As sustainable finance continues to grow, interest by investors, banks and issuers has broadened beyond financing for 'green' activities, and calls have been made to include financing for the transition of high carbon-emitting activities and assets towards a Paris Agreement-aligned economy. Harmonised approaches to transition financing standards are important for building confidence in this market by assisting the financial sector to identify the activities that need to transition and ensure their transition pathways are credible and impactful.

In April 2020, we shared a Client Update on the emerging use of transition financing to supplement existing green financing practices. Further development in the transition financing 'regulatory' landscape has taken place in the short span of just over six months, and in this update, we look at the milestones in the development of this landscape, focussing on the more recent developments and the likely next steps.

AXA Guidelines for Transition Bonds1

Investment managers, AXA, called for the establishment of a new type of bond – "transition bonds" – to provide financing for "companies, which are 'brown' today but have the ambition to transition to green in future" in November 2019. These are companies "in greenhouse gas-intensive industries...; and in industries which currently do not (and for the foreseeable future may not) have sufficient green assets to finance but do have financing needs to reduce their greenhouse gas footprint of their business activities, as well as their products and services".2 With the intention of kick-starting a dialogue between issuers, investment banks, investors, policy makers and wider stakeholders, AXA went on to propose guidelines for such bonds ("AXA Guidelines"), following the same structure as existing approaches to the International Capital Markets Association's ("ICMA") Green Bonds Principles, Social Bonds Principles and Sustainability Bonds Guidelines, framed around the four core components of:

  1. Use of proceeds;
  2. Process for project evaluation and selection;
  3. Management of proceeds; and

Use of Proceeds

The AXA Guidelines propose that the proceeds raised be used to finance projects within pre-defined climate transition-related activities, including but not limited to,


  • Cogeneration plants (Gas powered combine heat and power (CHP))
  • Carbon Capture Storage
  • Gas transport infrastructure which can be switched to lower carbon intensity fuels
  • Coal-to-gas fuel switch in defined geographical areas, with defined carbon avoidance performance
  • Waste-to-energy


  • Gas powered ships
  • Aircraft alternative fuels


  • Cement, metals or glass energy efficiency investments – such as to reduce clinker ratio, use of recycled raw materials, smelting reduction and higher recycling

Project Evaluation and Selection

Issuers should describe the eligible assets, the eligibility criteria and the asset selection process, and explain why these projects are important to finance from the perspective of commercial transformation and climate transition. Detail on the projects' environmental objectives, alongside expected outcomes and impacts, including negative externalities which may harm other environmental and societal aims, such as those set out in the UN Sustainable Development Goals, should also be provided.


Issuers should also report the selected projects' environmental and social performance, including the reduction in greenhouse gas emissions considered in the context of the International Energy Agency's ("IEA") pathway for a CO2 emissions trajectory to limit the average global temperature increase to 2°C.

Issuer-level Requirements

In addition to the issuance-level requirements, the AXA Guidelines propose issuer-level requirements for the issuer to communicate what climate transition means in the context of its current business model and its future strategic direction. Senior management and board directors should commit to aligning their business with meeting the Paris Agreement goals. It should also communicate a transition strategy that is intentional, material to the business and measurable, and the bond should fit into its transition strategy.

EU Taxonomy Regulation3

Transitional Activities

Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 ("Taxonomy Regulation"),4 which entered into force on 12 July 2020 offers guidance on the qualitative and quantitative criteria by which economic activities that may credibly be considered "transitional". Under Article 10(2) of the Taxonomy Regulation,

an economic activity for which there is no technologically and economically feasible low-carbon alternative, still qualifies as contributing substantially to climate change mitigation, where it supports the transition to a climate-neutral economy consistent with a pathway to limit the temperature increase to 1.5 ?C above pre-industrial levels, and where that activity:

