Transition finance for transforming companies

This report by the Climate Bonds Initiative proposes a framework called the 'Five Hallmarks of a Credibly Transitioning Company' to assess the credibility of corporate decarbonisation efforts and Sustainability Linked Bonds (SLBs). It aims to prevent greenwashing by moving from relative benchmarks to absolute, science-based transition pathways aligned with the Paris Agreement.

• 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 USD417.8bn.
• Sustainability Linked Bonds (SLBs) are increasingly used by high-emitting industrial and fossil-fuel-dependent sectors, which are largely absent from the UoP market. In H1 2022, SLBs accounted for 11% of total labelled debt issuance, up from 6% in H1 2021.
• There are market concerns that some transition-labelled bonds are 'business-as-usual' in disguise, as targets are often entity-specific and difficult to compare against peers or the Paris Agreement goals.
• Climate Bonds proposes 'Five Hallmarks of a Credibly Transitioning Company' to evaluate if a company's transition is robust enough to align with the goal of halving emissions by 2030 and reaching net zero by 2050. These hallmarks are: 1) Paris-aligned targets, 2) Robust plans, 3) Implementation action, 4) Internal monitoring, and 5) External reporting.
• For a transition to be credible under Hallmark 1, companies must adopt a common sectoral green transition pathway rather than defining their own company-specific pathways, ensuring comparability and alignment with 1.5°C goals.
• Credible transition targets must address all material emissions, including Scope 1, 2, and 3. For 'stranded' activities like coal-fired electricity, targets should include indicators for decommissioning facilities to address downstream Scope 3 emissions.
• Hallmark 2 requires a robust transition strategy and a detailed financing plan. The financing plan must address capital expenditure (CapEx), operating expenditure (OpEx), R&D, and M&A, and disclose the year in which carbon-intensive asset expenditures will peak.
• Climate Bonds is expanding its Certification Scheme to include non-financial corporates and their SLBs. Certification is available to entities where at least 90% of revenue or emissions come from activities that are already near net-zero, aligned with 1.5°C pathways, or will align by 2030.
• 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 proposed framework explicitly excludes certain factors from its core hallmarks to maintain simplicity and efficiency, including lobbying/trade association membership, executive remuneration, and GHG data validation (which is handled via the broader Certification process).

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} }