BETTER FINANCE: Transition Finance: Unlocking the Path to a Sustainable Economy
23 December 2024
Transition finance represents a critical middle ground in sustainable investing, targeting industries with high greenhouse gas (GHG) emissions... However, the report underscores the persistent disparities between investments in green, sustainable, and transitional financial tools.
BETTER FINANCE has today published a report highlighting the transformative potential of transition finance in driving the global shift to a sustainable economy. As the world races to meet the 1.5°C climate goal, the report reveals an expanding yet underdeveloped market, offering insights and actionable recommendations to bridge the gaps in transition investing.
Transition finance represents a critical middle ground in sustainable investing, targeting industries with high greenhouse gas (GHG) emissions and supporting their transformation towards greener practices. However, the report underscores the persistent disparities between investments in green, sustainable, and transitional financial tools.
Key Findings Reveal Urgent Opportunities and Challenges
- Market Growth: European Union (EU) climate benchmark funds surged by €135 billion in 2024, while Taxonomy-aligned capital expenditure (CapEx) increased by €58 billion, underscoring growing momentum.
- Investor Awareness Gap: One-third of individual investors remain unaware of transition finance, highlighting the need for clearer communication and education.
- Risks of Transition-Washing: A lack of standardised definitions and regulatory safeguards continues to threaten transparency and accountability.
- Individual Investors Demand Greater Clarity and Engagement
In a survey of French, German, and Italian individual investors, participants emphasised the need for:
- Clearer communication on transition finance products.
- Dedicated financial product categories for transitional activities.
- Harmonised legislation to improve transparency and trust.
BETTER FINANCE’s Managing Director, Aleksandra Mączyńska, stated: “Transition finance offers unparalleled opportunities to engage individual investors in the fight against climate change. Yet, our report shows a critical need for robust frameworks to enhance transparency and trust. Only then can the true potential of transition finance be realised.”
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