Planetary Pulse 2022
Planetary Pulse

The rise of transition finance

What transition finance means for asset owners and its role in the path to net zero
What transition finance means for asset owners and its role in the path to net zero

Planetary Pulse reveals the findings from new primary research into transition finance.

It is based on a survey of 300 senior professionals at asset-owner institutions and advisors around the world, including pension funds, insurers, endowments, foundations, central banks, sovereign wealth funds, and consultants.

North America highlights

Fighting climate change is a strategic goal for 60% of North America asset owners, and 52% say that financial institutions have a responsibility to provide investment capital to fund the decarbonization of high emitters. These proportions lag behind asset owners from the UK and Asia Pacific, falling roughly in line with Western Europe.

When it comes to transition finance in particular, only 17% of North America asset owners say they are using it – among the lowest adoption rates in our survey. The main barrier is internal resistance to changing traditional strategies. Given that a relatively high proportion (60%) believe transition finance is a major commercial opportunity for asset owners – higher than the other regions – the motivation to overcome this and other barriers is in place for many.

But transition finance adoption is unlikely to be as fast as other regions, with only 31% North America asset owners likely to invest in it within the next 12 months. However, the medium-term outlook is stronger, with 69% of North America asset owners saying transition finance will grow rapidly over the next three years – the highest among the regions.

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Visualised: The rise of transition finance

When it comes to generating real-world impact through transition finance, adoption rates vary. Transition Finance Leaders are actively using transition finance as part of climate-related strategies, Transition Finance Laggards are not.

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Real-world impact: The rise of transition finance

‘Green’ strategies, such as ESG-branded assets, are designed to have small carbon footprints. In some cases though, this means they are avoiding carbon-intensive industries, rather than taking meaningful steps to help lower emissions. Transition finance is about real-world impact.

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How pension funds enable transition finance

Listen to an exclusive interview with Brunel Pension Partnership’s chief responsible investment officer, Faith Ward, and portfolio manager, Daniel Spencer as they discuss how asset owners can enable vital transitions while remaining true to their fiduciary duties.

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Download the report and infographic to reveal what transition finance means for asset owners and its role in the path to net zero.

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