The World Meteorological Organization (WMO) projects 2025 will be either the second or third warmest year on record, continuing an unprecedented streak where the past 11 years (2015-2025) are individually the warmest in the 176-year observational record.

The global mean temperature from January to August 2025 was 1.42°C above the pre-industrial average, a slight decrease from the 2024 peak attributed to the fading El Niño and the emergence of La Niña conditions.

However, this minor cooling does not signify a break in the warming trend. The Copernicus Climate Change Service notes that the three-year average for 2023-2025 is likely to exceed 1.5°C, marking the first time this critical Paris Agreement threshold has been breached over a multi-year period. Samantha Burgess, Strategic Lead for Climate at ECMWF, stated, "We are now in the decade where the 1.5°C limit is likely to be exceeded, highlighting the accelerating pace of climate change and the urgent need for action".

This sustained heat is powered by record-high concentrations of greenhouse gases. Data indicates concentrations of carbon dioxide (CO2), methane, and nitrous oxide reached new observed highs in 2024 and are projected to be even higher in 2025. Critically, the Global Carbon Project's 2025 report projects fossil fuel CO2 emissions will rise by 1.1% to a new record of 38.1 billion tonnes this year.

This relentless rise has pushed the remaining carbon budget to limit warming to 1.5°C to near exhaustion, with scientists estimating it will be gone before 2030 at current emission rates. "With CO2 emissions still increasing, keeping global warming below 1.5°C is no longer plausible," said Professor Pierre Friedlingstein, who led the Global Carbon Budget study.

The year's impacts have been severe and widespread. Ocean heat content, a key measure of the Earth's energy imbalance, continued to rise above the record 2024 values. Both polar regions saw significant ice loss, with Arctic sea ice extent reaching its lowest annual maximum in the satellite record and Antarctic sea ice tracking well below average.

Extreme weather—from devastating floods in Africa and Asia to brutal heatwaves and wildfires across Europe and North America—has caused massive social and economic upheaval, contributing to displacement and undermining sustainable development.

Perspective on 2026: The Escalation of Climate as a Structural Reality

Looking ahead to 2026, the climate crisis is set to evolve from an environmental concern into a deeply embedded structural factor shaping economies, investments, and geopolitics.

Climate and Weather Outlook: The WMO's global decadal forecast provides a sobering outlook, predicting temperatures are expected to remain at or near record levels over the next five years. There is an 86% chance that at least one year between 2025 and 2029 will exceed 1.5°C of warming, and an 80% chance that a new annual temperature record will be set within that period.

For the specific 2025-2026 winter in North America, a weak La Niña is expected to influence conditions, potentially bringing colder and wetter weather to parts of the northern United States, though the system is highly variable and a transition to neutral conditions is likely by early 2026.

Market and Economic Forces: A key trend for 2026 is the growing divergence between political rhetoric and economic reality. Policy consensus has fractured amid geopolitical fragmentation, yet capital continues to flow. Investments in commercially viable green technologies like renewables and electric mobility are advancing on their own economic merits, decoupling from policy volatility.

"Markets are moving on their own momentum — rewarding commercially viable transition technologies and repricing physical climate risk," notes an MSCI analysis. This will sharpen the performance difference between companies with proven, scalable low-carbon revenue streams and those reliant on unproven tech or policy support.

Integration of Physical Risk: The financial materiality of climate change will become impossible to ignore, especially for investors in long-term, fixed assets like infrastructure. Analysis shows that while average losses from extreme weather may rise slowly, the share of assets exposed to catastrophic losses exceeding 20% of their value is projected to increase five-fold by 2050 under a 3°C warming scenario.

This is prompting a fundamental reassessment of location risk and adaptation strategy. Prudential regulators and central banks, concerned with financial stability, are expected to continue embedding climate risk into supervisory frameworks, moving from guidance to enforcement.

Corporate and Technological Shifts: For businesses, 2026 will mark an "era of authenticity" in sustainability, where performative messaging gives way to efforts rooted in core operational value and risk management.

Predictions include a boom in investment from tech hyperscalers in small modular nuclear reactors (SMRs) to power energy-hungry data centers, and the rise of private weather-monitoring unicorns to supply high-resolution climate risk data. Simultaneously, increased scrutiny on sustainability reporting is expected to expose major companies for erroneous data, highlighting the need for robust governance.

In summary, 2026 will not represent a departure from current trends but an intensification. The year will be characterized by continued climatic extremes, the firm entrenchment of climate considerations in global finance, and a strategic pivot in the corporate world toward treating climate action as a driver of resilience and competitive advantage rather than just a compliance exercise.

As the WMO's Celeste Saulo warned, "Each year above 1.5 degrees will hammer economies, deepen inequalities and inflict irreversible damage". The data for 2025 and the projections for 2026 underscore that this is no longer a future risk, but the unfolding reality of the present decade.