset owners and managers.
Despite these challenges, many long-term ESG-focused investors are committed to staying the course. A survey by the US Sustainable Investment Forum found that half of these investors plan to maintain their ESG efforts, with some even looking to increase their ESG activities. Large asset managers like the Big Three continue to face pressure from stakeholders and regulators to meet ESG targets, regardless of political changes in the US.
Overall, sustainable finance assets have been on the rise, representing a significant portion of investment assets in the US. With this growing trend, it’s evident that ESG strategies are here to stay and will likely continue to expand. So, despite the uncertainties in the financial world, sustainable finance is standing strong and moving forward.
