The report covers ways for corporations to finance the climate-friendly economy transition. It provides a step-by-step process starting from the standards and guidelines for thematic labels to the issuance process to post-issuance reporting, organised chronologically by steps.

The report explains that financing the climate transition is a necessity, especially by corporations that produce greenhouse gas (GHG) emissions in industries like heavy industry, agriculture, or energy. Regulatory changes are a significant driver for corporates to hasten their climate transition and access finance dedicated to climate change. The report also mentioned that many countries have mandatory or voluntary corporate ESG disclosure requirements in place, and additional specific climate transition requirements are also emerging.

The report elaborates on climate transition finance as financing dedicated solely to enabling a change in energy use, diversification of energy sources, or improving energy efficiency measures. It is critical to prioritise strategic, measurable, and ambitious activities that can make an impact in emissions reductions. The report suggests corporations establish sustainability disclosure requirements and set ambitious science-based targets as KPIs and Sustainability performance targets.

The report recommends that many corporations are issuing lots of green bonds but not explicitly labelling the bonds as climate transition finance. It also explains that financing the transition is expected to increase drastically to become a $120 trillion market by the end of 2022.

The report suggested that the foundation for transition finance is to follow standards and guidelines for thematic labels to avoid greenwashing or impact-washing. It also recommended investing in establishing a baseline for GHG emissions scopes that facilitate impact reporting post-issuance.

The report demonstrated that there are various standards and guidelines for thematic labels, such as green bonds and the Sustainability-Linked Bond Principles (SLBP), which can be used to issue transition-linked bonds. The report outlined a sustainable financing framework for each bond type and associated characteristics.

The issuance process

The report discusses how to organise and set milestones, including steps like building a transition plan and disclosing it, selecting a thematic label, selecting the sustainability financing framework, bond issuance, and post-issuance reporting.

Step 1: Building your transition plan and disclosing it

Corporations starting their transition journey should measure their GHG emissions and establish a baseline to assess which activities or equipment upgrades would have the most impact on the emission cuts and facilitate impact reporting post-issuance.

Step 2: Selecting a thematic label

The report discussed the use of proceeds and sustainability-linked bond and the additional considerations for all thematic labels. The report recommended that the corporation selects their thematic label based on their transition plan.

Step 3: The sustainable financing framework

The report recommended that entities dedicate resources to develop the sustainable financing framework for their selected thematic label that integrates the objective and strategy in their transition plan.

Step 4: Bond issuance

The report suggested that the issuer should aim to achieve a widespread investor interest to diversify their investor base. Any shortfalls should be planned for before bond issuance. After establishing the desired investor interest, the underwriter will take the lead to market and distribute the bond.

Step 5: Post-issuance reporting

The issuer should commit to regular reporting of relevant information to recent developments. The reporting should include impact and allocation reports, verifying that the management of proceeds for bond financing is done correctly.