Sustainability Newsletter – July 2025

The International Energy Agency (IEA) released World Energy Investment 2025. The flagship report projects that global energy investment is set to increase by 2% year-on-year to a record USD 3.3 trillion in 2025, despite headwinds from geopolitical tensions and economic uncertainty. Of this, clean energy technologies are set to attract twice as much capital over fossil fuels.

Quick recap: The report, a global benchmark for tracking capital flows in the energy sector, finds that clean energy technologies – including renewables, nuclear, grids, storage, low-emissions fuels, energy efficiency, and electrification – are projected to attract record investments of USD 2.2 trillion in 2025, double the USD 1.1 trillion expected in oil, natural gas, and coal. The 2:1 surge reflects the growing influence of industrial policies, energy security concerns, technology maturation and the cost-competitiveness of electricity-based solutions on energy transition spending. Low-emissions power generation has nearly doubled over the past five years. Solar PV is set to attract USD 450 billion in 2025, becoming the largest energy investment category. Battery storage investments are also rising rapidly, expected to exceed USD 65 billion this year, while nuclear power funding has grown 50% in five years, projected to reach USD 75 billion in 2025. However, the report warns that grid investments, at USD 400 billion annually, lag behind generation spending due to lengthy permitting processes and supply chain constraints which could threaten electricity security.

Why is this interesting? While the IEA report offers initial insight into the emerging picture for 2025, continued geopolitical tensions, economic uncertainty, and policy inconsistencies in certain regions are leading some investors to adopt a “wait-and-see” approach to new project approvals. The Global Clean Investment Monitor, a new resource by Rhodium Group, aims to help investors track real-time, project- and country-level information on clean energy technology manufacturing investments. The data will include projects at various stages of completion (e.g. announced, under-construction, operational), as well as estimates of annual production capacity and projected demand by country to assess the balance of domestic supply and demand and its implications for import and export markets. The first installment focuses on manufacturing investments in electric vehicles and batteries and will expand in the coming year to include wind, solar, critical minerals, clean steel and cement and sustainable aviation fuels.

The Government of Ontario unveiled Energy for Generations, its first-ever integrated energy plan for electricity, natural gas, hydrogen and other energy sources. The blueprint will guide decisions on new infrastructure, regulatory frameworks, technology deployment and public investment.

Quick recap: With electricity demand projected to increase in Ontario by 75% over the next 25 years, the integrated energy plan establishes a unified framework and planning horizon to 2050 for Ontario’s full energy system – including electricity, natural gas, hydrogen, and other energy sources such as diesel, propane and low-carbon fuels. The strategy aims to improve coordination across agencies, harness partnerships with municipalities, businesses, and Indigenous communities; and enable investments in energy infrastructure to modernize the grid, integrate new technologies, and support economic resilience. Among the plan’s key initiatives are: investing in energy efficiency, generation, storage, and distribution, including the continent’s largest nuclear expansion; boosting exports of Ontario-made electricity, nuclear technology, and engineering expertise, including enhancing east-west grid connections across Canada; advancing momentum on national energy corridors and pipeline infrastructure; unlocking distributed energy resources to enable individuals and businesses to generate and manage their own electricity; and protecting access to fuels such as natural gas and other fuels like low-carbon hydrogen. The Ontario Government is also working on legislation to further support the province’s strategic approach to system planning, project prioritization and investment.

Why is this interesting? In establishing an integrated energy plan, Ontario aims to end previously fragmented or siloed energy planning processes – taking a page out of the UK’s playbook. In October 2024, the UK nationalized its energy system operator to establish NESO which will deliver the country’s first-ever strategic spatial plan for energy (SSEP) in 2026. The new plan will serve as a blueprint for the country’s energy infrastructure out to 2050 and provide a more strategic approach to cut grid connection waiting times, reduce overall system costs and give stability to investors. In May 2025, NESO reached its first milestone with the approval of the methodology it will use to develop the SSEP.

The World Bank published its annual State and Trends of Carbon Pricing 2025. The report highlights that direct carbon pricing instruments, such as emissions trading systems (ETS) and carbon taxes, mobilized over USD 100 billion for public budgets in 2024 for the second consecutive year, and collectively cover 28% of global greenhouse gas (GHG) emissions – up from 24% in the year prior.

Quick recap: Despite the complex and uncertain economic environment, carbon pricing continues to be relied upon by many governments to raise domestic revenues. Today, there are 80 direct carbon pricing instruments—37 ETS and 43 carbon taxes—implemented across jurisdictions representing nearly two-thirds of global GDP and covering 28% of global GHG emissions. This marks a slight increase over the twelve months since the previous report, when 75 instruments covered 24% of global emissions. In 2024, carbon revenues from ETSs and carbon taxes generated USD 100 billion for the second consecutive year, despite lower allowance prices in major ETSs like the EU and UK. Additionally, carbon credit markets and mechanisms, which are also forms of carbon pricing, presented a mixed picture. The report notes that carbon credit prices fell across most project categories, but nature-based removal credits commanded premiums and high forward prices, reflecting growing demand from voluntary buyers. A positive correlation is also emerging between credit prices and ratings from proprietary providers, signaling a shift toward higher-quality credits.