  • has greenhouse gas emission levels that correspond to the best performance in the sector or industry;
  • does not hamper the development and deployment of low-carbon alternatives; and
  • does not lead to a lock-in of carbon-intensive assets, considering the economic lifetime of those assets,5

qualifies as environmentally sustainable for the purposes of establishing the degree to which an investment is environmentally sustainable, subject to the activity meeting technical screening criteria adopted pursuant to Article 10(3) of the Regulation.6 These criteria must take into account the nature and scale of the economic activity, including whether it is a transitional activity as referred to in Article 10(2).7 The technical screening criteria for transitional activities will be reviewed at least once every three years.8 Subject to the satisfaction of the other requirements of the Taxonomy Regulation,9 bonds whose proceeds are used to finance Article 10(2) transitional activities can be considered as aligned with the EU Green Bond Standard (subject to meeting the other requirements of the Standard).10

Enabling Activities

Article 16 of the Taxonomy Regulation further provides that an economic activity that directly enables other activities to make a substantial contribution to one or more environmental objectives is deemed to also substantially contribute to these objectives; provided: it does not lead to a lock-in of assets that undermine long-term environmental goals, considering the economic lifetime of those assets; and has a substantial positive environmental impact on the basis of its life-cycle considerations. This means that activities that enable climate change mitigation transitional activities, can also be considered environmentally sustainable and the financing of such enabling activities can also be aligned with the EU Green Bond Standard.

DBS Sustainable and Transition Finance Framework

DBS published its own Sustainable and Transition Finance Framework ("DBS Framework")11 in June 2020 to facilitate the categorisation, monitoring and reporting of financing of sustainable activities. The DBS Framework merits special attention because it is possibly the only one made with a focus on the Southeast Asian region so far.

Under the DBS Framework, financing is deployed or structured as use-of-proceeds specific financing for eligible green, sustainable or transition economic activities; or corporate level financing with an intent to aid corporate customers transition to a low carbon operation. For the former, the proceeds must be earmarked for an economic activity which meets the requirements of the bank's "green", "transition", or "UN Sustainable Development Goals" labels.

Activity-level Financing

An activity will be considered "transitional" if it can meet the following conditions:

  • Displace more carbon intensive options, document and independently verify the extent of greenhouse gas (GHG) emissions reduction (forecast or realised) compared to industry norms. We will consider contextual information as the activity should facilitate the graduation along the Paris Agreement-aligned trajectory, and not solely be less carbon intensive in isolation; or
  • Enables the wider application or integration of less carbon intensive options.12

The DBS Framework also outlines in its Appendix 1, a taxonomy of economic activities that can be labelled as "Transition".13 However, final decisions on whether the label may be applied to an activity in a particular case are made on a case-by-case basis, taking into account contextual information such as location of the economy activity, best availability technology, the time horizon and pace of change towards net zero carbon activities.14 For this purpose, the "Sustainable Development Scenario" adopted by the IEA ("IEA SDS") for different regions of the world serves as a guide to evaluate when emissions need to thereafter peak and reduce rapidly.15

Second Party Opinion

In its Second Party Opinion of the DBS Framework,16 Cicero Shades of Green ("Cicero") noted a number of strengths and weaknesses of the Framework.17 For example, in a number of activities that potentially qualify for transition-labelled financing, energy efficiency improvements of a brown technology may not contribute significantly to the green transition; may lead to rebound effects if not properly managed; or may pose a risk of substantial lock-in to a brown technology when greener alternatives already exist. Reductions in climate impacts may also come at the expense of increases in other forms of environmental impacts.

Overall, Cicero noted that,

[s]ome concerns remain that the eligibility criteria are partly lacking in specific details like specific targets and/or clear delineations within categories, and DBS will need to follow up on the implementation of the ambitious framework to ensure consistent project selection and compliance especially when considering the breadth of involved industries and technologies'/industries' nuances to avoid lock-in of fossil fuels... The inclusion of carbon intensive oil- and gas-related products in the "transition" label for DBS financing may not promote the scale of ambition required to achieve Paris agreement climate goals and present a substantial risk of lock-in or rebound. 18

