ISS ESG 2025 Global Outlook Report Identifies Key ESG Risks and Opportunities for Investors

NEW YORK (January 21, 2025) — ISS ESG, the sustainable investment arm of ISS STOXX, today released its annual global outlook report, Actionable Insights: Top ESG Themes in 2025Actionable Insights: Top ESG Themes in 2025. The new report draws on comprehensive ISS ESG data, with research and insights from ISS ESG’s financial research and sector leads, climate specialists, and regulatory experts to help investors identify key ESG risks and opportunities likely to impact their portfolios in 2025.

Key global trends identified by ISS ESG that some investors may be focusing on through 2025 include:

Time for More ESG Accountability: Supervisory authorities are starting to intervene in cases of greenwashing, imposing fines and other penalties on companies with sustainability-related actions or communications that do not reflect their underlying sustainability profiles. As investors try to identify potentially misleading sustainability-related claims, ESG ratings and data providers can support them by filtering out irrelevant or non-representative data and assisting investors to focus on the claims’ essential aspects.

Tackling Plastic Pollution: The United Nations Plastics Treaty negotiations, which will continue into 2025, are seeking to address plastics pollution at the international level. Reports suggest the final treaty may set a target for reduced plastics production and adopt an “Extended Producer Responsibility” policy to enhance producers and importers’ accountability for safe and environmentally sound plastics management. Possible treaty provisions on harmful chemicals in plastics may also have future legal implications for companies. Depending on its final form, the UN Plastics Treaty could increase the risks to companies and investors from plastic pollution.

A Deeper Understanding of Natural Systems: The Planetary Boundaries Framework (PBF) presents an expansive view of the interactions among Earth’s climate, land, and water systems. Interested investors could gain a better understanding of their portfolios’ exposures by adopting a more systematic approach in line with the PBF. The challenge is that a scientific framework for assessing environmental impact on a planetary scale cannot easily be translated into assessing a specific company’s impact. Nevertheless, indicators such as a company’s approach to climate change or freshwater use can serve as proxies for a PBF assessment.

The Energy Challenges of AI Expansion: Although Artificial Intelligence (AI) technology may foster greater energy efficiency in certain respects, the aggregate energy use of companies with large data centre operations is growing. Generative AI and cryptocurrencies could drive data centre consumption of electricity to more than 1,000 TWh by 2026. This rise in data centre electricity demand raises questions about whether large technology companies are transitioning in a manner consistent with Net Zero ambitions. A review of the “Magnificent Seven” technology companies indicates these companies are taking notable steps to align with Net Zero, but curbing emissions remains a challenge. Progress against Net Zero targets may require more aggressive mitigation measures in the next few years.

Human Rights in the Spotlight: While the responsibility to respect human rights has long relied solely on businesses’ voluntary commitments, multiple jurisdictions are shifting from voluntary to mandatory models of human rights due diligence. Both national and regional regulation, such as the European Corporate Sustainability Due Diligence Directive and the EU Forced Labor regulation, mean companies increasingly face obligatory corporate due diligence duties related to human rights impacts along their global value chains.

Evolving sustainability-related regulatory enforcement, as well as natural capital, human rights due diligence and continuing climate change mitigation efforts are among the major themes likely to shape the ESG investment landscape in 2025… Our new report demonstrates how ISS ESG’s proprietary data and research team, with significant capital markets and sectoral expertise, help support investors in evaluating and prioritizing evolving ESG risks and investment opportunities.

To download a copy of the full report, please click herehere.

About ISS ESG
ISS ESG solutions enable investors to develop and integrate sustainable investing policies and practices, engage on responsible investment issues, and monitor portfolio company practices through screening solutions. ISS ESG also provides climate data, analytics, and advisory services to help financial market participants understand, measure, and act on climate-related risks across all asset classes. In addition, ESG solutions cover corporate and country ESG research and ratings enabling its clients to identify material social and environmental risks and opportunities. For more information, please visit us at: www.iss-esg.comwww.iss-esg.com

About ISS STOXX
ISS STOXX GmbH, through its group companies, is a leading provider of comprehensive and data-centric research and technology solutions that help capital market participants identify investment opportunities, detect qualitative and quantitative portfolio company risks, and meet evolving regulatory requirements. With roots dating back to 1985, we today deliver world-class benchmark and custom indices across asset classes and geographies and serve as a premier source of independent corporate governance, sustainability, cyber risk, and fund intelligence research, data, and related offerings. Our products and services give clients the scale and leverage they need to grow their business more effectively and efficiently. ISS STOXX, which is majority owned by Deutsche Börse Group, is comprised of more than 3,400 professionals operating across 33 global locations in 19 countries. Its approximately 6,400 clients include many of the world’s leading institutional investors who turn to ISS STOXX for its objective and varied offerings, as well as companies focused on ESG, cyber, and governance risk mitigation as a shareholder value enhancing measure. Clients rely on ISS STOXX’s expertise to help them make informed decisions to benefit their stakeholders.