Happy (Gregorian and Lunar) New Year everyone! I wish you all a healthy and happy and prosperous New Year. That said, I think we could be in for some choppy economic waters this year with geo-politics leading the news and potentially disrupting markets. As I sat watching the US Federal Reserve rate announcement today (Jan 28, 2026), one of the commentators said it felt like we were in the ninth week of January. I could not agree more!
The year has begun against a backdrop of ongoing geopolitical and economic volatility, underscored by discussions at Davos (Jan 19 – 23, 2026). In my years of attending the World Economic Forum, I cannot recall being at one where the entire world felt so fragile and on the brink of an abyss. That said, on Wednesday the fever broke, and the risk receded (at least for the time being) and Mark Carney made a significant speech on the direction of a potential new world order.
Though it was hard to focus on anything other than geo-politics, there were some defining climate and sustainability developments of January 2026. These items have been a stark juxtaposition: intensified physical warming signals, aggressive U.S. policy retrenchment, and simultaneously a deepening global pivot toward electrification, carbon border measures and nature‑positive investment led by Europe, major emerging economies and private capital. For sophisticated business leaders and investors, the core message is that climate risk is now structurally embedded in macro, trade and technology trajectories, even as global governance fragments; opportunity is concentrating around electrification, grid and storage build‑out, and transition‑aligned trade regimes, while policy and geopolitical risk premia are rising, particularly in U.S.-linked value chains. [1][2][3][4][5][6]
Macro climate signals and the economics of “hotter still”
Three independent scientific assessments released in mid‑January confirmed that 2025 was the third hottest year on record, behind only 2024 and 2023, despite the presence of a La Niña cooling phase that would normally depress global averages. Scientists cited in these reports emphasised that the fact a La Niña year could sit among the very warmest on record underscores the accelerating contribution of greenhouse gases, with underlying warming now strong enough to offset cyclical ocean‑driven cooling. Berkeley Earth and other research groups expect 2026 global average temperatures to be similar to 2025, potentially ranking fourth on record, implying little respite for climate‑sensitive sectors such as agriculture, insurance and coastal real estate even in the absence of a strong El Niño.[4][6]
For investors, the data points reinforce that transition and physical risks are no longer tail scenarios but central tendencies that are increasingly being priced into portfolios, capital budgeting and sovereign risk assessments. In parallel, Politico’s climate coverage has framed 2026 as a potential inflection year in which global emissions growth could finally flatten, with early projections suggesting coal use falling, gas emissions still rising and oil demand creeping up, yielding a best estimate of roughly flat overall emissions growth—close to a structural peak but not a decisive decline. Analysts quoted in these pieces stress that even a plateau in annual emissions would mean continued accumulation of greenhouse gases in the atmosphere, with warming proceeding until net emissions move decisively toward zero.[7][6][4]
Three independent scientific assessments released in mid‑January confirmed that 2025 was the third hottest year on record, behind only 2024 and 2023, despite the presence of a La Niña cooling phase that would normally depress global averages. Scientists cited in these reports emphasised that the fact a La Niña year could sit among the very warmest on record underscores the accelerating contribution of greenhouse gases, with underlying warming now strong enough to offset cyclical ocean‑driven cooling. Berkeley Earth and other research groups expect 2026 global average temperatures to be similar to 2025, potentially ranking fourth on record, implying little respite for climate‑sensitive sectors such as agriculture, insurance and coastal real estate even in the absence of a strong El Niño.[4][6]
For investors, the data points reinforce that transition and physical risks are no longer tail scenarios but central tendencies that are increasingly being priced into portfolios, capital budgeting and sovereign risk assessments. In parallel, Politico’s climate coverage has framed 2026 as a potential inflection year in which global emissions growth could finally flatten, with early projections suggesting coal use falling, gas emissions still rising and oil demand creeping up, yielding a best estimate of roughly flat overall emissions growth—close to a structural peak but not a decisive decline. Analysts quoted in these pieces stress that even a plateau in annual emissions would mean continued accumulation of greenhouse gases in the atmosphere, with warming proceeding until net emissions move decisively toward zero.[7][6][4]
U.S. climate policy retrenchment and global governance fracture
