Priya Patel
TLDR: Transition finance, which refers to industries and infrastructure that promote a net zero economy, is becoming increasingly important for climate investing. The term “transition finance” emerged during Conference of the Parties (COP) 28 and describes a variety of strategies aimed at moving away from fossil fuels. While some investors focus on supporting green solutions like wind farms and battery plants, others are interested in investing in companies with plans to transition to renewables. Although it can be difficult to determine which companies will decarbonize effectively, transition finance is seen as a bridge to a more sustainable future. One important aspect of transition finance is the need for fossil fuel companies to diversify in order to help achieve a low- to zero-emissions end result. The Glasgow Financial Alliance for Net Zero (GFANZ) has developed a set of voluntary guidelines for financing strategies that can support a whole-of-economy transition. As transition finance becomes more common, more capital is predicted to flow to companies driving progress and providing climate solutions.
