Investing in transition finance set to be a big factor in 2024
“Transition finance” is shaping up to be one of the new year’s most important subjects for anyone professing to care about the climate crisis.
There’s a “whole world of transition finance being created as we speak,” said Mark Carney, the United Nations special envoy on climate action and finance, during a panel discussion at last month’s COP28 in Dubai.
The conversation has “matured from talking about investing in climate to investing in transition,” said Annika Brouwer, a sustainability specialist at Ninety One Ltd. At least half of the South African asset manager’s engagements in Dubai focused on transition finance for emerging markets, she said.
The term was part of the final agreement among 200 nations in which they agreed to move away from fossil fuels. However, there’s lots of wiggle room. In the nonbinding deal, countries are called upon only to contribute to a global transition.
In other words, fossil-fuel companies have few boundaries in deciding how and when they will take part, said Ehsan Khoman, the Dubai-based head of commodities, environmental social and governance and emerging markets research at MUFG Bank Ltd (EMEA).
It also gives leeway to investors, including those with so-called sustainable mandates. The phrase “transition finance” is loosely defined as investments mainly in industries and infrastructure that help drive efforts to achieve a net-zero economy. It’s distinct from green finance, which generally targets so-called climate solutions like wind farms or battery plants.
Still, Chuka Umunna, JPMorgan Chase & Co.’s head of EMEA ESG and green economy investment banking, said the change in tone is opening doors to strategies that floundered just a few years ago. Concerns about greenwashing
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