From concept to capital flows: The investor perspective on transition finance

Our latest position paper outlines investor perspectives on concept of transition finance.

Many investors have articulated support for a concept of transition finance that promotes capital allocation and management of assets in line with the transition to a low-carbon economy. But at present, the lack of a robust and consistent definition is inhibiting this capital flow. 

This position paper seeks to outline the investor perspective on the different types of transition finance that can exist, how they can be distinguished, and what is needed to give confidence that an investment can credibly be understood as ‘transition finance’. The paper does not seek to establish specific definitions or guidance although this may be explored in future work.

The position paper covers the following aspects:

• The need for a robust conceptualisation of the term ‘transition finance’ and initial investor perspectives on what it does and does not constitute.
• Several examples of the different types of transition finance that investors have encountered and several classifications by which they might need to be distinguished.
• The common principles that underpin robust, credible examples of transition finance. This section also identifies the next steps for this work.

The position paper reflects discussions held within IIGCC membership including a dedicated Transition Finance working group and an all-member consultation which ran throughout July and August 2024.

It is important to note that while the paper seeks to identify areas of consensus on this complex topic, there was expected divergence in some views. It follows that the perspectives contained herein do not unilaterally represent the views of IIGCC members nor its Transition Finance Working Group.