Financing credible transitions

This white paper by the Climate Bonds Initiative proposes a comprehensive framework and five core principles to define and finance 'credible transitions' for high-emitting entities and activities. The goal is to provide a scientifically robust standard that prevents greenwashing and aligns transition finance with the Paris Agreement's goal of net-zero emissions by 2050.

• The report establishes five 'Transition Principles' to ensure that transition finance is credible and avoids greenwashing: alignment with 1.5°C global warming limits, goals established by the science community rather than entities, the exclusion of offsets (while including upstream scope 3 emissions), prioritizing technological viability over economic competitiveness, and requiring actual operating metrics rather than mere pledges.
• The proposed Transition Framework categorizes economic activities into five distinct types based on their longevity and decarbonization viability: 'Near Zero' (already at or near net-zero), 'Pathway to Zero' (needed beyond 2050 with a clear 1.5-degree pathway), 'No Pathway to Zero' (needed beyond 2050 but lacking a clear 1.5-degree pathway), 'Interim' (needed now but to be phased out by 2050), and 'Stranded' (cannot align with targets and have low-emission substitutes).
• The report suggests a specific demarcation for the 'transition' label versus the 'green' label. The green label should be reserved for activities with a long-term role that are already near zero or following a Paris-aligned pathway. The transition label should apply to eligible investments that either make a substantial contribution to 2030/2050 goals but will not have a long-term role, or will have a long-term role but whose long-term pathway to net zero is currently uncertain.
• The framework applies to both activity-level and entity-level transitions. For whole entities, a credible transition requires a strategy that covers the term of the financial instrument and demonstrates a broader low-emissions shift rather than a one-time effort. For activities, it focuses on specific measures to reduce emissions or phase out stranded assets without locking in high-carbon technology.
• The report identifies significant gaps in existing guidance for 'stranded' and 'interim' activities, noting that most current material focuses on activities needed post-2050. It emphasizes that specific pathways are urgently needed for sectors such as oil and gas, mining, and heavy industry.
• A review of market transactions highlights the risks of 'lock-in' and the importance of corporate strategy. For example, Repsol's 2017 green bond was criticized because it funded efficiency in fossil fuel operations without a Paris-aligned corporate strategy, whereas Orsted's 2017 bond was viewed as a prime example of transition due to a full strategic reorientation toward renewables.
• Stakeholder interviews revealed a polarization regarding the role of natural gas. While some argue it is a necessary 'bridging fuel' or interim source, many stakeholders and think-tanks oppose labeling fossil fuel extraction as 'transition' without carbon capture and storage (CCS).
• The report argues that for mixed portfolios, issuers should adopt the 'lower bar' for labeling. If a financial product contains some proceeds categorized as transition and others as green, the overall product should be labeled as transition to avoid overstating its environmental credentials.

APA

Creed, A., Adamini, M., Vaze, P., & Boulle, B. (2020). Financing credible transitions. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/cbi_fincredtransitions_final.pdf

Chicago

Creed, Anna, Manuel Adamini, Prashant Vaze, and Bridget Boulle. Financing credible transitions. Climate Bonds Initiative, 2020. https://www.climatebonds.net/files/documents/publications/cbi_fincredtransitions_final.pdf.

Wikipedia

{{cite report |last1=Creed |first1=Anna |last2=Adamini |first2=Manuel |last3=Vaze |first3=Prashant |last4=Boulle |first4=Bridget |title=Financing credible transitions |publisher=Climate Bonds Initiative |date=September 2020 |url=https://www.climatebonds.net/files/documents/publications/cbi_fincredtransitions_final.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{creed2020financing, author = {Creed, Anna and Adamini, Manuel and Vaze, Prashant and Boulle, Bridget}, title = {{Financing credible transitions}}, institution = {Climate Bonds Initiative}, year = {2020}, month = sep, url = {https://www.climatebonds.net/files/documents/publications/cbi_fincredtransitions_final.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }