Gaps in addressing how financing needs will be met could undermine the UK’s transition finance efforts and damage its credibility with investors, a government-appointed transition finance task force has warned.
Sector transition plans often lack embedded and credible investment strategies and omit detail on how to mobilise private finance at scale, the Transition Finance Council said in a “finance playbook” published on Monday alongside its mid-year progress report.
The Council was set up in February by the Treasury and the City of London Corporation to implement recommendations from the Transition Finance Market Review which was published last year.
Transition finance helps high-emission industries move towards lower-carbon operations.
“Addressing this ‘finance gap’ is not only essential for emissions reduction, but also for economic growth, high-skilled job creation, and enhanced energy security and resilience,” said Chris Skidmore, working group chair at the Council.
Existing plans provide limited detail on how financing needs will be met, how risks will be mitigated and dependencies addressed, and how government policy and public finance will interact to mobilise private finance at scale, the playbook noted.
This gap “undermines credibility, slows delivery, and constrains investor confidence”, it added, noting that without details such as high-level measures and interventions that address the needs of different sources of transition finance, “road maps risk remaining aspirational rather than financeable”.
Global energy transition investment reached $2.1tn in 2024, up 11 per cent year on year, according to BloombergNEF data cited in the progress report.
UK investment accounted for around $65bn, ranking fourth worldwide, with areas such as agriculture, waste and heavy industry remaining underfunded, it said.
Early and ongoing involvement from the finance sector is “critical”, the Council said, pointing to expertise from banks and other financial institutions that can help inform commercial viability and preconditions for investment.
It comes as UK banks continue to publish their transition finance frameworks, with NatWest publishing in July a new 2030 target and associated framework, referencing guidance from the Transition Finance Market Review.
Representatives from HSBC, BNP Paribas and NatWest currently sit on the Transition Finance Council’s strategic steering group.
Earlier this year, the government said it would consult on mandating “credible” climate transition plans for banks and large firms to help transform the UK’s financial services sector into a “global hub” for green investment.
“Unlocking the economic opportunities of the transition and achieving a net zero global economy requires scaling up finance in emerging markets and developing economies,” Danny Alexander, chief executive of HSBC Infrastructure Finance, said in the report.
“This, in turn, will largely depend on effective public-private collaboration to overcome barriers to investment,” he added.