On June 25, at the World Economic Forum’s Annual Meeting of the New Champions in Dalian, the International Institute of Green Finance at Central University of Finance and Economics (IIGF, CUFE), in collaboration with the World Economic Forum (WEF), released the Transition Finance Transformation Map. This initiative aims to enumerate and summarize the key factors influencing transition financing activities, providing a concise overview of diverse financial tools, reporting, and planning mechanisms, as well as policy solutions necessary to scale up transition finance. It elaborates on methods to ensure a just and inclusive net-zero transition, offering policymakers, investors, financial institutions, and businesses comprehensive information on how to translate ambitious climate goals into tangible outcomes through capital mobilization. Professor Wang Yao, Director-General of IIGF, CUFE, presented and introduced the Transition Finance Transformation Map during the event.
Source: World Economic Forum
Transition finance is a crucial component in achieving net-zero transformation by effectively allocating financial resources, reducing transition risks, and pricing associated costs. The map is divided into nine key subdimensions: Net-zero policies, Sustainable finance taxonomies, Sectorial Transition Pathways, Transition Planning, Transition Finance Instruments, Reducing Green Premiums; Disclosure, Measurement, Reporting and Verification (MRV), Just Transition, and Carbon Markets. This comprehensive framework highlights the potential of transition finance by outlining critical dimensions for stakeholders such as governments, financiers, and industry.
The transformation map emphasizes several key topics. It highlights the evolution of global transition policies aimed at guiding and financially supporting industries in their shift towards sustainable development. Additionally, it underscores the role of transition finance taxonomies as essential tools in directing capital towards low-carbon economic activities, distinguishing them from traditional “green” taxonomies by focusing on transforming high-energy-consuming or carbon-intensive industries facing complex starting points or significant barriers. The map stresses the importance of clear industry transition pathways for effectively mobilizing funds towards achieving net-zero emissions in sectors with high emissions. Simultaneously, companies are urged to develop clear net-zero transition plans, detailing strategic measures to reduce their carbon footprint and actively engage in effective transition finance activities. It advocates for the more effective use of diverse transition finance tools to support initiatives aimed at achieving net-zero transformations, which includes reducing green premiums through innovative finance mechanisms, fostering buyer commitments, and establishing robust purchase agreements. Effective disclosure of transition finance activities is highlighted as critical to establishing frameworks for measuring and reporting these activities, managing associated financial risks, and improving climate impact assessments. Carbon markets play a pivotal role in promoting green and low-carbon transformation finance by utilizing market mechanisms to incentivize emissions reductions and boost investments in green technologies. Lastly, the map underscores the importance of emphasizing an equitable and just transition in financing activities, integrating principles of fairness, inclusiveness, and international cooperation into climate policies and transition finance strategies to ensure all societal groups benefit equitably from the transition to a zero-carbon economy.
Professor Wang Yao emphasized that the Transition Finance Taxonomy plays a crucial role in channeling financial support towards transforming high-emission industries into low-carbon sectors. IIGF, CUFE in collaboration with WEF, released the Transition Finance Transformation Map with the aim of providing stakeholders with guidance and reference in standard-setting, pathway design, information disclosure, capacity building, and other areas. As a leading green finance think tank, IIGF will continue its research on transition finance, collaborating with both local and global partners to foster the development and implementation of policies and practices in this field, promoting green and low-carbon development globally.