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Global aspirations, local priorities: mastering transition finance with finesse

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TLDR:

Marie-Bénédicte Beaudoin, Adams Wong, and Federico Pezzolato from ISS-Corporate discuss the challenges of transition finance due to the lack of an official definition. They mention the importance of following guidance from the EU Taxonomy and Climate Bonds Initiative, as well as local developments in the APAC region, particularly in Japan. The article highlights the tension between regional standards and global emission reduction targets, as well as the impact of political debates in the US.

Transition finance: balancing global ambitions with local needs

The article discusses the challenges ISS-Corporate faces in defining transition finance and incorporating local developments into their assessments. The lack of a standard definition has led to different approaches regionally. The importance of considering reduction of GHG emissions, deployment of technology, and integration of transition strategies into business models is emphasized.

ISS-Corporate highlights the need to balance regional differences with global emission reduction targets. The article mentions the evolving landscape in the APAC region with the proliferation of local taxonomies supporting green and sustainable finance activities. The challenges of aligning these regional taxonomies with global standards are also addressed.

The discussion moves towards the impact of transition finance on sustainable finance structures and innovation in the financial sector. The article points out the trend of asset managers issuing sustainability-linked instruments with KPIs to improve ESG performance. The need for more innovative transactions and partnerships to finance the transition is emphasized.

Lastly, ISS-Corporate shares insights on how their methodology has evolved in response to the challenges within the transition finance topic. The importance of understanding how technologies serve the transition, preventing greenwashing, and addressing different economic contexts while aligning with global targets is highlighted. The article concludes with the potential for a wave of innovation in financial instruments to support the transition.


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