Five themes for 2025

Theme 1: Climate impact to climate transition

Matt Christensen

16/01/2025

Our new blog series explores the five themes we expect to top the sustainability agenda in 2025. First, we examine how extreme weather events add urgency to the politics of climate transition.

In his New Year message, UN Secretary General António Guterres warned the world is facing “climate breakdown in real time”, while the Copernicus Climate Change Service confirmed 2024 as the warmest year on record globally. However, it is the rising speed, severity and cost of extreme weather events – like the catastrophic wildfires in California in January – that are altering our perspectives on climate norms.

Last year, we anticipated that climate would shift from a distant 2050 concept to a more immediate and urgent priority. The sheer number of elections held globally in 2024 risked diverting attention from the climate topic, but in 2025 we expect a maturing understanding of climate impact to prompt more formalised approaches to climate transition, which could mitigate the economic, environmental and social risks of each additional 0.1°C of warming.

What is climate transition? Simply, it is a fully scoped strategy of adaptation and mitigation to higher temperature scenarios. While many focus on energy transition being the sole contributor to climate transition – see our earlier article for more details – our view is that a credible climate transition strategy involves five critical elements in addition to energy transition (see graphic). Indeed, while energy transition is undeniably important, we would argue the “first fuel” in climate transition is in fact energy efficiency.¹

Six elements needed to support climate transition

Source: Allianz Global Investors Sustainability Research

The financial costs of last year’s extreme weather underscore the need for greater economic and social resilience to higher temperatures and better climate disclosures. Only 38% of global economic losses from natural catastrophes were insured in 2023.² Within the EU, it was only a quarter.³ Comparable figures for 2024, which will be released in March, are unlikely to be much higher.

A coordinated framework is required to direct and incentivise all stakeholders in the transition to a decarbonised global economy. This will include advancements in scenario analysis, formalised climate risk frameworks, finance and regulatory frameworks, and clarity on who ultimately finances an equitable transition and how. Private finance has a significant and growing role in this effort after the disappointment of COP 29.

In coming months, we will dive deeper into the six elements of a credible climate transition strategy in our blog and thematic papers.

Coming soon: Theme 2: The big moment of truth – how a wave of regulation in 2025 could help motivate transition finance now and in coming years.
Read an overview of our five themes: Sustainable investing in 2025: five themes to watch

¹ Energy efficiency: the first fuel and the long-term solution to the current energy crisis | UNECE
² How big is the protection gap from natural catastrophes where you are? | Swiss Re
³The climate insurance protection gap

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