Navigating Net-Zero in 2025: Challenges, Commitments, and the Role of Finance
As we move further into 2025, the global journey to net-zero faces increasing uncertainty, shaped by shifting political landscapes and economic pressures.
The UK financial sector, including Scotland’s financial services industry, must navigate diverging international policies while maintaining momentum towards sustainability. In this article, the Climate Change and Journey to Net-Zero workstream at SFE YP explores key themes that will shape the net-zero transition this year.
Climate policy divergence
The financial sector plays a key role in enabling businesses to decarbonize, yet the divergence in global climate policies is making this more complex. UK firms are required to report Scope 1 (direct – i.e., transport fuel use) and Scope 2 (indirect – i.e., electricity used for operations) emissions, with Scope 3 (emissions in the supply chain) being largely voluntary. However, progress toward a greater awareness of the impact of corporates on the environment is being made, even beyond the obligatory reporting requirements.
However, the recent policy reversals in the US, including withdrawal from the Paris Climate Agreement, cuts to renewable energy funding, and an emphasis on fossil fuel production, have sent ripples through global markets. Several major financial institutions have scaled back their climate commitments or withdrawn from net-zero alliances. This raises concerns about whether UK firms—particularly those in Scotland’s financial hub—will remain steadfast in their climate commitments or follow global trends of retrenchment.
Edinburgh, home to asset managers, insurers, and pension funds, has long positioned itself as a leader in sustainable finance. But as global firms scale back their climate commitments, will Scotland’s financial sector follow suit or stand firm against the tide? With major institutions reassessing the risks of climate-related investments, the ripple effects of America’s shift could challenge Scotland’s ability to attract green capital and uphold its sustainability goals.
The fossil fuel dilemma
Infrastructure expansion and energy policy shifts are also shaping the UK’s climate trajectory. The UK government’s focus on economic growth has led to plans for expanding Heathrow, Gatwick, and Stansted, raising concerns over aviation emissions. Meanwhile, the global post-pandemic recovery has seen a resurgence in passenger numbers, but without a clear path to making aviation more sustainable, emissions could soar.
Whilst it’s great to see the return of passenger numbers in a post-Covid era, it’s important to transition to a more efficient and sustainable era for the aviation industry.
At the same time, oil and gas interests are resurging, riding on the back of President Trump’s directives, seeking profit and improved outcomes for shareholders. With Trump’s pro-fossil fuel stance reinforcing the industry’s profitability, global energy firms face the challenge of balancing shareholder interests with long-term net-zero goals. These developments raise a critical question: Are net-zero targets still viable, or are they becoming increasingly unrealistic?
Breakthroughs in green technology and the role of finance
Despite the challenges, innovation in carbon capture, green hydrogen, and battery storage is offering hope, through promising innovation. The UK has already met its third carbon budget and set new interim climate targets for 2030 and beyond, reinforcing its leadership in emissions reduction. However, these technological advancements require significant financial backing (including significant upfront investment to construct and operate), making the role of the financial sector crucial.
The financial sector will play a key role in unlocking the funding needed into net-zero and green technologies – wind, solar, hydro, carbon capture, and battery storage all require significant upfront investment to construct and operate.
UK banks and asset managers are investing in green finance, even as regulatory inconsistencies and instability in the market, create challenges. The upcoming November 2025 UN Climate Conference in Brazil, set to focus on climate mitigation, adaptation, and financing, will be a key moment for global players to reassess commitments and drive investment in clean technologies.
US policy and the impact on the UK
The second Trump presidency has already influenced UK environmental policy and corporate decision-making. Donald Trump’s second term has already influenced global environmental policies, prompting the UK government to adjust in response to US climate rollbacks, withdrawal from the Paris Agreement, and fossil fuel promotion.
For example, National Grid’s decision to sell its US renewable assets for $1.735 billion, opting to concentrate on UK energy networks instead, reflects growing uncertainty over US federal climate policies and their long-term viability. Meanwhile, major institutions—including the UK government—have postponed their net-zero targets. HSBC for example, has extended its net-zero goal from 2030 to 2050, citing global regulatory inconsistencies that complicate sustainability efforts.
Despite these challenges, UK banks continue investing in green finance, reinforcing Britain’s climate leadership even as US policies diverge.
Staying the course amidst global uncertainty
The first months of 2025 have highlighted the fragility of global climate commitments. While political shifts and economic pressures threaten progress, the financial sector remains a critical enabler of the transition to net-zero.
Scotland and the wider UK must balance climate ambitions with economic realities, ensuring that investment in sustainability continues despite global headwinds. At SFE YP, we remain dedicated to promoting JTNZ within the UK financial sector, recognizing that our efforts contribute to a larger global movement.
The road to net-zero by 2050 is not without obstacles, but with innovation, investment, and firm commitment, meaningful progress remains within reach.