Sustainability trends for 2025

Disclosure is a word businesses will hear more frequently: the European Commission’s CRSD directive demands greater accountability and transparency from large companies and listed SMEs in the EU and Europe. The companies concerned will be disclosing the real-world impact of their practices, turning the tide on greenwashing, but more importantly embracing a lower-carbon future.

Current research shows that most leaders believe CSRD will make sustainability key to decision-making, while confidence in the sustainability business case tripled from 21% to 63% in 2022-23. As an adjunct, the ISSB exists to standardise companies’ sustainability reporting, offering investors an assured global baseline of ESG disclosures.

The circular-economy model is increasingly influential in greening business, through repair, reuse and recycling of resources, and is projected to grow to $2,882bn by 2031 from $696bn in 2024. In hard-to-abate industries such as manufacturing and construction, the integration of  circularity into operations has the potential to future-proof business. 

With America’s President-elect due to be sworn in on January 20th, companies that operate internationally are braced for the impact of significant changes to US trade policy, designed to safeguard America’s industries. 

The new administration will prioritise fossil fuel production, will almost certainly dismantle the Inflation Reduction Act and will likely withdraw from the Paris Climate Agreement (again). But Trump’s proposed tariffs of 10%-20% on all goods coming into the US, with 60% on imports from China, will also impact climate action.

With America being the world’s leading importer of EVs (currently, 30% of them come from other countries, including Germany, China and South Korea), the tariffs would make many electric vehicles more expensive in the US, "potentially slowing adoption rates and hampering efforts to reduce transport emissions,” according to a new report from the LSE.

Private capital is crucial to help bridge the gap left by COP29’s $100bn climate-finance deal. Countries in the early stages of growth need capital to invest in green-technology choices. While this presents opportunities in countries characterised by fast growth and young populations—particularly in renewables and clean energy, for which infrastructure funds are being established—the perceived risks and challenges instil caution. Investors that do their homework, rather than relying on historical data, will get an accurate estimate of the risks and opportunities in diversifying from developed markets. 

Blended-finance opportunities help to reduce the risk for private investors, while also funding climate action. Another potential incentive is the debt-for-climate model, where debt alleviation in exchange for protecting developing countries’ natural capital releases money into society, creating friendlier investment environments.

Water security is becoming a major investment trend. As floods and droughts grow in frequency and severity, societal impacts include water shortages and contamination, with related threats to human health and energy and food supplies. Annually, the direct economic losses caused by floods total an average of $5.25bn and losses from droughts $9.4bn. 

Mitigating the impact of climate change on water security requires a commitment to water conservation, with stewardship in place to ensure water is used sustainably, economically and equitably. 

With growing consumer demand for sustainability across sectors, including water management as its scarcity intensifies, there is increasing interest in water’s investment opportunities. 

The market for water-utility-monitoring software solutions is forecast to grow to $5.1bn by 2030, from $4.3bn in 2023. Digital platforms that process real-time data enable leak detection and management, monitor water quality, reduce waste and predict demand.

One of the latest innovations in water security illustrates a marked shift towards decentralised systems: closed-loop technology isolates an organisation’s water supply, enabling treatment and reuse. 

While the risks of climate change are better understood and continue to take priority, biodiversity is increasingly ingrained in business goals as more leaders explore their operations’ impact on it—along with the human-health and economic ramifications of losing our natural ecosystems. 

Proactive companies will align their targets with the Kunming-Montreal Global Biodiversity Framework (GBF), which established 23 biodiversity targets to slow nature loss by 2030.

During the third World Biodiversity Forum at Davos in June, the UN Environment Programme Finance Initiative reported that private finance for nature-based solutions had passed $102bn, up from $9.4bn in 2022.

Investors too can influence the shift towards a “nature positive” approach, diverting capital away from businesses whose operations deplete biodiversity. Open-ended funds and ETFs that focus on biodiversity have seen global assets more than double, to $3.7bn since 2021.

Global food supply chains are increasingly threatened by disruptions from extreme weather events and international conflicts. Many countries cannot take access to food for granted, yet producing more food for a growing population also brings the risk of further biodiversity loss. Transformation lies in finding ways to make the world’s food systems—currently valued at $9trn—more sustainable. 

Environmentally friendly food innovations that offer investor opportunities alongside better food security include lab-grown meat and plant-based proteins. Farm livestock is estimated to cause 11% to 15% of greenhouse-gas emissions and also dominates agricultural land use.

Aquaponics, the hydroponic cultivation of plants based on traditional fish culture, is an emerging market projected to reach $1.1bn by 2031, up from $493m in 2022. Its growth potential lies in year-round production, unaffected by weather.

Investors in AI will be glad to hear of its almost limitless power to drive sustainable food systems, from plot to plate. In agriculture, AI can accurately monitor crop health, measure soil health, detect water stress, forecast weather patterns and predict yields. In industry, it can optimise food distribution and match it to the needs of specific demographics. It can also ensure the efficient timing of food deliveries to retailers, restaurants and food banks to minimise waste and spoilage.