[2024-January-23]WG4 Webinar:Reflections and Cases on the G20 Transition Finance Framework
On January 23, 2024, the GIP Transition Finance Working Group (WG4), co-chaired by DBS Bank and the Bank of China, hosted a seminar titled "Reflections and Cases on the G20 Transition Finance Framework," inviting experts from Chinese and foreign banks, international organizations, and academia to discuss transition finance.
In the session “Policy Framework for Transition Finance,”REN Feizhou, Senior Manager of the Green Finance Department of the Bank of Huzhou, shared the experiences of the City of Huzhou and the Bank of Huzhou in driving low-carbon transition. As part of its broader transition strategy, the Huzhou government implemented a series of policies:
1. Released a transition finance taxonomy for eight carbon-intensive sectors.
2. Set short-, medium-, and long-term transition goals
3. Provided standardized templates for designing transition plans.
4. Published a list of supported projects and enterprises eligible for transition finance.
1. On the institution level, Bank of Huzhou has integrated transition finance into its overall strategy, collaborated with the local green finance database engine to establish a carbon accounting system, and introduced a fast-track approval process to address challenges faced by banks, such as restrictions on lending to high-emission industries, difficulity accessing carbon emission data, and limited willningess among enterprises to transition.
Sylvia CHEN, Head of ESG for South Asia at Amundi, presented the latest Singapore Asia Taxonomy to the attendees. Developed under the leadership of the Monetary Authority of Singapore (MAS), the Asia Taxonomy employs a traffic light system to classify activities: Green refers to activities that are near-zero emissions or can achieve net-zero by 2050. Transition (Amber) refers to activities are on a pathway to net-zero or contribute to net-zero outcomes. Red refers to activities that are inconsistent with the net-zero goal. The taxonomy tailors transition requirements to the specific nature of each activity. For example, hydrogen storage or transport and coal plant retirement can both fall under the amber category. However, their requirements differ: hydrogen-related activities are not assigned specific carbon reduction targets due to their unique characteristics, whereas coal plant retirement mandates that operational time not exceed 25 years.
Robert YOUNGMAN, Team Leader for Green Finance and Investment of the Environment Directorate at OECD, introduced the OECD's Transition Finance Guidelines, which outline 10 key elements of credible corporate transition plans, such as setting climate targets, clarifying the use of carbon credits, and addressing methods to avoid "carbon lock-in." The guidelines emphasize greater transparency, comparability, and granularity compared to other frameworks. To address carbon lock-in, the OECD recommends conducting long-term feasibility assessments, using sunset clauses to ensure timely transitions, and establishing standards and frameworks for sustainability-linked instruments.
In the session "Carbon Accounting for Investment and Operational Disclosure Framework," Milo SJARDIN, Group Head of Climate Analytics at HSBC, shared HSBC's approach to managing financed emissions. The approach taken by HSBC has covered most of its financed emissions and has used PCAF standards to calculate both financed and facilitated emissions. For target setting, HSBC prioritizes key stages in sectoral value chains, such as the upstream segment in oil and gas and the production phase in cement, to define emissions targets and strategies. SJARDIN also highlighted key challenges, including the volatility of market capitalization, complexities in group structures, and the lack of granularity in regional transition modeling.
In the session "Cases on Transition Finance Mechanism in Banking," WANG Na, Senior Manager of the Investment Banking Department at the Bank of China, shared examples of how the bank has supported carbon-intensive enterprises in transition. The Bank of China issued the first publicly offered transition bond outside Mainland China by a financial institution, as well as one of the initial batches of transition bonds in the Chinese interbank market. Its Huzhou Branch, the first green finance pilot branch, pioneered innovative measures such as Carbon Efficiency Loans. Furthermore, under the Belt and Road Initiative, the Bank of China participated in syndicated financing, leveraging third-party verification to support the construction of Central Asia's largest combined cycle gas-turbine power plant.
In the session "Net Zero Commitments in Banking: Paving the Way for Effective Transition Finance," Sang-Lye SEE, Executive Director of Institutional Banking Group at DBS Bank, shared how DBS Bank is advancing its net-zero transition. The bank has identified key industries in its asset portfolio based on factors such as their materiality to DBS, carbon emissions intensity, and the scalability of low-carbon technologies. SEE noted that beyond technical challenges, obstacles like inadequate infrastructure, immature supply chains, insufficient incentives, and market barriers remain significant. As a result, efforts should focus on reducing fossil fuel use, lowering financing and upfront costs, and enhancing support for green projects.
In the session "Just Transition: Concepts and Practices," SUN Yixian, Associate Professor in International Development at the University of Bath, introduced the concept of "Just Transition" and its significance in global environmental and climate governance. The concept includes distributional justice, procedural justice, and compensatory justice. To better support financial institutions in incorporating just transition principles, he shared that his expert group, under the Race to Zero initiative, is developing tailored guidelines for financial institutions. In closing, SUN called on all stakeholders to strengthen collaboration, share best practices, and create specific indicators to advance pathways toward equitable and sustainable development.