Unlocking investment for sovereign transition

This guide by the Climate Bonds Initiative provides a framework for investors to evaluate and engage with sovereign transition plans. It outlines key elements of credible planning, including science-based targets, detailed investment and policy roadmaps, and robust governance and transparency measures, aiming to help investors assess the long-term sustainability of sovereign asset exposures.

• Credible sovereign transition plans must be rooted in ambitious, science-based targets aligned with the Paris Agreement goal of limiting warming to 1.5°C. Investors are encouraged to look beyond Nationally Determined Contributions (NDCs), as NDCs often lack 2050 targets, fail to cover all greenhouse gases, or omit certain economic sectors.
• Investors should evaluate consumption-based emissions rather than just territorial emissions to understand a sovereign's full value-chain climate risk exposure. This is particularly critical for developed market sovereigns to prevent carbon leakage.
• Green budgeting, defined as the integration of environmental considerations into all budgetary decisions, is a critical indicator of a sovereign's commitment. Currently, 35% of Ministries of Finance assessed by the Coalition of Finance Ministers for Climate Action report full or partial integration of climate considerations into budget projections.
• Sovereigns must quantify transition investment needs and identify diverse funding sources, including public finance, sovereign debt, private capital, and Official Development Assistance (ODA). The report notes that the cost of capital varies significantly, citing 10-year sovereign bond yields of 21.16% for Egypt and 7.1% for India, compared to 2.8% for France and 4.25% for the US.
• The issuance of labelled green, social, sustainable, and sustainability-linked (GSS+) bonds can provide pricing benefits and attract a more diverse investor base. As of the end of 2024, 59 countries had issued aligned GSS+ bonds, totaling USD167.4bn.
• A robust national taxonomy is essential for translating high-level NDC targets into real-economy action and informing investment priorities. An internationally interoperable taxonomy is preferred by investors to ensure alignment with global expectations.
• Credibility is enhanced when climate targets are legislated, as this reduces the risk of targets being dropped by subsequent administrations and establishes legal liability. ASCOR found that 40 out of 70 sovereigns had passed a climate framework law or equivalent by 2024.
• Effective transition planning requires a clear policy roadmap with a logical sequence of actions. This includes addressing dependencies, such as ensuring electricity grid capacity before promoting electric vehicle (EV) adoption.
• Governance of transition plans should be situated at a senior government level, ideally with oversight from the Ministry of Finance and input from independent advisory bodies, such as the Climate Change Committee in the UK or the High Council on Climate in France.
• Article 6 of the Paris Agreement allows for the trade of Internationally Transferred Mitigation Outcomes (ITMOs), providing a potential source of green capital for emerging markets. However, as of June 2025, only one Article 6.2 bilateral cooperation has been fully negotiated out of 99 signed statements of intent.

APA

Burge, L., Van Coppenolle, M., Martini, M., & Creed, A. (2025). Unlocking investment for sovereign transition. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/Unlocking-investment-for-sovereign-transition.pdf

Chicago

Burge, Lily, Magali Van Coppenolle, Mireille Martini, and Anna Creed. Unlocking investment for sovereign transition. Climate Bonds Initiative, 2025. https://www.climatebonds.net/files/documents/publications/Unlocking-investment-for-sovereign-transition.pdf.

Wikipedia

{{cite report |last1=Burge |first1=Lily |last2=Van Coppenolle |first2=Magali |last3=Martini |first3=Mireille |last4=Creed |first4=Anna |title=Unlocking investment for sovereign transition |publisher=Climate Bonds Initiative |date=June 2025 |url=https://www.climatebonds.net/files/documents/publications/Unlocking-investment-for-sovereign-transition.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{burge2025unlocking, author = {Burge, Lily and Van Coppenolle, Magali and Martini, Mireille and Creed, Anna}, title = {{Unlocking investment for sovereign transition}}, institution = {Climate Bonds Initiative}, year = {2025}, month = jun, url = {https://www.climatebonds.net/files/documents/publications/Unlocking-investment-for-sovereign-transition.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }