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At our recent �۶���Ƶ Sustainable Finance Conference hosted in London, experts from a range of stakeholders discussed the challenges of expanding transition finance frameworks to support the economic shift to a more sustainable economy. They highlighted that transitioning their respective areas to become more sustainable will require a higher degree of government commitment and broad regulatory detail, alongside a broader corporate understanding that doing so should be their fiduciary responsibility.

It was also noted that one key barrier to transition and accessing finance today is a lack of options being available, due in part to some countries having insufficient regulatory and political certainty over the long term.

Nations across the globe have begun announcing climate-related goals as part of their efforts to reduce carbon emissions. The UK, for example, has committed to several milestones according to the on Nationally Determined Contribution published in 2022, including cutting greenhouse gas emissions by at least 68% by 2030 and decarbonising the power network by 2035.

However, the need for industries to embrace transition planning is quickly growing. The finance industry is already feeling the negative impact of climate change, with some US insurance companies becoming reluctant to insure homes in and . This fallout is likely to affect banking and parts of asset management, as some real estate will lose much of its value and eventually become stranded assets.

One key step to encouraging industries to transition more rapidly will be to expand the concept of fiduciary duty.

Historically, this concept applied only to financial advisers or investors seeking to maximize returns for their shareholders. Some companies and associations have expanded it to include reducing any direct impact on climate change, and sustainability experts at the conference argue this should become a standard across all industries.

One panellist stressed that companies that do not embrace the need to transition will fall behind their rivals and lose market share – in effect falling in breach of their traditional fiduciary responsibilities.

The concept of climate transition being a fiduciary duty is also applicable to governments. The UK Treasury, for example, concluding that the economic costs of delaying climate transition would be higher compared to acting quickly – as well as making the country a less appealing destination for transition-related investment.

It’s important for businesses that climate goals set by governments have broad political support and that these goals do not change with a new government. One example of this is the US’s Inflation Reduction Act, which contains ten-year tax breaks to solar and wind companies as part of the US’s efforts to expand clean energy.

Once businesses have such regulatory certainty for an extended period, they can make long-term strategic and capital expenditure plans – and financial institutions and investors will be far more likely to support finance-raising to support such��transitions.

Directing entire industries to become more sustainable will also require political willpower. Many carbon-emitting industries would like to delay the transition to a low carbon future as long as possible and are heavily lobbying politicians. In March, German carmakers successfully lobbied for the EU to exempt some cars that run on certain fuels from its plan to ban all petrol cars by 2035. Governments need to resist watering down climate commitments as much as possible, both to demonstrate their resolve and to encourage new investment into innovative technologies and transition finance efforts.

“There will always be vested interests from those who want to delay change,” said one panellist, "If they are successful in causing a delay, what’s to say that we won’t give up on other targets too? There is a knock-on effect [on confidence], so it’s vital we stay consistent for our net zero targets.”