Despite signs of a climate backlash in some political systems, transition experts are still positive about the long-term net zero transition.
The latest report by the Inevitable Policy Response (IPR) – 2025 Transition forecast – which analyses how the net zero transition will unfold if all planned climate global policies are implemented, has struck an optimistic tone.
Daniel Gallagher, senior lead, climate change, at Principles for Responsible Investment (PRI), said: “This new 2025 transition forecast from IPF provides asset owners and managers with essential insights into how global policy and transition experts now expect the net zero transition to unfold across sectors and markets.”
Despite potential headwinds in US climate policy, experts remain optimistic about a global net-zero trajectory.
Over 80% of G20 nations are projected to achieve an 80% reduction in emissions by the 2050s, with 40% expected to meet their net-zero targets within a four-year margin, according to the report.
Challenges still persist, however, particularly in ending deforestation, where progress is quite slow.
Commissioned by the PRI in 2018 to advance the industry’s knowledge of climate transition risk, the report aims to support investors’ efforts to incorporate climate risk into their portfolio assessments.
Looking at the regulatory landscape, the report found that most countries maintained policy momentum in 2024, mainly driven by advances in low-carbon technologies.
A finding that mirrors the latest analysis from the Confederation of British Industry (CBI) published earlier this week that found the UK’s net zero economy is growing three times faster than the overall economy itself.
The report comes after the UK Climate Change Committee (CCC) published its seventh carbon budget yesterday, laying out its recommendation to the UK government on how to achieve net zero carbon emissions by 2050, while highlighting key investment opportunities.
Political headwinds post-Trump
However, the report warns that the outlook for 2025 remains uncertain, stressing the importance of monitoring policy developments.
Post US election climate policy may create challenges for investors who have been relying on the momentum from previous climate policies, due in part to the US net zero target expected to be delayed into the 2060s.
In addition, potential trade wars, particularly related to tariffs on green technologies, are expected to create increased market volatility that could delay the adoption of cleaner technologies.
Looking ahead, the report urges investors to develop high-conviction, in-house forecasts to be resilient to transition risks and leverage future opportunities.
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