Unlocking investment for sovereign transition

The report outlines key elements of credible sovereign transition plans, focusing on science-based targets, investment and policy action plans, and governance and transparency measures. It emphasizes the role of green budgeting, the mobilization of private capital, and the importance of internationally interoperable taxonomies in reducing climate-related risks for sovereign bondholders.

• Investors should evaluate sovereign transition commitments based on their alignment with the Paris Agreement and Nationally Determined Contributions (NDCs), though NDCs often lack 2050 targets or full sectoral coverage.
• Consumption-based emissions are a critical indicator for investors to determine if a sovereign is addressing supply chain emissions and associated climate risks, particularly for developed market sovereigns.
• Green budgeting, which integrates environmental considerations into all budgetary decisions, is a key signal of a sovereign's commitment to transition and impacts debt sustainability.
• The mobilization of private capital is essential as public finances alone cannot fund the transition; investors look for the 'greening' of Development Finance Institutions (DFIs) and National Development Banks (NDBs) as indicators of this effort.
• Internationally interoperable national taxonomies are vital for translating NDC targets into real economy action and providing investors with confidence in investment planning.
• Legislated climate targets increase investor confidence by making governments legally liable for meeting goals and reducing the risk that targets are dropped by new administrations.
• Sovereign Green, Social, Sustainable, and Sustainability-linked (GSS+) bonds can provide pricing benefits and attract a more diverse range of investors, particularly in emerging markets.
• Article 6 carbon credit trades under the Paris Agreement are emerging as a key source of green capital for emerging markets, though bilateral cooperation remains limited as of June 2025.

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} }