1. OECD Guidance on Transition Finance
Ensuring Credibility of Corporate Climate Transition Plans
16 February 2023

2. Background
1
To limit the average global temperature increase to 1.5°C, global GHG emissions need to reach
net zero by 2050 and peak before 2025, with rapid emissions reductions across all sectors of
the economy, especially in in energy-intensive and hard-to-abate sectors.
In 2019, more than 50% of net GHG emissions
came from energy production and industry.
If emissions from electricity and heat production are
attributed to the sectors that use the final energy,
90% of these indirect emissions are allocated to the
industry and buildings sectors (increasing relative
GHG emission shares from 24% to 34%, and from
6% to 16%, respectively).
Source: Adapted from IPCC (2022), Climate Change 2022: Mitigation
of Climate Change (Figure 2.12)
Industry, 24%
Electricity +
heat, 23%
AFOLU, 22%
Transport, 15%
Other
energy,
10%
Buildings, 6%
Total net anthropogenic GHG emissions by sector (2019)
Note: AFOLU = Agriculture, Forestry and Other Land Use

3. OECD Guidance on Transition Finance
Main elements and target audience
• Landscape analysis
• Key challenges in transition finance (industry survey)
• 10 elements of credible corporate transition plans
• Financial market participants
• Corporates
• Policymakers and regulators
2
Source: OECD (2022) Guidance on Transition Finance:
Ensuring Credibility of Corporate Climate Transition
Plans
FOR WHOM
WHAT

4. • Finance raised or deployed by corporates to implement their net-zero
transition, in line with temperature goal of Paris Agreement, based on
credible corporate climate transition plans
3
OECD Guidance on Transition Finance
Definitions
Working definition
of Transition
Finance
Key distinction
• Green/sustainable finance = already green, point-in-time assessment
• transition finance = becoming green, moving towards net zero
• To date, there is no consensus definition of transition finance, nor commonly agreed criteria.
• The Guidance considers transition finance as finance intended for emissions-intensive economic
activities, with no viable green substitute but that are on their way to becoming sustainable or
reaching net zero.

5. Transition-related financial instruments
4
• In 2021, the utilities and industry sectors issued
the second largest share of SLBs by volume.
• Most SLBs target GHG or carbon emission
reduction objectives (of which, 77% were verified
by the Science Based Targets initiative).
• Concerns have been raised on the use of
composite ESG ratings as Key Performance
Indicators to link the financing with.
• Transition finance is currently extended mainly through fixed-income instruments, namely
sustainability-linked bonds (SLBs) and loans (SLLs) and transition bonds.
• Fast growth of sustainability-linked debt, led by utilities and industry sectors in Europe and North
America. Transition bond market still new but growing, led by hard-to abate sectors in Asia.
Source: OECD (2022), based on Bloomberg data
Green bonds,
620 bn (38%)
Sustainability-linked
loans, 428 bn (26%)
Social bonds,
205 bn (13%)
Sustainability
bonds,
190 bn (12%)
Sustainability-
linked bonds,
109 bn (7%)
Green loans,
86 bn (5%)
Note: bn = USD billion

6. OECD Guidance on Transition Finance
Focus on corporate transition plans
5
Why focus on corporate transition plans?
• Credible corporate transition plans can reduce or avoid risks
related to greenwashing, lock-in and delayed action
YET
• Increasing evidence that despite investor expectations, only a
minority of companies are developing transition plans
• Existing transition plan disclosure is limited and inadequate
31%
69%
Yes No
Do you have
a low-carbon
transition
plan?
Source: CDP (2022)
A transition plan is a time-bound, cross-cutting action plan that clearly sets out how a company
intends to achieve its transition strategy and reach its goals/targets to transform its business model,
operations, assets and relationships towards low-emission, climate resilient pathways aligned with the
goals of the Paris Agreement (CBI, 2021; CDP, 2021; CPI, 2022).

7. OECD Guidance on Transition Finance
Mushrooming of initiatives on transition plans
Disclosure
frameworks
• Standards and
regulatory
frameworks with
components that
companies
should
disclosure
Validation and
assessment
services
• Validation of
science-based
targets
• Transition plan
assessments
Pathways and
methodologies
• Methodologies
for companies to
set GHG
emission targets
• Guidance and
tools for
companies to
develop TPs
Data collection
and analysis
• Data collection
and analysis on
entities’
transition plans
and targets
6

8. OECD Guidance on Transition Finance
Elements of credible corporate transition plans (I)
7
Setting temperature goals, net-zero and interim targets
Long-term and interim targets are consistent with a 1.5°C reference scenario (explaining underlying
assumptions) and cover all relevant GHG emissions.
Using sectoral pathways, technology roadmaps and taxonomies
Targets are based on available sectoral pathways / technology roadmaps / taxonomies. The plan
clarifies how future operating and capital expenditures will be used to achieve targets.
Measuring performance and progress through metrics and KPIs
Metrics and KPIs cover lifecycle GHG emissions, are measurable and externally verifiable. Targets
and reporting include scope 3 emissions (omissions are limited and clearly justified and explained).
1
2
3
Providing clarity on use of carbon credits and offsets
Given the risk that carbon credits and offsets can pose to the credibility of transition plans, their
use is limited and carefully explained.
4
Setting out a strategy for implementation, incl. on preventing emission- intensive lock-in
The plan includes actions to achieve the targets, an assessment of the risk of emission-
intensive lock-in and, where relevant, a plan for responsible retirement of high-emitting assets.
5

9. OECD Guidance on Transition Finance
Elements of credible corporate transition plans (III)
8
Integration with financial plans for internal coherence
The transition plan is integrated into the corporate business and financial planning and reporting.
Supporting a just transition
Measures are taken to mitigate any negative impact on workers, suppliers, local communities.
Addressing adverse impacts through the Do-No-Significant-Harm (DNSH) Principle and due
diligence for Responsible Business Conduct (RBC)
The plan should consider environmental and social objectives and ensure no harm is done to them.
6
7
8
Ensuring sound governance and accountability
The design and implementation of the transition plan is subject to regular monitoring and
reporting, senior management oversight, and involves all relevant stakeholders.
Transparency and verification, labelling and certification
Progress on targets is regularly disclosed and third-party verification of the plan ensured.
9
10

10. `z
Thank you!
For more information, please contact:
Elia Trippel: elia.trippel@oecd.org
Valentina Bellesi: valentina.bellesi@oecd.org