Date: 20th December 2024
Author:
Type: Research papers
Executive Summary
The global financial landscape is increasingly focusing on transition investing, a strategic approach to channelling capital towards aspiring sustainable economic activities. This paper provides an overview of the current state, challenges, and opportunities in transition investing, with a particular emphasis on European markets and retail investor perspectives.
BETTER FINANCE also assesses transition finance from the lens of financial institutions and industries, whereby a large disparity between investments in green, sustainable and transition tools can be observed.
Some of the key findings in this paper include:
Market growth and potential in 2024
- EU climate benchmark funds grown by €135 billion
- Taxonomy-aligned CapEx increased by €58 billion
- EU accounts for 84% of global sustainable fund assets
Investor awareness and challenges
- While most investors are familiar with transition investing, approximately one-third remain unaware of the concept
- Lack of commonly accepted transition definitions
- Insufficient regulatory requirements
- Risks of "transition-washing"
- Inconsistent reporting by financial institutions
Recommendations from retail Investors
- Improve communication and clarity about transition investing
- Develop a unified engagement mechanism
- Introduce a dedicated transition category for financial products
- Harmonize existing legislation to increase transparency and trust
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