ESG TRENDS 2024 AND 2025: THE RISE OF CLIMATE TECHNOLOGY

From an ESG trends standpoint, much is changing as we speak. Climate technology, including clean energy, carbon capture, and sustainability solutions, will see major growth and adoption in 2024 and 2025. As the impacts of climate change intensify, companies and governments are investing in technology to rapidly cut emissions and build resilience. Expect breakthrough innovations in areas like renewable energy storage, carbon removal methods, climate-smart agriculture, and electric vehicles. Top players will be startups creating novel solutions, as well as big tech firms applying AI, IoT, and cloud computing to drive sustainability.

Increased ESG Reporting and Standardization

Stakeholder capitalism is driving more rigorous ESG disclosures from companies, but reporting remains inconsistent. Throughout 2024, regulators and standard-setting bodies will act to standardize sustainability reporting and performance metrics. That spans guidelines from the IFRS Foundation’s International Sustainability Standards Board, and potential SEC rules mandating climate risk disclosure for US public companies. The focus will be on comparable, reliable data so investors can effectively evaluate corporate ESG commitments and progress.

Mainstreaming Sustainable Finance

Sustainable finance gained significant momentum in recent years with net-zero commitments from financial firms and growth in ESG investment strategies. At present, the trend will accelerate as stakeholder expectations grow and access to ESG data improves. More financial institutions will integrate ESG criteria into lending and underwriting policies, apply stewardship principles as active owners, and develop innovative sustainability-linked financial products. Policy support will also expand as governments incentivize sustainable finance to fund green infrastructure and transition programs.

Focus on Social Issues

While environmental issues have dominated ESG agendas so far, social considerations like human rights, diversity, equity and inclusion (DEI), and labor practices will gain more attention during 2024 and 2025. Investors, regulators, and the public want assurance that green goals embed strong social safeguards and support a just transition for affected groups. Companies will face growing pressure to improve social risk management, ensure diverse and equitable workplaces, support community stakeholders, and address issues like data governance as part of their ESG priorities.

The Growth of Transition Finance

And of course 2024 and 2025 will see the rapid emergence of transition finance as more companies develop net-zero and sustainability transition plans. Financial products like transition bonds, transition loans, and sustainability-linked bonds will grow to fund corporate decarbonization projects, changes to business models, and growth in green revenue streams. Banks are already developing transition taxonomies and services to evaluate transition readiness. That will spur innovation in financial and advisory services to fund and scale up transition activity across carbon-intensive sectors.