SUSTAINABLE FINANCE & CLIMATE TRANSITION

WHAT ROLE DO FINANCIAL INSTITUTIONS PLAY IN THE CLIMATE TRANSITION?

INNOVATIVE FINANCE INSTRUMENTS ARE RAPIDLY EMERGING

Financial institutions are crucial in accelerating sustainable finance and driving the climate transition. As the world confronts climate change, the financial sector needs to innovate and channel capital towards sustainable investments and low-carbon solutions. The emergence of green bonds, sustainability-linked loans, and renewable energy investments provides opportunities to support the transition. However, taxonomies are needed to bring clarity and consistency to the market, enabling the identification and assessment of environmentally impactful investments.

POLICIES AND REGULATIONS ARE GUIDING THE MARKET

Financial institutions must navigate evolving sustainable finance policies and regulations, such as mandatory climate risk disclosures and green finance guidelines, to align with the Paris Agreement. Robust frameworks and guidelines are necessary to integrate ESG factors into decision-making processes. Calculating and disclosing financed emissions allows institutions to identify high-carbon assets, set emission reduction targets, and develop decarbonization strategies.

TRANSITION PLANNING IS CRITICAL TO LONG-TERM SUCCESS

Long-term transition plans that align with the Paris Agreement’s goals are essential. Financial institutions must set interim targets, monitor progress, and collaborate with stakeholders to drive systemic change. Participating in industry initiatives like the United Nations’ Principles for Responsible Banking and the Task Force on Climate-related Financial Disclosures (TCFD) facilitates best practice sharing and global standard development.

Accelerating sustainable finance is a strategic necessity for financial institutions. By embracing sustainable products, supporting taxonomies, adapting to regulations, calculating financed emissions, decarbonizing portfolios, and instituting transition plans, financial institutions can become leaders in the low-carbon economy. This proactive approach mitigates climate risks and unlocks growth opportunities, positioning financial institutions to thrive in a sustainable future.

What is sustainable finance?

Sustainable finance is an approach within the financial sector that systematically integrates environmental, social, and governance (ESG) factors into finance decision-making. This approach aims to redirect capital flows towards sustainable economic activities and projects, fostering long-term investments that generate positive environmental and social impacts alongside financial returns.

What is the climate transition?

The climate transition, as it relates to financial institutions, refers to the process of aligning financial flows with a low-carbon, climate-resilient economy by integrating climate considerations into investment decisions, risk management, and product offerings to support the global shift towards net-zero emissions and climate change adaptation.

OUR AREAS OF WORK

Innovative finance facilities/products

Sustainable finance and GSS+ bond issuance frameworks

Transition planning

ESG and climate strategy and roadmaps

SDG alignment and impact assessments

FEATURED PROJECTS

Climate-integrated business transformation: Policy and financial pathways for hard-to-abate sectors

Client/partner: A national climate and energy NGO

Year: 2024

Country: India

Description: Developed an integrated approach to enable corporates to embed climate considerations in operations, supply chains, and financing. 3 core components were explored; (i) sectoral analysis and benchmarking of 5 hard-to-abate sectors and key suppliers; (ii) policy analysis and development of sector-specific climate transition recommendations; and (iii) design of a climate finance strategy, including innovative instruments and investor engagement pathways. The outcome strengthened corporate readiness, policy alignment, and access to transition finance.

Strengthening climate risk management and transition finance readiness in India’s financial sector

Client/partner: A large international funding agency

Year: 2022-2025

Country: India

Description: Initiative aimed at increasing awareness and build capacities of FIs and corporates in harnessing transition financing opportunities to fund transition plans, and to equip the Reserve Bank of India (RBI) with necessary support and information to introduce climate-related prudential regulation

As part of the three-partner consortium, played a key role in an ongoing national-level initiative to strengthen financial sector capacity for managing climate risks and mobilising transition finance. Initiative included evaluation of Basel Principles for India’s supervisory framework and developing recommendations for the Reserve Bank of India on the application of Basel Principles, grounded in feedback gathered from financial sector stakeholders. Led the workstream responsible for delivering climate-transition training sessions for the Reserve Bank of India and financial institutions and supported capacity-building for high-emitting corporates to develop credible transition plans. Additionally, supported training high-emitting corporates on developing credible transition plans. The project contributed to policy dialogue through G20 and COP28-linked events to advance India’s transition agenda.

Gender-responsive climate finance facility, focusing on clean energy

Client/partner: 3 UN agencies & the national government

Year: 2021

Country: Zimbabwe

Description: Developed the blueprint for a gender-responsive climate finance facility designed to catalyse private investment in renewable energy and empower women- and youth-owned enterprises.

Designed the facility’s financial architecture, risk management and investment frameworks, and SDG-aligned financing instruments. It incorporated currency risk analysis, outreach strategy design, and stakeholder consultations to strengthen the facility’s operational, financial, and social impact foundations.

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