Four policy briefs for scaling transition finance flows

The pace of the UK’s transition to a net-zero economy will depend on whether capital can flow at scale into the sectors where emissions – and opportunities for decarbonisation – are greatest. Transition finance is central to this challenge: directing investment that supports the real-world decarbonisation of high-emitting industries, supporting credible transition pathways, and enabling the technologies and infrastructure required for long-term competitiveness. 

“The Council’s policy work has been driven by real-world insights. Through multistakeholder engagement and ongoing collaboration with UK Government, we have developed a set of practical solutions to unlock capital flows. We are confident that this momentum is creating the conditions needed to catalyse investment into the decarbonisation of high-emitting sectors.”

Faith Ward MBE, Chair of Working Group 3, Scaling Transition Finance

These policy briefs aim to set out four targeted, market-led recommendations to the UK Government to help address those barriers. They focus on: 

• Clarifying and promoting links between UK Pension Fund trustees’ fiduciary duties and scaling transition finance flows - this brief calls for: formal UK Government endorsement of the FMLC report; clarification of fiduciary duty in relation to transition finance through forthcoming DWP statutory guidance; strengthened trustee knowledge and understanding; and practical tools and guidance to help trustees and their advisers.
• Supporting the uptake of transition-labelled instruments - this brief calls for the UK Government to encourage coalescence around market-led transition finance frameworks to align expectations across issuers and capital providers, reduce fragmentation and build confidence. It also sets out targeted levers – across demand, supply and fund-level regimes – to accelerate the scaling of transition-labelled debt.
• Establishing co-creation processes across a range of sectors and technologies critical for the transition – this brief builds on the Council’s Finance Playbook recommendation, calling for the UK Government to move from principle to practice by implementing the co-creation  design principles relevant to its role – taking strategic oversight of the UK’s sector transition plans and technology scale-up roadmaps, ensuring the process remains inclusive, and investing in the capacity needed to deliver it effectively.
• Continuing the rollout of government-backed guarantees to de-risk private investment - this brief outlines how the UK can accelerate private investment into the Net Zero transition by scaling the use of blended finance, particularly government-backed guarantees, to de-risk uncertainty and fund first-of-a-kind projects. It calls for Public Finance Institutions (PuFIns), in conjunction with UK Government departments, to leverage their existing remits and the new fiscal framework  to target interventions to solve market failures.

Together, these interventions aim to strengthen the UK’s position as a global leader in transition finance by improving bankability, reducing risk, and signalling clear, durable policy intent.