Cicero also pointed out that current stated policies in Southeast Asia indicate a linear upward trajectory in greenhouse gas emissions until 2040 whereas the IEA SDS Scenario allows for emissions in Southeast Asia to peak in 2024. Much work on electrification and increasing access, and increased investment in renewable energy, is needed to bring emissions in the region in line with the Scenario.19

Corporate-level Financing

Corporate-level financing with unspecified uses is tagged by DBS as "Corporate in Transition". This transition differs from the use-of-proceeds transition label used to describe individual economic activities. According to the DBS Framework, the "Corporate in Transition" label will be applied when any of the three "Ds" criteria is satisfied, in the previous 12 months of any new transaction:

  • Divest: Exiting or decommissioning carbon-intensive assets.
  • Diversify: Decreasing the share of revenue derived from carbon intensive activities over time, diversification may be in the form of acquisition of green/socially positive business, R&D investment, etc.
  • Decarbonise: Demonstrating an overall reduction in GHG emissions intensity with independent verification. This is especially relevant for sectors which are hard to decarbonise, but whose activities are critical to the economy. Customers must significantly enhance their performance i) beyond the industry average in the country or region; and ii) over time in terms of emissions intensity.20

Climate Bonds Initiative's White Paper on Financing Credible Transitions

The Climate Bonds Initiative ("CBI") published its White Paper, Financing Credible Transitions: How to Ensure the Transition Label Has Impact ("CBI White Paper") for consultation and discussion in the market in September 2020.21

Transition Framework

The CBI White Paper proposes that the transition label be used for eligible investments in entities or activities that:

  • are making a substantial contribution to halving global emissions levels by 2030 and reaching net zero by 2050 but will not have a long term role to play ["substantial contribution"]; OR
  • will have a long term role to play, but at present the long term pathway to net zero goals is not certain ["long term role"].22

This can refer to:

  • an entity that is not currently near zero emissions, but which is following a credible entity-level transition strategy (not a one-time effort) that is in line with the Paris Agreement, at least during the financing term, e.g., sovereign whose economy is fully aligned with 1.5°C goals, coal company switching to renewables at the speed required by the Paris Agreement ('long-term role' entities); or waste to energy company rapidly switching to recycling operations ('substantial contribution' entities);23 or
  • an activity that:

Long-term role –

  • is needed beyond 2050 but at present, does not have a clear 1.5-degree decarbonisation pathway to 2050 and one is not credibly envisaged within a reasonable timeframe – e.g., long-haul passenger aviation ("'No Pathway to Zero' activities");
  • is essential to 'No Pathway to Zero' activities, e.g., manufacture of wind turbines, metals recycling, or carbon capture and storage ("Enabling Activities");24

Substantial Contribution –

  • is currently needed but should be phased out by 2050 – e.g., production of energy from municipal waste ("Interim Activities"); or
  • cannot be brought into line with global warming targets and has an alternative, low-emissions substitute – e.g., electricity generation from coal or solid fossil fuels ("Stranded Activities").25

Transition Principles

The CBI White Paper also proposes five Transition Principles for setting "credible transition goals":26

  1. Credible transition goals and pathways align with 1.5°C global warming limits;27
  2. Credible transition goals and pathways are established by the climate science community and are not entity specific;28
  3. Credible transition goals and pathways don't count offsets, but should count upstream scope 3 emissions;29
  4. Credible transition goals and pathways take into account technological viability, but not economic competitiveness; and
  5. Credible transition means actually following the transition pathway – pledges, policies and strategies alone are not sufficient.

The nature of transition will differ. Emissions from 'No Pathway to Zero' activities should be reduced as much as possible without locking-in technologies that might prevent future rapid decarbonisation. Interim activities should be phased out in line with their sunset date, but in the meantime, they should be decarbonised as fast as possible along appropriate transition pathways. Stranded activities should also be phased out, with measures being taken that can deliver substantial emissions reduction without locking-in those stranded assets and technologies.30 

Transition Financing and Sustainability-linked Financing

Finally, the CBI White Paper also recommends that in respect of sustainability-linked instruments with sustainability performance targets related to climate mitigation should also make use of the Transition Framework and link their performance metrics to a transition pathway that meets the Transition Principles in order to maintain a suitably robust and ambitious ambition.31

