Transition finance for transforming companies

Climate Bonds Initiative introduces the 'Five Hallmarks of a Credibly Transitioning Company' to combat greenwashing in transition finance. These Hallmarks—Paris-aligned targets, robust plans, implementation action, internal monitoring, and external reporting—provide a science-based methodology to evaluate whether a company's transition is rapid enough to meet the 1.5C goal. The report details the integration of these Hallmarks into a new certification scheme for non-financial corporates and SLBs, emphasizing the need for common sectoral pathways over company-specific baselines. It also highlights the growth of the SLB market, particularly among high-emitting sectors, and the necessity of comprehensive scope 1, 2, and 3 emissions accounting to ensure transition credibility.

• The sustainable finance market experienced significant growth in the first half of 2022, with Green, Social and Sustainability (GSS) use-of-proceeds (UoP) bonds and Sustainability Linked Bonds (SLBs) collectively reaching USD 417.8 billion.
• Sustainability Linked Bonds (SLBs) are more prevalent among high-emitting industrial and fossil-fuel-dependent sectors than UoP bonds, as these entities are often at an earlier transition stage and prefer forward-looking KPIs.
• Climate Bonds proposes 'Five Hallmarks of a Credibly Transitioning Company' to evaluate if a company's transition aligns with the Paris Agreement's goal to halve emissions by 2030 and reach net zero by 2050.
• The Five Hallmarks are: 1) Paris-aligned targets, 2) Robust plans, 3) Implementation action, 4) Internal monitoring, and 5) External reporting.
• To be credible, companies must adopt a common sectoral green transition pathway rather than defining their own company-specific pathways, which prevents a lack of comparability and the risk of failing to meet collective goals.
• Credible transition targets must address all material emissions, including scope 1, 2, and 3; specifically, upstream scope 3 emissions in purchased goods must be addressed as companies can choose their suppliers.
• Climate Bonds is expanding its Certification Scheme to include non-financial corporates and their SLBs, using a 'checklist approach' where all core components must be fulfilled rather than using a weighted scoring system.
• Company certifications will have a fixed term of 5 years to ensure regular re-evaluation of targets and plans, while SLB certifications will last for the tenor of the bond.
• The framework explicitly excludes requirements for lobbying on policy, membership of trade associations, and executive remuneration, arguing that these are either too difficult to assess or not essential indicators of transition credibility.

APA

Creed, A. (2022). Transition finance for transforming companies. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/Climate-Bonds_Transition-Finance-for-Transforming-Companies_EN_Sep-2022.pdf

Chicago

Creed, Anna. Transition finance for transforming companies. Climate Bonds Initiative, 2022. https://www.climatebonds.net/files/documents/publications/Climate-Bonds_Transition-Finance-for-Transforming-Companies_EN_Sep-2022.pdf.

Wikipedia

{{cite report |last1=Creed |first1=Anna |title=Transition finance for transforming companies |publisher=Climate Bonds Initiative |date=6 September 2022 |url=https://www.climatebonds.net/files/documents/publications/Climate-Bonds_Transition-Finance-for-Transforming-Companies_EN_Sep-2022.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{creed2022transition, author = {Creed, Anna}, title = {{Transition finance for transforming companies}}, institution = {Climate Bonds Initiative}, year = {2022}, month = sep, url = {https://www.climatebonds.net/files/documents/publications/Climate-Bonds_Transition-Finance-for-Transforming-Companies_EN_Sep-2022.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }