To identify core features of transition finance, this paper reviews 12 transition relevant taxonomies, guidance and principles by public and private actors, as well as 39 transition relevant financial instruments, including vanilla transition bonds and key performance indicator-linked fixed income securities.
The paper does not aim to define transition finance, but rather to review emerging approaches and instruments to highlight commonalities, divergences as well as issues to consider for coherent market development and progress towards global environmental objectives.
Based on the review, the paper puts forth two preliminary views. First, that the essence of transition finance is triggering entity-wide change to reduce exposure to transition risk, and second, that transition finance may be better understood as capital market instruments with a set of core functions/attributes rather than a specific format or label.