Transition Finance for Transforming Companies

The Climate Bonds Initiative (CBI) proposes a certification framework to ensure company decarbonisation is rapid and robust enough to align with the Paris Agreement. The proposal introduces five 'hallmarks' of a credibly transitioning company: Paris-aligned targets, robust plans, implementation action, internal monitoring, and external reporting. This framework aims to bridge the gap between light-touch market guidance and overly complex entity-level assessments. CBI suggests differentiating between 'Green Transition' (already aligned with sectoral pathways) and 'Interim Transition' (catching up, with a proposed grace period until 2025). The framework emphasizes absolute measures tied to common sectoral transition pathways over relative 'best-in-class' benchmarking and requires the inclusion of scope 1, 2, and 3 emissions.

• The Climate Bonds Initiative proposes five 'hallmarks' that a company must satisfy to be considered credibly transitioning: Paris-aligned targets, robust plans, implementation action, internal monitoring, and external reporting.
• To ensure ambition, companies must select a common 'sectoral green transition pathway' rather than defining their own company-specific pathways, which the author argues leads to a lack of comparability and risks failing to meet global targets.
• Credible transition targets must address all material emissions, specifically including scope 1, 2, and 3 emissions, to prevent 'cherry-picking' low-hanging fruit.
• The framework rejects relative measures such as 'best in class' or 'sector benchmarking' in favor of absolute measures tied to common transition pathways.
• CBI proposes two distinct transition categories: 'Green Transition' for companies whose KPIs align with or outperform sectoral pathways, and 'Interim Transition' for those catching up, with the latter potentially limited to a grace period ending in 2025.
• A robust transition plan must include a detailed financing plan that addresses CAPEX, OPEX, M&A, and R&D expenditures, as this serves as a tangible indicator of the company's ability to deliver on its strategy.
• For companies undergoing 'transitions away' (fundamental transformations), the framework requires Board oversight of climate change and Board climate-related capabilities, though executive remuneration linked to KPIs is not deemed essential.
• The sustainable finance market has seen a surge in Sustainability Linked Bonds (SLBs), which are particularly prominent among high-emitting industrial and fossil-fuel-dependent sectors compared to the use-of-proceeds (UoP) market.

APA

Creed, A., & Horsfield, M. (2021). Transition Finance for Transforming Companies. Climate Bonds Initiative. https://www.climatebonds.net/files/drupal-files/files/Transition-Finance%20for-Transforming-Companies-6Sept2021.pdf

Chicago

Creed, Anna, and Michelle Horsfield. Transition Finance for Transforming Companies. Climate Bonds Initiative, 2021. https://www.climatebonds.net/files/drupal-files/files/Transition-Finance%20for-Transforming-Companies-6Sept2021.pdf.

Wikipedia

{{cite report |last1=Creed |first1=Anna |last2=Horsfield |first2=Michelle |title=Transition Finance for Transforming Companies |publisher=Climate Bonds Initiative |date=10 September 2021 |url=https://www.climatebonds.net/files/drupal-files/files/Transition-Finance%20for-Transforming-Companies-6Sept2021.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{creed2021transition, author = {Creed, Anna and Horsfield, Michelle}, title = {{Transition Finance for Transforming Companies}}, institution = {Climate Bonds Initiative}, year = {2021}, month = sep, url = {https://www.climatebonds.net/files/drupal-files/files/Transition-Finance%20for-Transforming-Companies-6Sept2021.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }