This article is written by Tim Mohin
Welcome back! We sincerely hope that our readers took some meaningful time away from work to relax, reflect, and recharge.
By now, you have read a few 2025 forecasts. While no one knows the future, 2025 is shaping up to be a difficult year for Climate and Sustainability issues. Regular readers have seen the rapid fluctuations in the past three years: The ESG pendulum has swung faster and further than ever before, and in 2025, sustainability issues will pull back.
Predicting the year ahead is typically a fool’s errand, but you can grade our prognostications for the past year here. Overall, our 2024 forecast was fairly accurate, but we could have stressed the “backlash” point even more – here’s what we said 12 months ago:
“With 2024 being an election year for over two billion people in 40 countries, ESG has become a hot-button topic for leadership hopefuls to varying degrees around the world. In the US, Republican presidential candidates are amplifying the ESG backlash. The current Republican frontrunner, Donald Trump, promised to gut President Biden’s climate agenda, including the IRA and would reinvest in fossil fuels. US auto companies warned that cutting the IRA could destroy the US EV market. ”
As we enter 2025, sustainability issues are in for a rough ride. The results of the mega-election year in 2024 were mixed but mostly stable for sustainability…until the US election in November. Since then, the trend lines have been decidedly negative for these issues.
But, dear colleagues, do not despair! As a 40+ year veteran of this profession, I have seen many peaks and valleys, and the overall trend is positive and will continue to be. We need to gird for the setbacks ahead (which will mostly be in the policy area), adapt, and continue to lead.
Here are my top eight forecasts for 2025:
1. Trump 2.0: Scale Back of US Climate Policy
President-elect Donald Trump will take power in 10 days. His personal views on climate change and those of his new cabinet have been well documented, and we are likely to see a massive rollback of federal policies on climate and sustainability.
Current President Joe Biden has banned new oil drilling in most federal waters and set a new 2035 US climate goal in his final days. Trump claims he will overturn the ban on day one and pull the US out of the Paris Climate Accord again.
While Trump has pledged to eliminate Biden’s cornerstone climate policy, the Inflation Reduction Act, it has some Republican support and, with the narrow Congressional majorities, it is expected to survive, at least in part.
Many have likened the Biden-Trump transition to the transition of Jimmy Carter to Ronald Reagan. More than 40 years ago, Jimmy Carter (who died last week, leaving a powerful environmental legacy) installed solar panels on the White House roof. After taking power, his successor, Reagan, took them down and reversed Carter’s environmental policies. Bill McKibben fears the momentum lost in that handover could be replicated again.
However, this time, most believe the momentum in the energy transition and climate action is too strong for any administration to slow it. Former UN Climate Chief Christiana Figueres said, “The result from this election… cannot and will not halt the changes underway to decarbonize the economy and meet the goals of the Paris Agreement.”
2. States, China, and Other Countries Will Step Up
New York Governor Kathy Hochul introduces a state climate superfund.
A US slowdown is inevitable at the federal level, however, US states are stepping up. Since the election, New York Governor Kathy Hochul re-introduced a congestion charge in New York City and moved forward with a climate super fund, which will require fossil fuel companies to pay for the state’s climate adaptation to the tune of $75 billion over the next 25 years.
California is pressing ahead with its nation-leading climate reporting rules, which require US companies that meet certain thresholds to report climate risks and emissions. The California Air Resources Board (CARB) has solicited comments to finalize the rules, which are due by February 14th. Four other states have similar policies that are moving forward.
As the US pulls back, China is rushing to fill the gap. China, the world’s largest carbon emitter, is adopting renewables at an astronomical pace and will be responsible for around 60% of new global renewable capacity by 2030. China also leads in the production of electric vehicles, solar panels and other building blocks of the energy transition. And China recently released its first set of sustainability disclosure standards for voluntary reporting ahead of mandatory reporting in the future.
Other countries are also pressing ahead with climate and sustainability policies. The image below from Datamaran shows the many ESG compliance deadlines and new regulations scheduled for 2025.
Source: DataMaran
3. The EU Will Weaken ESG Regulation
Over the last few years, the European Union issued a torrent of regulations to promote sustainable business under its “Green Deal.” While nowhere near the turnaround that will occur in the US, EU lawmakers are under pressure to relax, delay, and roll back many of their Green Deal policies.
By late February, we will know the outline of the new “Omnibus” (ominous?) regulation. The Omnibus is intended to streamline the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence DIrective (CSDDD), and the EU Taxonomy. But, since the report of the former Italian Prime Minister – Mario Draghi – tied these regulations to poor economic consequences for the EU, there has been a strong de-regulatory push in Europe, leading many to think the requirements will be delayed or eliminated.
