The transition to net zero is reshaping every sector. Nowhere is that more evident than in the industries with the highest emissions today.
For emerging markets and developing economies, the challenge is particularly acute; these economies must continue to grow, create jobs and expand new industrial capacity in a way that responds to the climate crisis, as well as decarbonising existing systems. Doing so is critical to delivering both development and climate goals, and presents a significant opportunity for sustainable economic growth.
Development finance institutions invest to support this transition, by working with companies and financial institutions to support a just and resilient path to net zero. In recent years, transition finance has emerged as a new area of sustainable finance. At BII we are excited about its potential to accelerate climate action.
Our new guidance, published in partnership with Norfund and Proparco, sets out a practical approach to transition finance. It is grounded in existing frameworks and in our experience of investing in the real economy. We focus on how this approach can be applied in practice for companies in emerging markets and developing economies (EMDEs), recognising that opportunities and constraints can differ from those in more developed economies. By aligning with existing marketleading transition finance frameworks and private sector examples, we aim to support greater consistency between DFIs and private sector investors, and help mobilise private capital into this promising space.
We also outline how transition finance complements climate finance within our broader development finance toolkit, and how a similar approach may help us tackle related challenges, including nature loss, adaptation and resilience.
There is certainly more to learn, and we are at the beginning of our journey, but given the urgency of the climate crisis, it is important to act now. We see this guidance as a starting point that we will continue to develop as the market evolves and as we learn from experience. We hope it is useful, particularly to other investors focused on emerging markets, and we look forward to continuing the conversation.
