Understanding transition finance - The case of the energy sector
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Supervisor
Publication Year
2024
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Book
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Publication Number of pages
48
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Abstract
In this white paper we introduce a new definition of transition finance that overcomes the drawbacks of existing definitions and, with an emphasis on energy, we discuss the need for substitutability of investments in terms of GHG emissions. We also present worldwide statistics, an overview of the types of investors and investees, and the cost of capital. The paper concludes with a taxonomy of investor engagement based on regulatory strength. In a nutshell, the stronger the regulation in terms of reporting, verification, and decarbonisation pathways, the lesser the engagement needed from private investors. We suggest using the EU Emission Trading System as a benchmark of good regulatory strength towards achieving the goals of the Paris Agreement.
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Sustainability