In 2024, the world witnessed a significant wave of elections across more than 70 countries, including in major economies such as India, the United Kingdom, the United States and the European Union.
Recent elections have led to a more fragmented global political landscape. Notably, in over 80% of democracies that held elections, incumbent parties lost seats or vote share, potentially prompting some governments to reconsider their policy priorities.1 While voters in some countries (e.g., the U.K.) empowered their governments to place sustainability at the forefront of their policy agendas, others (e.g., the EU) demanded a more balanced approach. Meanwhile, in the U.S., voters prioritized cost-of-living concerns.
In our publication last year, “Building Momentum: 2024 Outlook for ESG Regulation,” we highlighted the impact of rapidly evolving regulatory frameworks on sustainable investing. While the regulatory landscape remains complex, the discourse around financing the transition has moved to a more “existential” level, with governments balancing sustainability with other priorities, including competitiveness, energy security/lower prices and defense.
Therefore, 2025 marks the beginning of a new era, one that will require pragmatism to fund the transition. In this Insights, we aim to capture the impact of these political shifts on sustainable finance frameworks and explore how the changes influence policy directions. As active managers, we diligently monitor the potential effects of such shifts on our investments, ensuring we are well prepared to support clients through policy and regulatory changes.
We have identified three trends that we believe could shape the sustainable finance policy and regulatory landscape in 2025:
- Policymakers juggle sustainability with competitiveness, energy security and defense
- Transition finance takes the spotlight to drive genuine decarbonization efforts
- Maturing regulations demand adaptability amid ongoing uncertainty
