The Climate Action Monitor 2025

The OECD's 2025 Climate Action Monitor reveals that current 2030 Nationally Determined Contributions (NDCs) are critically insufficient to meet Paris Agreement goals, with aggregate emissions 8% above targets and inconsistent with 2050 net-zero pathways. The report highlights a significant slowdown in climate action since 2021, with only a 1% expansion in 2024, and notes that only 17.7% of global emissions are covered by legally binding net-zero pledges. This lack of ambition and momentum exacerbates climate risks, underscoring the urgent need for stronger, coordinated international action and more ambitious, legally binding 2035 NDCs to avert severe global warming and align with long-term climate objectives.

Analysis

The OECD's 2025 Climate Action Monitor reveals a critical shortfall in global climate efforts, with current 2030 Nationally Determined Contributions (NDCs) proving insufficient to meet Paris Agreement goals. Aggregate emissions are 8%, or approximately 2.5 gigatonnes of CO₂e, above the level required for 2030 targets, creating both an NDC Delivery Gap and a significant 2050 Target Consistency Gap. This trajectory is inconsistent with long-term net-zero objectives.

A concerning slowdown in climate action has been observed since 2021, with policy expansion measuring only 1% in 2024, according to the OECD's CAPMF. This deceleration, no longer attributable to COVID-19 or economic shocks, signifies a loss of momentum in implementing effective climate policies and risks increasing carbon leakage due to uneven efforts across nations. Only 17.7% of country-based global emissions are currently covered by legally binding net-zero pledges.

The report underscores intensifying climate hazards, including record heatwaves, floods, and droughts in 2024, which heighten the risk of crossing critical climate tipping points. Projections indicate potential global mean temperature rises of up to 6°C between very low and very high-emissions scenarios, highlighting the severe costs of delayed action and the urgency for deeper emission reductions.

The forthcoming 2035 NDCs present a crucial opportunity to elevate ambition and enhance credibility by translating long-term targets into robust legislation. Stronger, coordinated international action is essential to align with the 1.5°C temperature goal, requiring a 63% reduction in countries' GHG emissions by 2035, and to mitigate the escalating physical and transitional risks.

Key Decisions for Investors

• Investors should re-evaluate portfolio exposure to physical climate risks given intensifying hazards and the current policy inaction, assess transition risks from potential future abrupt regulatory shifts impacting high-emission sectors, and identify opportunities in climate adaptation and mitigation technologies as the need for solutions intensifies.