A newly released position paper delves into investor perspectives on the evolving concept of transition finance, highlighting its complexities and diverse forms. This document aims to provide clarity on what constitutes transition finance and the essential criteria required for investments to be classified under this framework.
Investors have increasingly voiced their endorsement for transition finance as a mechanism to align capital allocation and asset management with the shift towards a low-carbon economy. However, the absence of a clear and consistent definition has been a significant barrier to effectively channeling capital in this direction.
The position paper presents an in-depth examination of investor views regarding transition finance, categorizing its various forms, and outlining what is necessary for investments to be deemed genuine transition finance. It does not offer specific definitions or guidelines but suggests that such details may be addressed in subsequent work.
Key aspects covered in the position paper include:
The necessity for a well-defined conceptual framework for ‘transition finance,’ incorporating initial investor viewpoints on its scope and limitations.
A review of different types of transition finance encountered by investors, along with proposed classifications for distinguishing between them.
The fundamental principles that underpin credible transition finance examples, outlining what investors require to be confident in an investment’s classification as ‘transition finance.’ This section also proposes future steps for advancing this area.
