Transition Finance
Financing hard-to-abate sectors' credible decarbonisation.
Transition finance funds the credible decarbonisation of high-emitting and hard-to-abate sectors — steel, cement, aviation, shipping — with a science-based transition plan aligned to 1.5°C.
Financial products supporting the decarbonisation of activities that cannot yet be classified as sustainable but have a credible, science-based transition plan aligned with limiting warming to 1.5°C.
Key concepts
Backed by a published, science-based transition plan and validated interim targets.
Transition SLLs, transition bonds, sustainability-linked bonds with sectoral pathways.
IEA, Mission Possible Partnership and TPI benchmarks for hard-to-abate sectors.
Board oversight, capex alignment and transparent progress reporting.
Glossary terms
Frequently asked questions
How does transition finance differ from green finance?+
Green finance funds already-sustainable activities (a solar farm). Transition finance funds the shift of high-emitting activities (a steel plant switching to hydrogen DRI). Transition finance is often larger and more consequential for global emissions.
What makes a transition credible?+
A published, science-based transition plan; interim and long-term targets validated against a recognised pathway; capex aligned with the plan; and transparent progress reporting.
Is there an EU transition taxonomy?+
The EU Taxonomy includes 'transitional' activities under the climate mitigation objective, and the Commission has issued a Transition Finance Recommendation. A dedicated transition taxonomy is under discussion.
Related regulations
- EU Transition FinanceEU Recommendation on Transition Finance
Commission guidance on credible transition.
Industry-specific guidance
Process heat, purchased electricity and upstream materials dominate manufacturers' footprints — and the sustainable-finance opportunity is proportionally large.
Transport and logistics operators sit at the intersection of Scope 1 fuel use and their customers' Scope 3 category 4 emissions — making them a priority for both green loans and SLLs.