Wishing you a great 2025!

Welcome to Climate Money Work! As we approach the holiday season, we want to take a moment to thank you for your support and engagement throughout the year. Your interest and feedback have been invaluable as we’ve shared insights and updates on sustainability trends and practices.

Starting in the new year, we’ll be transitioning to a less frequent newsletter schedule. While we won’t land in your inbox as often, we look forward to staying connected with many of you through direct communication, continuing to collaborate and share ideas that drive positive impact.

Thank you for being part of our journey, and we wish you a wonderful holiday season and a sustainable, successful year ahead!

Warm regards,

Climate Money Work Team

2025 Sustainability Trends: How Cloud and AI Are Shaping Sustainability 

Cloud and AI advancements are shaping sustainability, bringing opportunities for innovation while raising pressing environmental concerns. Cloud infrastructure continues to expand, with IDC projecting 19.3% year-over-year growth driven by AI-powered workload modernization. However, the environmental cost is steep: Gartner estimates AI could consume 3.5% of global electricity by 2030.

Generative AI (GenAI) offers sustainability benefits, such as optimizing energy grids and reducing emissions, but its high energy demands pose challenges. Leading cloud providers are addressing these issues with innovations like waterless cooling systems for data centers.

The EU’s Corporate Sustainability Reporting Directive (CSRD) amplifies the need for sustainable cloud practices. Frameworks like GreenOps and FinOps enable businesses to align IT usage with environmental goals while improving financial accountability. These tools simplify compliance and support data-driven sustainability strategies.

AI and cloud technologies are essential for achieving sustainability objectives, creating a virtuous circle of efficiency and innovation. As highlighted by MIT Technology Review and Nature, balancing energy use and sustainability will define the next phase of growth in 2024.

Sources: MIT Technology Review, Nature, IDC.

2025 Sustainability Trends: Transition Investing Takes Center Stage

Investor strategies in decarbonization are shifting from minimizing carbon exposure to unlocking value through transition investments. Schroders identifies two key pillars: companies reducing their emissions toward sustainable business models and those providing solutions to help others transition. Both approaches offer opportunities for growth, with historical data showing that firms prioritizing decarbonization often outperform.

The U.S., despite recent focus on the Inflation Reduction Act, represents just 10% of global investments in climate and energy transitions. However, major industrial players and tech giants are driving advancements in nuclear energy and carbon removal credits. Outside the U.S., Japan and emerging markets offer additional opportunities, particularly as policies in Washington evolve.

Active ownership remains critical, especially in hard-to-abate sectors, as investors encourage alignment with net-zero goals. This approach emphasizes collaboration and innovation, showcasing the broader value of transition investments in a decarbonizing economy.

Source: Schroders Insights.

2025 Sustainability Trends: U.S. Businesses Prepare for Mandatory Sustainability Reporting

Sustainability reporting in the U.S. is entering a new era as the European Union's Corporate Sustainability Reporting Directive (CSRD) extends its reach globally. By 2025, approximately 50,000 companies will be directly impacted by the CSRD, including over 3,000 U.S.-headquartered businesses. This shift moves sustainability reporting from voluntary to mandatory, with a significant expansion in scope beyond climate-related issues.

The European Sustainability Reporting Standards (ESRS) require companies to assess the materiality of 70 disclosures across areas such as climate change, biodiversity, business conduct, and community impact. These disclosures go beyond traditional financial reporting and require third-party assurance. This comprehensive approach to sustainability metrics will set a new global benchmark, and U.S. companies must prepare for increased reporting obligations, especially as value chain-related disclosures gain prominence.

CPAs and business advisors should familiarize themselves with these evolving requirements to support affected companies in navigating this shift.

Source: IPE News.

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