Transition finance

Climate change - transition - financing.

Transition finance is finance to enable activities and businesses that are currently large emitters of greenhouse gases, to:

• Reduce their emissions significantly
• In alignment with the Paris Agreement

Transition finance may be available for - and applicable to - initiatives that do not qualify as fully "green", but still have a substantial and important contribution to make in transitioning from "brown" to "light brown" levels of emissions.

Relevant sectors might include fossil-fuel extraction and heavy manufacturing.

Transition label v Green label

"Turning to the bond market, the transition label originated to sell bonds that were difficult to market as green bonds...

In broad terms, we propose that:

• The green label continues to be used for eligible investments in activities or entities that (a) have a long-term role to play [in the future economy] and (b) are either already near zero or are following decarbonisation pathways in line with halving global emissions by 2030 and reaching net zero by 2050.

• The transition label be used for eligible investments that:

(i) are making a substantial contribution to halving global emissions levels by 2030 and reaching net zero by 2050 but will not have a long term role to play; OR

(ii) will have a long term role to play, but at present the long term alignment to net zero goals is not certain."

Financing credible transactions - How to ensure the transition label has impact - Climate Bonds Initiative

See also

• Bond
• Brown
• Climate Bonds Initiative
• Climate change
• Climate transition risk
• Decarbonise
• Emissions
• Finance
• Fossil fuel
• Green
• Green bond
• Greenhouse gas
• Net zero
• Paris Agreement
• Reputational risk
• Stakeholder
• Stranded assets
• Task Force on Climate-related Financial Disclosures
• TCFD Recommendations
• Transition
• Transition Finance Market Review (TFMR)
• Transition risk
• Transition sukuk
• World Economic Forum

Other resources

• Scaling Transition Finance: Findings of the Transition Finance Market Review - October 2024
• How to ensure the transition label has impact - Climate Bonds Initiative