For businesses, internal carbon pricing can be used as a tool to help manage climate-related risks and inform capital investment decisions . In 2024, 1,753 companies across 56 countries reported using internal carbon pricing, an 89% increase since 2021, according to CDP data. Many have set an internal carbon price in the range of USD 10 to USD 130 per ton of CO2, with 15% of companies applying a price above USD 130 per tCO2 (an increase from 11% in 2023).

Why is this interesting? While the annual changes in global carbon pricing have been incremental, the report highlights the growing role of carbon pricing in the transition to a decarbonized economy. To scale impact, a first-of-its-kind government-led initiative aims to strengthen voluntary demand for high-integrity carbon credits by establishing shared principles – set for release at COP30 in November 2025. These principles seek to provide businesses with the confidence and incentives to invest in carbon markets, ultimately helping to increase the flow of climate finance.

The Australian Sustainable Finance Institute (ASFI) launched a Sustainable Finance Taxonomy custom-built for the Australian economy, aimed at aligning green and transition investments with the nation’s net-zero goals. It also offers a blueprint for other jurisdictions.

Quick recap: The Australian Treasury and financial regulators have launched the country’s landmark Sustainable Finance Taxonomy. It is a classification system that provides financial institutions and businesses with a voluntary framework to define green and transition activities and entities, as well as to facilitate the allocation of capital toward sustainable projects aligned with the country’s net-zero goals. Taxonomies can also help to mitigate greenwashing risk and make it easier to compare investment products and sustainability disclosures both within and across jurisdictions, enhancing investor confidence. Following a 20-month development process with market stakeholders, the Australian taxonomy establishes clear, science-based definitions for eligible green and transition investments in six priority sectors that include agriculture and land; electricity generation and supply; transport; manufacturing and industry; construction and buildings; and minerals, mining and metals. It is also the first taxonomy in the world to set expectations for engagement with First Nations peoples and the management of cultural heritage. Globally, three-quarters of advanced economies, or 47 countries, have a national or regional sustainable finance taxonomy in place. Australia’s taxonomy is interoperable and aligned with leading global taxonomies like the EU’s, ensuring international compatibility.

Why is this interesting? The Australian sustainable finance taxonomy is designed to attract global finance by being both internationally credible and tailored for the local market. Its release coincides with a period when some companies are deprioritizing climate risks due to economic uncertainty. In Canada, a new initiative by sustainable finance experts aims to encourage companies to develop and implement credible climate transition planning. The Business Future Pathways will draw on frameworks like the Australian taxonomy, ISSB’s sustainability disclosure standards and Canada’s Sustainable Finance Action Council’s recommendations to publish new reports in the coming months on why transition planning matters, particularly in this moment in time.

Carbon capture and storage (CCS) is at an inflection point with cumulative investments forecasted to reach USD 80 billion over the next five years, quadrupling capacity, according to DNV’s Energy Transition Outlook: CCS to 2050 report. Despite this growth, CCS is projected to capture just 6% of global emissions in 2050, requiring a sixfold increase to meet net-zero goals.

Quick recap: According to DNV, the CCS sector is set to receive nearly USD 80 billion in investment by 2030, quadrupling CCS capacity to 270 MtCO2/yr. Growth is expected to be driven by projects in North America and Europe, spurred by carbon capture development within oil and gas production, such as for natural gas processing and enhanced oil recovery. Post-2030, CCS growth is expected to be mainly driven by hard-to-decarbonize sectors such as steel, cement, chemicals, as well as maritime transport where onboard carbon capture could emerge in parts of the global shipping fleet by the 2040s. Countries like Canada, Australia, and the UK are also developing shared CCS ‘hub models’ that would help to pool project resources and reduce costs. As the technology matures and scales, costs are expected to drop by an average of 40% by 2050. However, DNV caution that the biggest barrier to accelerating CCS deployment is policy uncertainty, not technology or costs, which have been responsible for many CCS project failures in the past. Recent instability in the global economy risks further shifting CCS priorities and funding. Although CCS will grow to capture 1,300 MtCO2/yr by 2050 – equivalent to 6% of today’s energy-related global emissions – it is still far below the levels required for net-zero targets.

Why is this interesting? The report highlights that CCS is growing where there are mandates and price incentives. DNV projects that Europe, with its strongest price incentives, will catch up with — and eventually surpass — current North American deployment dominance. Last month, the UK Government announced it will commit an additional GBP 9.4 billion to carbon capture infrastructure. The funding comes atop GBP 21.7 billion committed for CCS last October over 25 years and will go toward supporting development of four CCS projects. The funding is also expected to unlock billions more in private investment. In December 2024, CIBC supported the financing for two landmark European transactions in the carbon capture, utilization and storage space – Northern Endurance Partnership & Net Zero Teesside Power. The projects are located in the East Coast Cluster of the UK, which accounts for ~50% of the country’s industrial emissions.

In line with our commitment to make sustainability a reality for our clients and the communities we serve, CIBC Capital Markets continues to advise and lead significant client deals as part of a focused objective to help our clients achieve their sustainability goals.

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