Data confirming 2024 as the hottest year on record – and the first to exceed 1.5°C above pre-industrial levels – should trigger “unprecedented” climate action, said the World Wide Fund for Nature (WWF). “The Copernicus climate data is a wake-up call that highlights the urgent need to invest in a just transition to warm homes, clean energy and nature-friendly farming,” said Isabella O’Dowd, WWF’s Head of Climate Policy. “It’s time to put policy into action and the money on the table to finance a just transition to a low-carbon future and turn the temperature down. Climate action now is a downpayment to grow the economy and build the businesses of the future.” The European Commission-supported Copernicus Climate Change Service said that human-induced climate change remained the primary driver of extreme air and sea surface temperatures, with other factors, such as the El Niño Southern Oscillation, also contributing. In November, COP29 ended with no new common pledge to increase investment in renewable energy after parties had agreed at COP28 to transition away from fossil fuels. “We need record increases in renewable energy generation, ecosystem restoration and finance for climate and nature in 2025,” said Fernanda Carvalho, WWF Global Climate and Energy Policy Lead. “Multilateralism remains the best and only solution to engage all countries in this vital mission. It must be strengthened this year.” James Alexander, CEO of the UK Sustainable Investment and Finance Association, said the financial system must rapidly transition away from activities that accelerate climate change. “Every week we encounter investors who have faced policy barriers like planning permission and grid connections which prevent them from investing in otherwise viable renewables projects,” he said. “The sustainable transition is the economic opportunity of the century, but only if policymakers urgently remove these barriers”. 

Investors have been offered guidance on assessing their portfolio exposures to deforestation in the inaugural flagship study from ISS ESG’s Natural Capital Research Institute. ISS ESG, the sustainable investment arm of ISS STOXX, established the institute last year to improve understanding of how nature affects businesses and investments and to help institutional investors incorporate nature-related considerations into their investment decision making. The study suggested that investors should take a tailored approach to deforestation risk exposure analysis that takes account of multiple layers of exposure, and utilises three key data typographies: dependency, impact, and performance data. ISS recommended use of dependency assessments to help investors identify financial risks arising from deforestation and impact assessments to understand how their portfolios affect forests. “Institutional investors are aware of deforestation risks within their portfolios,” the report read. “Although challenges persist, opportunities are growing rapidly – more discussions are occurring around asset-level data, substantial guidance for businesses and investors around deforestation continues to become available, nature data architecture grows, and regenerative agriculture and sustainable land management practices expand.” The research additionally highlighted that institutional investors are increasingly considering the interconnected of biodiversity loss and climate change challenges, the need to better understand associated dependencies and impacts, and to assess related risks and opportunities in their portfolios.

The global carbon credit market is set to grow at least fivefold by 2030 after a period of stagnation, according to projections by data and research provider MSCI. The market remained flat at US$1.4 billion in 2024, below a peak of US$1.7 billion in 2022, due to average spot prices falling by 20% and 180 MtCO2e of credits being retired – meaning they were permanently removed from the market. “This chill persisted despite increasing momentum on improving the integrity of carbon projects and further growth in the number of corporations announcing targets for their net emissions,” MSCI noted, pointing out that 2,732 companies had a new climate target validated by the Science Based Targets initiative in 2024, a 65% increase on the previous year. However, MSCI Carbon Markets’ latest modelling suggests that the global carbon credit market could rise in value to at least US$7 billion – up to as much as US$35 billion – by 2030. By 2050, this could increase to between US$45 billion to US$250 billion, MSCI said. “Sources of demand include voluntary corporate action (from companies making a net zero or carbon neutrality claim), the CORSIA market for international aviation, the potential use of carbon credits within compliance markets and the use of carbon credits by governments as part of Article 6 of the Paris Agreement,” the firm noted. The mix of carbon credits is also expected to evolve, with around two-thirds of the value by 2050 being in carbon removal credits. “Even more eye-catching is likely to be the growth of ‘engineered’ removal credits, such as from projects that capture CO2 directly from the air or that trap carbon in the soil through biochar,” MSCI said, predicting these alone could reach US$42 billion by the mid-century.