International Capital Markets Association Climate Transition Finance Handbook

The ICMA's Climate Transition Finance Handbook: Guidance for Issuers (December 2020) ("ICMA Handbook")32 provides additional guidance for issuers seeking to utilise either use-of-proceeds bonds or sustainability-linked bonds towards the achievement of their climate transition strategy. Guidance for the issuance of use-of-proceeds and sustainability-linked bonds is already provided for under the Green Bond Principles, Social Bond Principles, Sustainability Bond Guidelines, and Sustainability-Linked Bond Principles.33

Importantly, noting that transition pathways must be tailored to the sector and operating geographies of an issuer, and that issuers are generally at different starting points and on different pathways, the ICMA clarified that the Handbook does not seek to provide definitions or taxonomies of transition projects, and only seeks to clarify the recommended additional disclosures to credibly position the issuance of use-of-proceeds or sustainability-linked instruments to finance the transition, particularly of 'hard-to-abate' carbon intensive sectors.34

The ICMA Handbook also leaves open the question of whether transition finance should be a new category of labelled green financing instruments.35 Instead, its aim is to provide guidance to these sectors on how issuers may credibly use existing green financing instruments.36 Like the Green Bond Principles, Social Bond Principles, Sustainability Bond Guidelines, and Sustainability-Linked Bond Principles, the Handbook is sector agnostic and does not preclude any sector from applying the guidelines therein and issuing green-labelled bonds.37 Issuers who are at the start of their transition journey and are as yet unable to articulate a Paris Agreement aligned transition strategy may also choose to align to the Handbook's guidelines on a best-efforts basis, disclosing how they are progressing against each of the recommended elements within their respective frameworks.38

The ICMA Handbook considers that the financing purpose of a transition-labelled instrument should be to enable an issuer's climate change strategy, and the label should therefore communicate the credibility of an issuer's change-related commitments and practices. To achieve this, the Handbook recommends disclosure on four elements:

  1. Issuer's climate transition strategy and governance;
  2. Business model environmental materiality;
  3. Climate transition strategy to be 'science-based' including targets and pathways; and,
  4. Implementation transparency.39

Climate Change Transition Strategy and Governance

The establishment of a corporate climate change strategy is a fundamental pre-requisite. The strategy should clearly communicate how the issuer intends to adapt its business model to make a positive contribution to the transition to a low carbon economy and "should be guided by the objective of limiting global temperature increases ideally to 1.5°C and, at the very least, to well below 2°C".40 Disclosures may be aligned with recognised reporting frameworks such as the recommendations of the Task Force on Climate-Related Financial Disclosures ("TCFD") or similar frameworks.

Suggested information and indicators on Strategy and Governance to be included are:

  1. a long-term target to align with the goals of the Paris Agreement ...;
  2. relevant interim targets on the trajectory towards the long-term goal;
  3. disclosure on the issuer's levers towards decarbonisation, and strategic planning towards a long-term target to align with the goals of the Paris Agreement;
  4. clear oversight and governance of transition strategy; and
  5. evidence of a broader sustainability strategy to mitigate relevant environmental and social externalities and contribute to the UN Sustainable Development Goals.41


The two-way materiality of the planned transition trajectory to be financed should be communicated. The trajectory should be relevant to the issuer's core business activities which are the main drivers of its current and future environmental impact. It should also be relevant to the future success of the business model of the issuer. The trajectory should also consider the materiality of the issuer's climate impacts on the environment and society and seek to mitigate the negative externalities.42

Science-based Targets and Decarbonisation Pathways

The trajectory should refer to science-based targets and decarbonisation pathways that are:

  1. quantitatively measurable;
  2. aligned with recognized, science-based trajectories where such trajectories exist;
  3. publicly disclosed; and
  4. supported by independent assurance or verification.43

Suggested targets and pathways for disclosure include:

  1. short, medium, and long-term greenhouse gas reduction targets aligned with the Paris Agreement;
  2. baseline;
  3. scenario utilised, and methodology applied;
  4. greenhouse gas objectives covering all scopes (Scopes 1, 2, and 3); and
  5. targets formulated in intensity or absolute terms.44

Implementation of Strategy

Finally, the issuer should disclose its capital expenditure and operational expenditure plans and other relevant financial metrics related to the transition strategy, including its plans to mitigate the strategy's social externalities. The issuer should also provide an analysis of the extent to which outcomes have aligned with original plans, and in the event they did not, explain why.45

What's Next?

On 8 December 2020, the Monetary Authority of Singapore ("MAS") acknowledged the value of a common language on green finance in helping financial institutions channel more green financing flows with confidence. It shared that it is working with the financial sector to assess the potential of a taxonomy for Singapore-based financial institutions, which could cover both green and transition activities and could also be applied to these financial institutions' regional and global operations. It is also involved with taxonomy at regional and international platforms.46  The same day, its Managing Director, Mr Ravi Menon, remarked that,

Asia's transition to a low carbon future has to be consistent with its economic and social development. Asia is at a different starting point from Europe – millions of people still do not have access to electricity. Fossil fuels are still the cheapest way to generate energy in many parts of Asia. Yet, there is scope for energy-efficient technologies and renewable energy solutions. Asia's transition to sustainability will be progressive – through deeper shades of green.47

A taxonomy for Singapore-based financial institutions, if it comes to pass, would be an important milestone in Singapore's sustainable financing journey, and would certainly be one to watch closely.


There are many activities and entities in carbon-intensive industries that require financing for transition to a low-carbon future, and there is a need and opportunity to aid the sustainable transition of entities involved in these activities. Activities that enable the transition of other activities should also be encouraged and require financing. Transition financing can take the form of activity-level use-of-proceeds or entity-level sustainability-linked instruments. Where an entity seeks transition for an activity, the activity should be material to the entity's core business. One-off projects and achievement of sustainability performance targets however do not a transition make. Whichever instrument is used, a credible transition requires disclosure of a whole-of entity corporate transition governance and strategy, with quantified and measurable Paris-aligned short-term and long-term targets, along the lines of the TCFD or similar frameworks.

The appropriate transition pathway from a carbon-intensive entity or activity to a low carbon one will necessarily vary from sector to sector. In some cases, where a role for an entity or activity is envisaged in a post-2050 net-zero emissions economy, the pathway may be to rapidly decarbonise with a view to transitioning to zero or near-zero emissions by 2050; or where that is not possible, simply to decarbonise rapidly for the duration of the financing term., without risking lock-in of any carbon intensive asset or technology. Credibility is key, so where a recognised science-based transition pathway for a sector already exists,48 it might be more credible to align the transition strategy with such established sectoral pathway. Where such pathways do not exist or have not yet been developed, a bespoke transition strategy would need to be accompanied by sufficient explanation as to how the proposed transition strategy and measures are aligned with a 1.5oC emissions pathway. In other cases, where an high carbon-emitting  entity or activity is not expected to be needed post-2050, because a low carbon substitute already exists or is envisaged to become available, the pathway should be to rapidly decarbonise in a way that does not risk locking in any carbon intensive asset or technology or delay its phase-out in favour of low-carbon substitutes. Long term and interim targets can be formulated in absolute or intensity terms. They should be quantitatively measurable, publicly justified and disclosed, as should performance and/or outcomes against these targets.

Increasingly, consideration is also being given, not only to whether a transition pathway discloses an appropriate rate of decarbonisation, but also to whether it is a 'just' transition – the negative (and positive) environmental and social externalities of a proposed transition pathway must also be addressed in the course of the transition. Local development needs are relevant considerations, but it remains unclear how and to what extent national and regional contexts can and should be taken into consideration while forging internationally coordinated, credible, and impactful transition pathways that global investors can identify with and invest in.49 One approach may be to take local contexts into consideration for the purpose of the starting point of the transition pathway, but not its ending point; another may be to chart separate transition pathways for different regions, each aligned with a science-led sustainable emission transition pathway, such as the IEA SDS.

Transition financing is still at a formative stage, and is set to grow in importance in response to growing transition risks; interest by regulators, financial institutions and civil society; and pent-up demand from investors and fossil fuel companies and heavy corporate emitters.50 In anticipation of and to facilitate this growth, the 'regulatory' landscape, whether voluntary or otherwise, is under pressure to quickly firm up to provide greater certainty and rigour in distinguishing between impactful transition financing and greenwashing. Progress has been made, but this landscape is still a work-in-progress, and more developments can be expected to emerge in the days to come.


1. See also, our April 2020 Client Update, "Transition Bonds: Financing for a Greener Shade of Brown". 

2. Yo Takatsuki, "Financing Brown to Green: Guidelines for Transition Bonds" (25 November 2019) (

3. See also, our April 2020 Client Update, "Transition Bonds: Financing for a Greener Shade of Brown".

4. (

5. Emphasis added.

6. Pursuant to Article 10(1)(b) of the Taxonomy Regulation, power generation activities that use solid fossil fuels do not qualify as environmentally sustainable activities. Draft technical screening criteria have been published for consultation for certain transitional activities in livestock production; manufacturing (cement, aluminium, iron and steel, carbon black, soda ash, chlorine, organic basic chemicals, anhydrous ammonia, nitric acid, and plastics in primary form); energy (electricity generation, co-generation of heat/cool and power, and production of heat/cool from gaseous and liquid fuels, and bioenergy, manufacture of biogas and biofuels for transport) transport (passenger interurban and freight rail transport, freight transport services by road, inland and sea coastal passenger and freight water transport); construction and real estate services (renovation of existing buildings, and acquisition and ownership of real estate); and data processing, hosting and related activities (

7. Taxonomy Regulation, Art 19(1)(h)(i).

8. Taxonomy Regulation, Art 19(5).

9. Namely, that the activity does not significantly harm any of the other environmental objectives; and complies with the minimum social safeguards.

10. Namely the requirements for a Green Bond Framework; mandatory reporting; and mandatory verification. See our July 2019 Client Update, "The Proposed EU Green Bond Standard – a Sign of Things to Come?" ( 

11. (

12. DBS Framework, p 6. Emphasis added.

13. These are mainly energy efficiency, decarbonisation, and carbon capture and storage activities in the automotive; metals and mining (including decarbonization technologies and energy efficiency of blast furnaces for iron and steel production, but excluding coal-fired iron or steel plants); food and agribusiness; oil and gas; chemicals; power (excluding coal-fuelled power generation, but including conversion of coal powered to gas powered energy generation); shipping; aviation; telecommunication; and logistics industries. 

14. As Ms Yulanda Chung, Head of Sustainability, Institutional Banking Group at DBS, elaborated, instead of a universal definition, DBS' approach is to compare a company's performance against the industry norm and evaluate it in the context of the stage of economic development of the host country; as well as the requirements for system-wide adaptations; and ask whether it is transitioning to achieve Paris-compliant goals; and whether its end goal is Paris-compliant. The time frame of projects is also important and is evaluated against a greenhouse gas emissions trajectory that is looking to peak by 2030 and achieve net-zero by 2050, and peaking emissions by 2030. See "Transition Finance Completes the Picture of Greener Goals" The Asset (June 2020), p 6, ( 

15. DBS Framework, p 6. The scenario shows how the world can change course to deliver on the three main energy-related SDGs – achieve universal access to energy (SDG 7), reduce severe health impacts of air pollution (SDG 3), and tackle climate change (SDG 13) – simultaneously.

16. Cicero Shades of Green, DBS Sustainable & Transition Finance Second Opinion (24 June 2020)("Cicero SPO") (

17. Cicero SPO, pp 7 to 41.

18. Cicero SPO, pp 42 and 43.

19. Cicero SPO, p 41. See also, IEA, Southeast Asia Energy Outlook 2019 (

20. DBS Framework, pp 6 and 7.


22. CBI White Paper, p 22. Emphasis added. The White Paper suggests that entities and activities that are needed beyond 2050 and have a clear 1.5-degree decarbonization pathway to 2050 or one that can be credibly envisaged within a reasonable timeframe, e.g., shipping, should be labelled "green" as they are Paris Agreement-aligned.

