Is your net zero strategy keeping you competitive? What financial institutions are signalling to businesses in 2025

This is a sponsored article from SustainabilityTracker.com member South Pole Australia.

As climate impacts intensify and 2025 marks a decade since the Paris Agreement, expectations on companies’ climate action are rising — not just from regulators and consumers, but increasingly from the financial system itself.

Businesses are now finding that their future competitiveness is tied to how well they plan for a low-carbon world.

South Pole’s 2025 Net Zero Report focuses on financial institutions as they act as a powerful lever for climate action. By choosing where capital flows, they help decide which business models thrive and which technologies scale. Their evolving expectations are sending clear signals to the real economy, including large, global companies that operate within a financial system that is shifting toward resilience and responsibility.

So, what do these shifts mean for your business? This blog unpacks four key findings from the report and explores how your climate strategy — or lack thereof — could influence your reputation, competitiveness and long-term success.

1. Net zero is on track – but the pace is uneven

The global shift to net zero is progressing, but the pace varies dramatically between sectors and geographies. While some companies are forging ahead, others are lagging behind, creating exposure to transition risk and reputational harm. Our report found that:

• 86% of financial institutions say they are either on track or partially on track to meet net zero goals
• 47% say a lack of progress from organisations they provide finance to is slowing them down
• 27% say they aren’t getting enough support from retail customers

What this means for your business

Climate action is no longer optional — it’s becoming a business norm and standard practice risk management. As finance shifts towards decarbonisation, companies are under growing scrutiny to demonstrate alignment with net zero pathways. Without a clear plan, companies risk losing access to favourable financing, partnerships, and market positioning.

Strategic actions to take

Develop and communicate a tailored, science-aligned climate transition plan. This isn’t just about compliance — it’s about securing future relevance and resilience in a low-carbon economy. It’s a signal to investors that your company has a plan to manage the physical and transition risks of achieving net zero.

2. Capital is flowing to climate-conscious companies

Financial institutions report that progress to reach net zero targets is being hampered by the slow pace of decarbonisation by the companies they finance, highlighting the interconnected nature of the climate transition.

Our report found that financial institutions are increasingly prioritising companies with credible climate strategies:

• 77% of financial institutions say companies with climate transition plans are more attractive to invest in
• 61% say progress on net zero influences capital allocation
• 73% want to finance companies that already have a carbon credit strategy’

What this means for your business

Your climate strategy is becoming a key lever for business development and competitiveness, influencing who wants to partner with you, buy from you, or procure your services.

Strategic actions to take

Build climate credibility through clear transition plans and smart use of tools like high-integrity carbon credits. These signals build trust with suppliers, customers, and collaborators.

3. Engagement is increasing

Rather than walking away from high-emitting sectors, financial actors are choosing to stay engaged and push for change. Our report found that:

• 88% plan to increase engagement with portfolio companies on decarbonisation over the next two years
• 44% see increasing exposure to green assets and companies with climate transition plans as their top decarbonisation priority
• 53% of large financial institutions anticipate a significant increase in engagement with companies on decarbonisation

What this means for your business

Companies are now expected to have a plan and show progress. Engagement is shifting from general climate commitments to deeper scrutiny of implementation. There is a growing expectation for full transparency.

Strategic actions to take

Be proactive. Anticipate tough climate-related questions and establish robust internal processes for tracking, reporting, and updating your climate strategy over time.

4. More communication, more conservatively

Despite increasing action, many financial institutions are now more cautious about what they publicly disclose. This shift is in response to regulatory ambiguity and backlash against greenwashing.

• 53% are increasing net zero communications
• 27% are making more conservative claims on climate to manage legal and reputational risks, especially in the UK (43%) and US (33%)
• Top drivers of communication strategies: regulatory requirements (48%), data availability (48%), and investor scrutiny (46%)

What this means for your business

You don’t need perfect data to start communicating. Investors want to see progress, not perfection. A lack of disclosure can signal a lack of readiness.

Strategic actions to take

Stay ahead of regulatory shifts and make sure your climate disclosures reflect both ambition and credibility. Avoid overclaiming, but don’t undercommunicate genuine progress.

Turning climate ambition into business resilience

The message from financial institutions is clear: climate risk is financial risk, and companies that fail to respond are becoming harder to back, insure, or do business with.

Investors and banks aren’t waiting for mandates. They’re proactively integrating climate into decision-making, shifting portfolios toward low-carbon opportunities, and safeguarding long-term financial stability. Increasingly, access to capital, reputation, and even market position depend on how convincingly companies can show they’re part of the solution.

So, what does leadership look like in this new reality?

1. Manage climate risks

• Embed climate and nature into your core strategy, not just ESG reporting
• Adjust business models and supply chains to align with global decarbonisation trends
• Engage constructively with your stakeholders — from regulators to partners — to show your long-term value

2. Build a credible climate transition plan

• Use globally recognised frameworks to guide your climate transition plan
• Rely on science-based targets and robust data to measure impact and progress
• Be transparent — credible disclosure builds trust with customers, investors, and regulators alike

3. Enhance internal accountability

• Set clear, measurable climate goals with executive-level buy-in
• Ensure adequate financing and governance to implement your transition strategy
• Empower teams with the tools, resources, and data they need to take ownership

In short, future-ready companies are those that act now, aligning with where capital is going, not where it’s been. The net zero transition may be complex, but it’s increasingly becoming a business necessity.

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This is an article from a SustainabilityTracker.com Member. The views and opinions we express here don’t necessarily reflect our organisation.