Transition Finance for Transforming Companies

This discussion paper by the Climate Bonds Initiative (CBI) proposes a framework to assess the credibility of company decarbonisation transitions to prevent greenwashing in sustainable finance. It introduces five 'hallmarks' for a credibly transitioning company—Paris-aligned targets, robust plans, implementation action, internal monitoring, and external reporting—which CBI intends to use as the basis for certifying Sustainability Linked Bonds (SLBs), Sustainability Linked Loans (SLLs), and the companies themselves.

• The sustainable finance market is experiencing rapid growth, with Green, Social and Sustainability (GSS) bonds and Sustainability Linked Bonds (SLBs) collectively reaching $496.1 billion in the first half of 2021.
• Sustainability Linked Bonds (SLBs) are increasingly used by high-emitting industrial and fossil-fuel-dependent sectors, which are less prominent in the use-of-proceeds (UoP) market.
• There are significant market concerns regarding the credibility of transition finance, specifically that KPIs are often entity-specific, difficult to benchmark, and may represent 'business-as-usual' rather than ambitious transition pathways.
• CBI proposes five 'hallmarks' to identify a credibly transitioning company: Paris-aligned targets, robust plans, implementation action, internal monitoring, and external reporting.
• To be credible, company targets must align with a common sectoral decarbonisation pathway based on science (such as IPCC 1.5°C goals) rather than relative measures like 'best in class' or historical baselines.
• Credible transition targets must address all material emissions, including scope 1, 2, and 3, and be set across short (to 2025), medium (2025-2030), and long-term (2030-2050) milestones.
• A robust transition plan must include a detailed financing plan for CAPEX, OPEX, M&A, and R&D to demonstrate the company's ability to deliver its strategy.
• CBI proposes differentiating between 'Green Transition' (already aligned with or outperforming sectoral pathways) and 'Interim Transition' (catching up to pathways), with the latter being a time-limited category potentially ending in 2025.
• CBI intends to expand its certification scheme beyond use-of-proceeds bonds to include SLBs, SLLs, and the certification of companies' overall transition agendas.

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} }