January 2026 has seen an unprecedented rollback of U.S. engagement in multilateral climate governance, with significant implications for global coordination and policy risk. In early January, President Trump announced that the United States would withdraw from the 1992 United Nations Framework Convention on Climate Change (UNFCCC), the overarching treaty that underpins the entire system of international climate negotiations. Shortly thereafter, the administration completed the legal steps to exit the Paris Agreement for a second time, with the formal departure from the accord—committing nearly 200 countries to limit warming to “well below” 2 degrees Celsius and preferably 1.5 degrees—taking effect on 27 January.[8][9][10][3]
Reporting from Bloomberg and Politico highlights the US administration has paired these treaty exits with an aggressive dismantling of domestic climate rules under the Clean Air Act, including rollbacks of regulations on power‑sector and vehicle emissions, and the planned elimination of a major scientific climate research center. Commentators note that these actions signal a strategic vision of the United States as a fossil‑fuel “petrostate” at the very moment when global demand for oil is expected to peak later this decade and when China is pursuing a model of “electrostate” leadership built on solar, wind and other clean power technologies.[11][10][12][3][13][14]
From a markets and corporate‑strategy perspective, the immediate implications fall into three buckets. First, rule‑of‑law and litigation risk has risen sharply in U.S. climate policy, with many repeals expected to face court challenges within 60 days of finalisation, creating an environment of regulatory whiplash that complicates long‑term capital planning. Second, federal retreat has pushed more of the policy burden onto states, cities and private actors, reinforcing the importance for investors of tracking subnational regulations, disclosure mandates and voluntary standards, particularly in large U.S. states that continue to advance their own climate frameworks. Third, the international credibility gap created by treaty exits risks trade friction and carbon‑border responses from other major economies, especially the EU, reinforcing the importance of trade‑exposure analysis for U.S.‑based exporters of carbon‑intensive goods.[3][5][14][11]
Europe, CBAM and the hardening of climate‑linked trade
In contrast to the U.S. retreat, Europe has entered 2026 by operationalising a new phase of climate‑aligned trade policy via the EU’s Carbon Border Adjustment Mechanism (CBAM), which launched on 1 January for selected high‑emissions imports such as steel and other carbon‑intensive products. The Financial Times reports that CBAM is designed to level the playing field for European producers subject to stringent domestic carbon costs by imposing equivalent carbon pricing on imports or requiring comparable emissions reduction measures from exporting countries. While several developing nations argue CBAM risks raising costs, constraining trade and impeding their growth, EU officials and supporting analysts contend that it is already prompting major exporters such as Turkey to consider their own carbon pricing and allowance trading systems, effectively externalising EU climate standards along global value chains.[5]
The same reporting underscores that 2026 is emerging as a critical test of global willingness to align climate ambition with concrete implementation, particularly in the context of record recent heat and ongoing U.S. federal rollback. In Asia, large‑scale renewable projects such as the Terra Solar initiative in the Philippines—expected to bring online 3,500 MW of solar capacity and 4,500 MWh of battery storage in its first phase—are scheduled to begin operating in 2026, positioning it among the world’s largest single‑location solar farms and illustrating the scale at which emerging markets can pivot toward clean power when policy frameworks and financing converge. At the same time, UN climate negotiations have yet to secure a consensus roadmap for phasing out fossil fuels, with more than 80 countries having failed in late‑2025 COP talks to win agreement on such a plan; Brazil has pledged to bring forward a strategy for reducing fossil‑fuel dependence at COP31 in Turkey later this year, but details remain to be seen.[5]
For corporates and investors with European and global exposure, CBAM and related measures have three strategic consequences. They increase the salience of product‑level carbon accounting, as border charges will depend on verified emissions profiles of traded goods rather than only country‑level averages. They create competitive advantage for firms that can decarbonise production faster than peers, particularly in trade‑exposed sectors like steel, aluminum and cement. And they raise the likelihood that other large markets will experiment with their own border measures or standards‑based trade policies, fragmenting regulatory regimes but converging around the idea that carbon intensity is a material trade variable.[5]
Electrification, green technologies and capital flows
Bloomberg’s early‑January climate features identify 2026 as a pivotal year in which electrification—rather than decarbonisation as a generic goal—is poised to be the central climate story. Analysts argue that alongside cutting emissions from existing energy systems, the world must electrify as many end‑uses as possible, from transport and heating to industrial processes, in order to enable deep decarbonisation via increasingly clean power grids. The “Electrotech Revolution” concept, advanced by strategists such as Kingsmill Bond at Ember, frames this as a structural technology shift comparable to past industrial transformations, with new value pools emerging around power electronics, storage, demand‑response, smart grids and electric vehicles.[2][13][1]
