Looking at the rest of 2025, here are some bright spots.
First, many corporations worldwide remain committed to decarbonisation and managing climate risks. As interim climate targets for 2030 draw nearer, companies may need to allocate capital toward new sustainability initiatives to stay on track.
Second, emerging megatrends are poised to play a pivotal role. The rapid expansion of the AI and data centre industries demands sustainable solutions to meet their substantial energy requirements – driving the need for significant sustainable financing.
Third, in many parts of the world, governments are leveraging sustainable finance as a tool to fund decarbonisation efforts. Admittedly, this year some governments have rolled back, paused, or postponed Environmental, Social, and Governance (ESG) policies – such in as Canada, Switzerland, South Korea, the US, and the EU. However, other jurisdictions, including China and the UK, have recently advanced the implementation of the International Sustainability Standards Board’s (ISSB’s) climate disclosure standards. Australia, Poland, and China have also updated their sustainable debt frameworks or taxonomies to facilitate further sovereign issuance.
Lastly, while transition debt is not expected to be a short-term growth driver, it has the potential to increase over time as policies evolve. Admittedly, transition debt volumes declined year-on-year, primarily due to reduced sovereign issuance in Japan – following a remarkable surge in 2024 after the country introduced its transition debt frameworks. However, other countries are beginning to emulate Japan’s approach. Australia, Thailand, and India have now formally defined transition activities, paving the way for sustainable financing tailored to each country’s energy landscape.
The global journey toward sustainability is not linear but continues to advance. The ongoing demand for decarbonisation and future resilience will drive market development and policy improvement over time, with financing being an essential tool to facilitate that process.