2024 was a tough year for climate progress. From stalled commitments at COP summits to dire scientific reports confirming the severity of our trajectory, the global community is facing an urgent call to action. The Intergovernmental Panel on Climate Change (IPCC) continues to warn that even their conservative predictions are being outpaced by reality, underscoring the need for accelerated solutions.

Yet, political will, particularly in major economies, appears to be waning. But the reality is that even with the will, governments cannot tackle this alone. Partnerships with the private sector, with entrepreneurs, and institutional investors will be critical if we’re to truly push progress forward.

As we approach 2025, the question looms: who will step up when governments step back? And who will partner with governments to ensure true change is enacted?

While this withdrawal is concerning, it also represents an opportunity—one where the private sector, institutional investors, and global markets can rise to the occasion and fill critical gaps in climate finance.

The State of Play

This year’s global climate and biodiversity summits delivered mixed results. Progress on Article 6 of the Paris Agreement, aimed at creating robust global carbon markets, was a bright spot, but commitments to financing biodiversity and climate adaptation remain woefully inadequate both by corporates and governments.

These crises are interconnected: damage to natural ecosystems fuels the climate crisis, and unchecked climate change further erodes biodiversity. Yet, traditional public financing structures have struggled to meet their mandates, let alone scale to the enormity of the problem. With expectations that political focus on climate might diminish further in certain regions, the responsibility to lead is shifting to other players.

The Case for Private Sector Leadership

The private sector, particularly institutional investors and corporates, has shown a growing willingness to engage with nature-positive solutions that address the double environmental crisis and builds resilience. This is not just altruism; the business case for climate-conscious strategies is undeniable. Companies and investors increasingly recognise that failing to account for climate and biodiversity risks leads to bad business outcomes in the medium and long term.

Encouragingly, asset managers and fund managers are stepping into this space, developing innovative strategies to raise funding, and partner with organisations focused on sustainable solutions to build investable and impactful project pipelines.

While these sectors are traditionally risk-averse, their cautious but deliberate movement toward climate and nature investment is a hopeful sign. Similarly, corporates, especially in areas like regenerative agriculture, are demonstrating sustained commitment to sustainability models that benefit both people and the planet.

Unlocking Nature’s Potential

A critical frontier for private sector engagement is nature-based solutions. Efforts to restore ecosystems, reduce deforestation, and improve land management yield multiple benefits: sequestering carbon, preserving biodiversity, and enhancing resilience to climate impacts. However, expecting nature to “pay for itself” is unrealistic in today’s economic paradigm. Clean air, thriving ecosystems, and biodiversity are common-pool resources, while their value often remains external to market systems – the exception being carbon sequestration that has been somewhat operationalized through compliance and voluntary carbon markets.

This is where innovative partnerships and finance mechanisms are crucial. By showcasing scalable, ground-level solutions that sustain and increase the value of natural capital, the private sector can demonstrate that investing in nature is not only necessary for climate and biodiversity but good for business.

The Road Ahead

Despite challenges, there are reasons for optimism in 2025. The development of global carbon markets under Article 6 has the potential to unlock significant finance flows. Meanwhile, institutional investors continue to be curious and cautious—but willing—to explore how to embed climate and nature considerations into their portfolios.

This moment is also a call to action. Governments alone cannot shoulder the burden of the climate and biodiversity crisis. The private sector must not only step up but accelerate its commitments. This is an opportunity for businesses to innovate, lead, and partner with public and civil society actors to drive meaningful progress.

Moreover, the narrative around nature offers a unique opening. While climate action can be politically divisive, biodiversity and ecosystem restoration often garner broader support. Showcasing nature-based solutions’ essential contribution to resilience, productivity, and well-being may galvanise action where broader climate policies have faltered in the land-use sector.

A Hopeful Vision

At its core, the shift toward private sector leadership in climate finance is about fostering practical, scalable solutions. Sustainable land management practices that conserve nature and help address our immediate need for notorious food and other nature-supported services and products can transform lives, proving that environmental stewardship and economic development are not mutually exclusive.

As we look to 2025, the message is clear: while governments may falter, the private sector has the power—and the responsibility—to lead. By stepping into this moment, investors, corporates, and innovators can help choose to build a brighter future that defies some of the gloomy odds of our current trajectory.

Those odds won’t be solved by international diplomacy alone, but rather in partnership and perhaps even led by the bold and visionary action of the business community and private sector finance. The solutions are within reach; now, it’s time to accelerate.

For more, read '2025 is the Year for ESG' or contact info@thepalladiumgroup.com.