Financing Credible Transitions - A framework for identifying credible transitions

How to ensure the transition label has impact

A joint Climate Bonds & Credit Suisse Whitepaper 


Resources:

  1. 4 page Summary note: Financing Credible Transitions
  2. Original Press Release from Sept 2020
  3. Transition Feature: Inclusive
  4. Transition Feature: Ambition
  5. Transition Feature: Flexible

               

News:

Building a market for green transitions, 30th Nov 2020 

 

Event speakers: 

Adam Matthews, Church of England Pensions Board; 

Anna Creed, Climate Bonds; 

Marissa Drew, Credit Suisse; 

Stephen Liberatore, Nuveen;

Sean Kidney, Climate Bonds.

Conference 2020 Session, 8th Sep: 
A Path Forward For Transition Finance
Marisa Drew, Credit Suisse & Sean Kidney, from Climate Bonds were hosted by Bloomberg television's Francine Lacqua on the launch session of the new transition framework during the Conference 2020.

 

 

 

 

The September 2020 whitepaper presented a framework for identifying credible transitions and had 2 purposes:
1. Define transition as a concept by presenting a starting point for the market to see a credible brown to green transition as ambitious, inclusive and aligned with the Paris Agreement (thereby avoiding greenwash).
2. Put forward a framework for use of the transition label in practice and propose clearly demarcated roles for both a green and a transition label.
 
 A summary of this is available in the resources box 'summary note' along with the the whole paper 'Financing credible transitions (white paper)'. 

 


1. Defining transition as a concept 

Whilst the Green bond market has grown fast over recent years, there is insufficient volume and diversity of sectors and on their own, they will not deliver the goals of the Paris Agreement.  To do this, all sectors of the economy will adjust to operate effectively in a low carbon economy.  For many sectors - especially the high carbon emitting sectors - they may need to fundamentally reshape and transform their strategy in light of the challenges of a changing climate.

The paper presented 5 Core Principles for an ambitious transition that need to be considered for any organisation looking to transition in order to ensure that transition is done in the right way.  If a bond meets these principles, it’s important to also check that:

  • there is sufficient information to enable an informed decision to be made;
  • that it doesn’t contribute to locking in GHG intensive infrastructure.

 

In addition, the paper presented 3 key features that a transition must display:  

Three common features for Transition

• Ambitious – this means aiming high i.e. in line with 1.5 degrees or has a significant emissions reduction potential) and aiming well i.e ensuring that reductions are real (no offsets) and plans are real (not just a plan to have a plan).

• Flexible – applicable to whole entities, everything they do, and a range of associated financial products

• Inclusive – allow all sectors and activities to participate as long as they demonstrate compliance with the principles and framework outline

 


2. A framework for use of the transition label

Some low-emissions solutions are already available in some sectors, and transition should therefore be towards those solutions. For others, there are no solutions yet, but substitute low-emission activities exist and so the transition should be towards better alternatives. The nature of transition differs depending on the need and potential to decarbonise them. Different financial mechanisms can be employed to fund this transition and can be tailored to engage the appropriate investor:
 

 

 

Multiple pathways to achieve Paris goals and the SDGs

 

 

 

 

 

 

 


A flexible framework applicable to whole entities and everything that they do