Launched in 2024, the Transition Finance Council aims to support the UK in becoming a leading global market for transition finance, where money is spent to help sectors shift to a low-carbon economy.
Following on from draft guidelines, testing periods and consultations, a new exposure draft was published on Thursday (26 March), outlining recommendations for finance to be funnelled into high-emitting sectors.
The voluntary framework offers clear and credible guidance to steer general-purpose finance into decarbonising in these sectors.
Published in March are:
The International Energy Agency estimates that $4–5 trillion in transition finance could be unlocked over the next decade, but investors often lack a framework to outline what transition financing should look like. There is also the optics risk of being seen to invest in high-emitting sectors, so outlines on funding credible decarbonisation initiatives are much needed.
Chair of the Transition Finance Council, Lord Alok Sharma, said: “The Transition Finance Council has undertaken a significant level of engagement with domestic and international financial institutions in developing these draft guidelines, and this engagement will continue in 2026. It is pleasing to see that banks and asset owners and managers have already started testing the guidelines to inform their usability and practical application and the intention is that these guidelines become an industry reference point.
“To assist with further unlocking the flow of transition finance the Council has also the published several policy recommendations for government, including clarifying fiduciary duties and strengthening the market for transition labelled instruments, to scaling the use of government backed guarantees. We look forward to government acting on these recommendations.”
Last year, the UK Transition Finance Council unveiled its first draft guidelines, setting out how investment can be unlocked to decarbonise businesses in high-emitting industries, including cement, steel and transport.
More than a dozen banks, asset managers and asset owners including Natwest, Standard Chartered, Santander, Lloyds Banking Group, Ninety One and Carlyle Group, have started testing the new guidelines.
The Council has confirmed that Barclays will take the final Guidelines into consideration under their own Transition Finance Framework. The Council expects more financial institutions to do the same over the next 12 months.
Since last year’s iteration, the Council has introduced new updates following consultative feedback. Criteria have been streamlined for complex issues such as management of external dependencies and differences in decarbonisation pathways around the world. New case studies have been added to showcase guideline implementation, and advice has been split into “core” and “recommended” criteria to help organisations in less mature markets.
New updates have also been included to show how the guidelines align and operate alongside other voluntary frameworks.
Many recommendations align with the Transition Plan Taskforce’s (TPT) ‘Gold Standard’ for how businesses should shape their strategies and disclosures.
Minister for Climate at the Department for Energy Security and Net Zero, Katie Whie OBE MP said: “Transition finance is central to our Clean Energy Superpower Mission, and capitalising on the economic benefits of the transition. We are delighted to be working with the Transition Finance Council on their important outputs to help make the UK the world-leading financial centre for deploying and raising transition finance.
“I look forward to working together with the Council and City of London Corporation to translate these outputs into delivery – mobilising private capital into UK projects and shaping practice internationally.”
