Transition finance in the regulatory contexts
Description of the Project
This activity is part of the European Union Climate Dialogues (EUCDs) project and funded by the European Union. It intends to support stakeholders from non-EU countries by providing recommendations based on good practices and international standards and guidelines on transition finance and support how to first adopt and subsequently manage climate and nature related (C&N) risks. In this regard, it aims to support EU actors and partners to strengthen ongoing discussions on transition finance measures and specifically on the holistic integration of C&N risks in policy and supervisory frameworks.
The practical cases in this guide provide an overview from key institutions, including the European Central Bank (ECB), and central banks from the Netherlands, Germany, and Portugal. The selection of country-specific examples targets national central banks and regulators that have systematically integrated transition finance across the different dimensions assessed in this guidance note (e.g., adoption of climate and partly nature-related risks, prudential regulation, monetary and non-monetary policy operations, other financial regulation tools). However, while the applied practice cases presented in this guidance note serve an informative purpose, the list of country examples is non-exclusive, and may be subject to further modifications or enlargements due to the highly evolving regulatory landscape that characterizes policy action related to transition finance. Therefore, reader discretion is advised.
Most thematic areas include short, medium and long-term measures about the holistic integration of C&N risks policy and supervisory frameworks that correspond to the time component of transition finance. Key literature available during the time of developing the guide provides further reading, but the topic and associated publications are evolving. Overall, each country will need to examine different options for adjusting and using the introduced tools dependent on the national context and developments. That said, the applied practices (see tables on practical cases) in this report can provide guidance and/or lessons for most jurisdictions.
Thematically, this guidance note covers the following four chapters with respective sub-chapters:
1. Adoption of climate and nature related risks: Leading by example,
2. Prudential regulations, including disclosure and reporting standards and climate stress testing,
3. Monetary and non-monetary policy operations, and
4. Further financial regulation tools, incl. green credit policies and finance taxonomy development.
Each (sub-)chapter follows the same structure: An introduction to the chapter is complemented with applied practical cases illustrating the adoption of C&N risks from EU and non-EU authorities. Next, each chapter contains a concise description (“country stance”) of the state of play of transition finance among selected EUCD partner countries. This covers the Commonwealth of Australia, the Federative Republic of Brazil, the Republic of Colombia, the Republic of South Africa, the Arab Republic of Egypt, the Kingdom of Morocco, the Republic of Türkiye, and the Republic of Korea.
The used terms in brackets respect each nation’s official designation while providing a more straightforward name for ease of communication. In addition, there are as well as an information box with potential bilateral learning opportunities between EU authorities and those of the selected EUCD countries. The aim of this complementary evidence is to inform readers about the actual progress made by the corresponding authorities in the policy areas examined in the report, highlight existing role models, and identify potential policy gaps and learning opportunities across the mentioned states. This is followed by illustrative guiding notes, and potential next steps with a time dimension if applicable. Finally, key literature for further reading is provided (with last updates on November 2024).