Bloomberg’s “14 global trends” list for climate in 2026, together with its climate newsletter coverage, highlights several themes particularly relevant for investors. These include a bifurcation in the global electric‑vehicle market between high‑end, feature‑rich models and low‑cost mass‑market offerings; intensifying competition in battery supply chains and critical minerals; and the expansion of nuclear and long‑duration storage as complementary technologies to variable renewables. Reporters also note that despite progress, the world remains “woefully off track” to achieve the roughly 50 percent emissions cuts by 2030 that scientists say are needed to have a credible chance of limiting warming to 1.5 degrees, implying continued policy and investor pressure for accelerated deployment of proven technologies rather than reliance on late‑stage innovations.[1][2]
National‑level analyses echo these dynamics. A January report from the RBC Climate Action Institute, summarised in the Financial Times’ markets section, shows Canada’s total national emissions in 2025 projected to have declined about 7 percent relative to 2019, with significant emissions‑intensity reductions estimated in electricity, buildings and oil and gas, driven by clean‑tech deployment, efficiency and regulatory measures. The same report notes that climate‑aligned capital flows in Canada are running at approximately 20 billion dollars annually, with nearly 100 billion dollars of incentives for clean‑tech and climate programs budgeted between now and 2035, even as its “Climate Action Barometer” index registered its first decline in six years amid policy uncertainty and cost‑of‑living pressures.[15]
For allocators, this cluster of evidence has clear implications. Electrification and grid modernisation are emerging as central transition themes, cutting across listed equities, infrastructure, credit and private markets. Large, policy‑backstopped project pipelines in emerging markets, such as the Philippines’ solar‑plus‑storage build‑out, present both opportunity and execution risk, emphasising the importance of country risk, offtake contracts and currency exposure. Meanwhile, the Canadian case illustrates that even in advanced economies with credible net‑zero pathways, political cycles and economic headwinds can slow climate action, underscoring the value of policy‑diversified portfolios and careful tracking of incentive durability.[13][2][15][1][5]
Davos 2026: climate, nature and “regenerative” growth
The World Economic Forum’s Annual Meeting in Davos, held from 19–23 January 2026 under the theme “A Spirit of Dialogue,” has placed climate, nature and sustainability at the center of its agenda, even as geopolitical fragmentation and economic disruption dominate headlines. I can tell you first-hand, although there were climate and sustainability meetings and events, they took a deep back seat to the geo-political issues. Of the events at Davos, there were some interesting sessions on rebuilding trust in climate and environmental information in an age of AI, rewiring Switzerland around a “net‑positive” national playbook, and launching a “Business for Land” champions council under the UN Convention to Combat Desertification.[16][17][18]
Other Davos‑week sessions emphasise “regenerative economies,” anticipatory leadership in a science‑accelerated world, and the “winners in a post‑fossil fuel economy,” with convenings bringing together leaders from government, finance, industry and civil society to align priorities around climate, nature, energy and economic resilience. The World Business Council for Sustainable Development (WBCSD) has flagged its presence at Davos as a signal of its belief that sustainability is not only a moral imperative but a source of long‑term competitiveness and resilience, reflecting a broader shift in corporate narratives from compliance to opportunity framing.[17][18][16]
For business executives and investors, Davos 2026 therefore performs three roles. It acted, as it often does, as an agenda‑setter, crystallising concepts like “regenerative economies” and “nature‑positive” strategies into concrete initiatives, coalitions and sometimes voluntary targets that can shape investor expectations. It also served as a platform for climate‑finance matchmaking and dialogue, with events, such as the Tropical Rainforest Fund and others explicitly focused on “financing regeneration” and mobilising capital for climate action, including in emerging markets and land‑use systems. There were some good meetings around the growing integration of climate, biodiversity and social resilience in strategic conversations, encouraging firms to move beyond narrow carbon metrics toward broader measures of sustainable prosperity.[18][16][17]
Sustainable growth, political economy and investor takeaways
Although debates on “green growth” versus degrowth remain live in academic and activist circles, January’s news in mainstream business and policy outlets has focused less on abstract models and more on the political economy of sustaining climate action amid inflation, cost‑of‑living crises and geopolitical competition. Politico reported that democratic politicians in the U.S. are increasingly cautious about leading with climate messaging, instead emphasising affordability and economic security as voters’ top concerns, even as they propose climate policies through the lens of industrial strategy and job creation. The RBC report on Canada notes that while a quarter of Canadians still prioritise climate, issues such as the cost of living, healthcare access and overall economic strength now outrank climate in public salience, helping explain some loss of momentum in the Climate Action Barometer despite continued investment.[19][15][1][5]