Case in point, German Chancellor Olaf Sholz called for a two-year delay in the CSRD last week and to rethink the Carbon Border Adjustment Mechanism (CBAM). Also, the European Investment Bank has asked for a postponement of the EU Taxonomy, fearing it could lead to a “reputational disaster.”
The final outcome cannot be predicted with any certainty, but it’s likely we will see more implementation delays and breaks for small and medium-sized companies.
4. The ESG Backlash Will Deepen
COP26 protestors Shutterstock/Lewis Mackinlay
In 2021, at COP26 in Glasgow, the Glasgow Financial Alliance for Net Zero (GFANZ) and its affiliate groups were founded with much fanfare and the promise of mobilizing trillions of dollars to support the energy transition.
Now, driven by the ESG backlash and supercharged by Trump’s election, six of the US largest banks have left the group. The last of which JP Morgan left this week. This has led GFANZ to restructure the organization and relax membership requirements. But leaving the alliance has already paid off for these banks as Texas dropped its threat to cut them from managing state and municipal bonds.
On the corporate side, things are not much better. Since affirmative action in university admissions was struck down by the Supreme Court, corporate DEI (Diversity, Equity, and Inclusion) programs have been under fire. Dozens of companies have already backtracked on their DEI goals, and threats of lawsuits and social media attacks will force more to retreat in 2025. Trump supporter Elon Musk was quoted saying “DEI is just another word for racism.” As a senator, Vice President-elect JD Vance co-introduced the Dismantle DEI Act in June, saying DEI “is a destructive ideology that breeds hatred and racial division.” Trump signed an executive order barring federal DEI programs near the end of his first term in 2020, and such actions are likely in the new Administration.
McDonald’s became the first company to join the expected DEI exodus in 2025. The trend has already had consequences: The number of new black directors among Russell 3000 companies dropped by more than half between 2022 and 2024, even as research continues to show the positive impacts of diversity on boards.
5. Leaders Will Lead…Quietly
Some companies are already bucking the trend by sticking to their values and commitments. Costco was targeted over its DEI policy, but remained steadfast to its commitments even in the face of boycotts.
And it’s not just Costco: While high-profile retreats from DEI and environmental goals make good headlines, the vast majority of companies are sticking with their goals because the business rationale behind them is sound – value for employees, brand, customers, and investors.
“Green-hushing” – speaking less about sustainability – will continue to grow in 2025. Even companies that are advancing with their sustainability programs will stay quiet to avoid unwanted controversy. Also, there will be a higher bar to demonstrate ROI and integrate sustainability into the broader company compliance and financial strategy.
6. Climate Litigation Will Surge
California’s Attorney General, Rob Bonta, is being counter-sued after suing Exxon.
In 2024, there were a number of precedent-setting cases against oil and gas firms, government inaction, and greenwashing. In 2025, the results of some of these cases will be known. As in 2024, we expect a mixed bag of rulings, but the number of climate and sustainability cases will accelerate in 2025.
The International Court of Justice will decide its first climate case in early 2025. Initially, the low-lying Pacific nation Vanuatu brought the case, but it has garnered support from 130 countries. The court will determine whether states have an obligation to address climate change. Although non-binding, the decision will carry significant weight in other cases.
Also, in 2025, expect fossil fuel and other companies on the receiving end of lawsuits to push back. One early example of this is Exxon’s attempt to counter-sue California’s Attorney General, Rob Bonta and NGOs claiming defamation.
7. Hope for Treaties on Climate, Plastics & Biodiversity
Brazilian President Lula (left) will host COP30 this year.
2024 was a disappointing year for international agreements. There was no deal on biodiversity, failure to reach an agreement on plastics, and a weak deal at COP29 on climate.
Even without US leadership, there is some hope in 2025 for fresh international agreements. Countries in the Paris Climate Accord must deliver new 5-year Nationally Determined Contributions (NDCs) for greenhouse gas reductions in February 2025.
And, despite last year’s failures, delegates will return to the negotiating table in February to try to reach a biodiversity deal and will meet again in mid-2025 to attempt to finalize a global plastics agreement.
The global climate meeting – COP30 – will be held in Belem, Brazil, in November, marking the 10th anniversary of the Paris Agreement. Chief among the discussions will again be cash for developing countries and accelerating action.
8. Warming and Costs Will Accelerate
Wildfires raging across Los Angeles
Scientists predict that 2025 might not break temperature records like the past two years, but it is expected to be one of the three hottest years ever.
With another hot year will inevitably come the climate-related natural disasters we have become all too familiar with over recent years.
This year started with the devastating fires ripping through LA this week, causing death, destruction, and evacuations. Climate costs continue to mount, with new research showing that damage from extreme weather events in the US reached 2% of GDP in 2024.
Related Article: Guest Post: SEC Disbands Climate & ESG Task Force – Tim Mohin
