ICMA Reviews Debt Capital Market Transition Finance

The International Capital Market Association (ICMA) has published a paper reviewing the latest guidance and recommendations on transition finance across the debt capital market. The paper underlines the progress of international taxonomies to integrate transition plans, as well as the latest developments on sector-specific transition pathways and industry roadmaps. The ICMA considered transition finance across three overlapping definitions: economy-wide, climate, and hard-to-abate. The green and sustainability bond market has been largely focused on the climate transition, the paper noted, and is not a major resource for carbon-intensive and hard-to-abate industries – largely because of greenwashing fears. The ICMA called on market participants to voluntarily adopt and implement transition plans in anticipation of upcoming regulation. “With this paper, we define transition finance with greater clarity while acknowledging the progress of both official and market guidance,” said Nicholas Pfaff, Deputy CEO and Head of Sustainable Finance at ICMA. “We also propose a model structure for integrated transition plans to help unlock further the potential of the sustainable bond market to finance transition, especially in the fossil fuel and hard-to-abate sectors.”

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