Five themes for 2025
Theme 2: Big moment of truth
This series explores the five themes we expect to top the sustainability agenda in 2025. For the second theme, we examine whether a raft of incoming regulation can unlock much-needed capital to finance the climate transition.
A wave of enhanced regulatory frameworks, guidance and oversight is set to come into force this year.
- Companies face increased disclosure requirements in terms of both their own activities (eg, the Corporate Sustainability Reporting Directive), and due diligence of their value chain via the Corporate Sustainability Due Diligence Directive from 2027.
- Investors await the outcome of the review of Europe’s Sustainable Finance Disclosure Regulation and the implementation of new fund categorisations (the European Securities and Markets Authority requirements in Europe and the Sustainability Disclosure Requirements in the UK).
- The uptake of the new Green Bond Standard and possible new transition plan guidance and standards are also items to watch.
- The market will also consider the implications of proposals for an EU omnibus regulation and likely see the full impact of ESG Ratings Regulation, which affects data providers and their services.
In summary, there’s a lot going on. Much of these regulations centre around Europe, but the world is watching. The European Environment Agency has warned of Europe’s vulnerability to climate and planetary changes1, yet there is a persistent fragmentation of priorities. Policymakers, regulators, companies and investors need to come together with a simpler, pragmatic approach to accelerate transition investment.
Other challenges concern the commercial impact of these regulations. They will place heavier burdens on companies already faced with financially stretched consumers and competitive pressures. Sustainable investing remains broadly flat from three years ago2, yet the demands on investors and investee companies have ratcheted up materially through this period.
If regulation can alleviate concerns of greenwashing, and if it can motivate much-needed capital to adapt to emerging economic, climate, planetary and social opportunities, then 2025 might be a critical turning point. It will certainly be the big moment of truth.
“Big moment of truth” timeline for 2025
Source: Allianz Global Investors, 2025
- Read the first post in this series: Theme 1: Climate impact to climate transition
- Read an overview of our five themes: Sustainable investing in 2025: five themes to watch
1 Climate change impacts, risks and adaptation | European Environment Agency's home page
2 Assets under management in global sustainable funds accounted for about 6% of the overall funds market in 2024, roughly the same level as in 2021. Source: JP Morgan sustainable funds monthly chartbook (Morningstar data).