International Financial Services Centres Authority (IFSCA) recently released a consultation paper on ‘Framework for Transition Bonds’. This consultation paper is developed in context of Paris Agreement which aims to limit global temperature rise to well below 2°C above pre-industrial levels, with efforts to keep it within 1.5°C. As on April 02, 2025, 142 countries, covering 78% of global Gross Domestic Product (GDP) and 76% of global GHG emissions, have adopted net zero targets and around 1173 of the largest 2000 publicly traded companies now have net zero targets1. While these commitments are a positive step, the implementation of these targets will be the real challenge. 

In recent years, ESG labelled debt securities (Green, Social, Sustainability and Sustainability-linked) have seen substantial growth, with many government and corporate entities engaging with investors to finance debt while making a net positive environmental or social impact. 

Transition finance provides a structured pathway for various industries to reduce their emissions progressively by enabling investments in cleaner technologies, processes and alternative fuels. Instruments such as transition bonds and transition loans can help mobilize capital towards these efforts while ensuring alignment with emission reduction goals. While Transition Bonds hold significant potential, their growth has been slow.
 

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