It is absolutely possible.
Thank you.
Defining what is already sustainable has traditionally been the focus of sustainable finance initiatives. This approach is criticized by some corporates and financial market participants as being insufficient to facilitate the whole-of-economy greenhouse gas emission reductions necessary to achieve the temperature goal of the Paris Agreement.
Transition finance focuses on the dynamic process of becoming sustainable rather than providing a point-in-time assessment of what is already sustainable today. This inclusive approach creates room for financing to decarbonize the most polluting and hard-to-abate industries today. On the other hand, transition finance can run the risk of sacrificing environmental integrity for inclusiveness and enabling greenwashing, a topic that is attracting increasing attention from stakeholders and regulators.
The "OECD Guidance on Transition Finance" provides a comprehensive analysis and mapping of existing initiatives. It identifies key challenges to scaling up transition finance currently faced by market actors and policy-makers. In the context of the guidance, transition finance is understood as finance deployed or raised by corporates to implement their net-zero transition in line with the temperature goal of the Paris Agreement and based on credible corporate climate transition plans. The guidance presents 10 elements of credible corporate plans, and highlights areas where more transparency is needed. In doing so, it can support market actors in conducting transition finance transactions with environmental integrity; corporates in developing their transition plans; and policy-makers in developing robust policy frameworks for transition plans.
This focus on transition plans in the guidance is also reflected elsewhere, including the G20 sustainable finance working group's transition finance framework, the International Platform on Sustainable Finance's transition finance principles, and the U.K. transition plan task force disclosure framework. Existing frameworks share several common elements, which they cover with varying degrees of detail, prescriptiveness and stringency. These elements include setting of net-zero and interim targets, use of metrics and key performance indicators, use of carbon credits and offsets, internal coherence with a company's business plan, guidance on governance and accountability, as well as issues surrounding transparency and verification. The guidance draws on all these existing frameworks and initiatives when presenting elements of credible corporate climate transition plans.
I will skip a little bit just to stay within the five minutes, Chair. I'm sorry for the initial “coverage”.
It is worth highlighting that the journey toward credible transition plans has only just begun. In a recent report, CDP found that in 2022, 22% of the organizations disclosing through the climate change questionnaire disclosed that they had already developed a climate-aligned transition plan. However, of those organizations, only 81—that's less than 1% of the full sample—reported sufficient detail on key indicators. Moreover, only 9% of the full sample reported that their transition plan was publicly available. We're very early on in the process.
The guidance was developed in consultation with an informal reflection group of interested policy-makers that included the Bank of Canada, the U.S. Department of the Treasury and representatives from several other countries. In addition to being reviewed by relevant policy committees at the OECD, it was also submitted as an input to the G20 sustainable finance working group. It also informed the development of other relevant transition finance initiatives and frameworks.
Thanks very much for the opportunity to share this information to help inform the study on the current state of play. I'll be happy to answer any questions.