At the same time, the prospective flattening of global emissions growth and the rise of electrification, CBAM and nature‑positive finance show key structural elements of a sustainable‑growth trajectory are still advancing, albeit unevenly and with major governance gaps. For sophisticated business leaders and investors, the key takeaways this month were around: integrating policy‑scenario analysis that explicitly considers further U.S. retrenchment versus renewed cooperation; stress‑testing value chains against carbon‑border measures and climate‑related trade friction; prioritising exposures to electrification, grid and storage assets with credible policy support; and treating climate‑aligned capital formation in emerging markets as both an impact lever and a source of uncorrelated growth.[7][2][3][15][1][5]
Overall, January 2026 has clarified that climate policy and green‑growth dynamics are entering a more contested, geopolitically fragmented phase in which regional blocs pursue divergent strategies even as the physics of warming continue to tighten the constraint set for long‑term economic planning. The paradox for investors is that rising policy noise coexists with strengthening technological and economic fundamentals for the transition, making disciplined, data‑driven allocation to climate‑aligned opportunities more—not less—central to competitive performance and risk management.[10][6][2][3][13][15][1][5]
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References:
Bloomberg, “14 Climate Change Trends to Follow in 2026, From EVs to Nuclear Power,” 2026. https://www.bloomberg.com/news/features/2026-01-02/14-climate-change-trends-to-follow-in-2026-from-evs-to-nuclear-power
Bloomberg, “The Key Climate Trends We’re Following in 2026,” 2026. https://www.bloomberg.com/news/newsletters/2026-01-02/the-key-climate-trends-we-re-following-in-2026
Bloomberg, “US Exits Paris Agreement: What Trump’s Withdrawal Means for Climate Change,” 2026. https://www.bloomberg.com/news/articles/2026-01-27/us-exits-paris-agreement-what-trump-s-withdrawal-means-for-climate-change
Bloomberg, “2025 Officially Joins 2024 and 2023 in Three Hottest Years Streak,” 2026. https://www.bloomberg.com/news/features/2026-01-14/2025-officially-joins-2024-and-2023-in-three-hottest-years-streak
Financial Times, “Climate transition: the high cost of the status quo,” 2026. https://www.ft.com/content/33ba41ba-4b57-4fb0-b16f-baa03358fc59
The Economist, “2025 was the third-hottest year on record,” 2026. https://www.economist.com/science-and-technology/2026/01/14/2025-was-the-third-hottest-year-on-record
Politico, “The key climate tipping point you haven’t heard about,” 2026. https://www.politico.com/newsletters/forecast/2026/01/27/the-key-climate-tipping-point-you-havent-heard-about-00750138
Politico, “So long, Paris: US officially leaves landmark climate pact,” 2026. https://www.politico.com/news/2026-01-27/so-long-paris-u-s-officially-leaves-landmark-climate-pact-00746628
Politico, “Rubio urges Trump to leave UNFCCC,” 2026. https://www.politico.com/news/2026/01/07/rubio-urges-trump-to-leave-unfccc-00487331
Politico, “Trump quits the world’s most important climate treaty,” 2026. https://www.politico.com/newsletters/power-switch/2026/01/08/trump-quits-the-worlds-most-important-climate-treaty-00716524
Politico, “U.S. climate policy’s fate heads to court in 2026,” 2025. https://www.politico.com/newsletters/power-switch/2025/12/17/u-s-climate-policys-fate-heads-to-court-in-2026-00695183
Politico, “The scrappy attempt to save US climate data,” 2026. https://www.politico.com/newsletters/power-switch/2026/01/07/the-scrappy-attempt-to-save-us-climate-data-00714581
Bloomberg, “Why Electrification Is the Climate Story of 2026,” 2026. https://www.bloomberg.com/news/articles/2026-01-23/why-electrification-is-the-climate-story-of-2026
Bloomberg Opinion, “Trump Is Making a $7 Trillion Climate Change Problem Worse,” 2026. https://www.bloomberg.com/opinion/articles/2026-01-08/trump-is-making-a-7-trillion-climate-change-problem-worse
Financial Times, “Canada Nickel Company Announces Successful Flow-Through Offering,” 2026. https://markets.ft.com/data/announce/detail?dockey=600-202601131045CANADANWCANADAPR_C0188-1
World Economic Forum, “World Economic Forum Annual Meeting 2026,” 2026. https://www.genevaenvironmentnetwork.org/events/world-economic-forum-annual-meeting-2026/
World Climate Foundation, “World Climate Sessions, Davos 2026,” 2026. https://www.worldclimatefoundation.org/davos
WBCSD, “WBCSD at the World Economic Forum Annual Meeting 2026,” 2026. https://www.wbcsd.org/events/wbcsd-at-the-world-economic-forum-annual-meeting-2026/
Politico, “Democrats lean into climate affordability to counter Trump,” 2026. https://www.politico.com/news/2026/01/25/democrats-climate-affordability-trump-00745597
The Economist, “How to know when the world has passed 1.5C of global warming,” 2024. https://www.economist.com/the-economist-explains/2024/02/09/how-to-know-when-the-world-has-passed-15c-of-global-warming
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