G20 Introduces Transition Finance Framework

The Group of 20’s Sustainable Finance Working Group (SFWG) has published the outcome of its activities across three workstreams, including the development of a transition finance framework. It outlines high-level principles for jurisdictions and financial institutions to consider on a voluntary basis across five pillars: the identification of transition activities and investments, reporting of information on these activities and investments, developing transition-related finance instruments, designing policy measures, and assessing and mitigating the negative social economic impacts of transition activities and investments. The underlying principles include the recommendation to introduce a transition-focused taxonomy and establishing clear recommendations around the verifiability of transition activities. The framework has been designed to guide the future development of both jurisdictional policies and financial services’ strategies to support the net zero transition, with SFWG noting that the framework can be broadened over time to cover other sustainability-related objectives, such as nature conservation and the development of the circular economy. The report said: “We acknowledge that jurisdictions could consider adoption of these principles on a voluntary basis, and implement them in a phased manner, and capacity building services offered by the international community will be important for accelerating their adoption especially in developing countries.”

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