23. CBI White Paper, p 22.

24. CBI White Paper, p 11. Their contribution to decarbonisation is not their own decarbonisation but the decarbonisation they enable elsewhere.

25. CBI White Paper, p 10.

26. CBI White Paper, p 12.

27. "1.5oC global warming limits" refers to the emission pathways with no or limited overshoot of 1.5°C presented in the Intergovernmental Panel on Climate Change ("IPCC")'s Special Report on Global Warming of 1.5°C (SR15). In these pathways, global emissions need to drop by 45% from 2010 levels by 2030 and down to net zero globally by 2050. See Myles Allen, et al, "Summary for Policymakers", in Masson-Delmotte, V, et al, (eds), Global Warming of 1.5°C: An IPCC Special Report on the impacts of global warming of 1.5°c above pre-industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty (IPCC, 2018) ("SR15"), pp 11 and 12 ( This means that credible transition goals may necessarily go beyond nationally determined contributions and 'best-in-class' benchmarks. For entities and activities for which no 2050 pathway exists, there is no credible transition pathway, but the Transition Principles certain measures for decarbonisation may be considered credible under the Transition Principles.

28. The CBI White Paper acknowledges that widely and commonly accepted transition metrics and pathways have not been established yet for many sectors, and the absence of clear targets or guidelines to aim for leads to challenges in determining or assessing the credibility of their transition. It recommends that until the situation is addressed, borrowers and investors select a pathway they believe is credible and provide transparency on the source of the pathway, the extent to which it does or does not meet these principles, and the rationale for its selection for the assessment of the activity or entity transition in question.

29. The CBI White Paper takes the position that offsetting reduces transparency and diverts attention away from reducing inherent emissions. The only exception to this proposed principle is if the offsetting is directly linked to the key activity in question and offsets emissions that cannot be minimised in any way.

30. CBI White Paper, p 11.

31. CBI White Paper, p 24.

32. (

33. ICMA Handbook, p 2.

34. ICMA Handbook, p 2.

35. ICMA, Climate Transition Finance Handbook: Related Questions (9 December 2020) ("ICMA Handbook Related Questions"), p 5 (

36. ICMA Handbook Related Questions, p 3.

37. ICMA Handbook Related Questions, p 4.

38. ICMA Handbook Related Questions, p 3.

39. ICMA Handbook, p 3.

40. ICMA Handbook, p 3.

41. ICMA Handbook, p 3.

42. ICMA Handbook, p 4.

43. ICMA Handbook, p 5.

44. ICMA Handbook, p 6.

45. ICMA Handbook, p 7.

46. See MAS, Response to Feedback Received: Proposed Guidelines on Environmental Risk Management (Banks) (8 December 2020), p 21 (; MAS, Response to Feedback Received: Proposed Guidelines on Environmental Risk Management (Insurers) (8 December 2020), p 11 (; and MAS, Response to Feedback Received: Proposed Guidelines on Environmental Risk Management (Asset Managers) (8 December 2020), p 11 (

47. See "FinTech for an Inclusive Society and a Sustainable Planet" - Remarks by Mr Ravi Menon, Managing Director, Monetary Authority of Singapore, at Singapore FinTech Festival 2020 on 8 December 2020 (

48. See for example the Science Based Targets initiative's "Sector Guidance" (; and the Transition Pathway Initiative's derivation of various sector benchmark pathways using the sectoral decarbonisation approach ( See also, CBI White Paper, pp 31 to 33. 

49. See for example, Don Weinland, "Global Investors Prepare to Brave China's Green Bond Minefield", (5 June 2020) Financial Times (

50. See for example, Tome Freke, "Bonds Aimed at Heavy Corporate Emitters Set to Roll Out in 2021" (30 November 2020) Bloomberg Green  (

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.