For the UK to become an international leader in transition finance, supporting global decarbonisation efforts and UK-specific climate and economic goals, the Government needs to take comprehensive action across the policy and regulatory environment.

The decarbonisation of the UK is expected to require £50-60bn of capital investment each year through the late 2020s and 2030s. However, the growth of underlying capital required to support this – transition finance – is hampered by a number of strategic challenges, which are detailed in the Transition Finance Market Review (TFMR) report, published today.

Alongside the TFMR report, Barclays has published, ‘Transition Finance: what is needed from UK public policy to support the scaling of high-integrity transition finance to achieve climate and decarbonisation goals?’, a policy paper which spotlights three focus areas where policymakers should take action and will facilitate the delivery of the TFMR's recommendations:

1.Create the economic conditions for transition finance to thrive by supporting real economy measures and incentives. This should include:
    a. The implementation of a National Transition Plan, with clarity on sector decarbonisation pathways. A clear roadmap for the transition of key sectors will be vital to ensuring transition plans can be appropriately assessed and finance provided in line with them;
    b. The development of a stronger suite of internationally competitive incentives for companies looking to raise and issue transition finance. These could include new innovative financial products such as transition or ‘greening’ bonds, and financing mechanisms which de-risk and facilitate the growth of transition finance in the UK.

2.Develop a supportive political and regulatory environment for transition finance to scale, by:
    a. Providing a flexible and broad definition of, or principles for, transition finance. This would bring much needed clarity to the market, whilst remaining sufficiently flexible to accommodate rapidly evolving industries and technologies
    b. Developing a balanced regulatory and policy framework which complements and is interoperable with existing green finance and sustainability-related frameworks and policies in different jurisdictions

3. Ensure a just transition. Policy makers and standard setters should articulate clear principles for a just transition and provide detailed guidance on how this can be delivered in the real-economy.

Daniel Hanna, Group Head of Sustainable & Transition Finance, Barclays, said: "We need ambition to credibly scale transition finance and today’s report from the Transition Finance Market Review is an important milestone in this discussion, and we welcome its publication.

“Scaling transition finance is a necessary step in mobilising sufficient capital to tackle the climate crisis and it presents an opportunity for the UK to show international leadership and unlock growth and economic opportunities. Transition finance needs a strong, supportive policy and regulatory environment, with the public and private sectors working together to help set the standard for, and develop the financial mechanisms required to scale it at pace. With a framework for progress published by the TFMR, our paper provides additional clarity on the areas where work is needed.”

Barclays recognises the critical role banks must play in supporting the transition, and has committed to facilitate $1trn in Sustainable and Transition Finance between 2023 and the end of 2030. This target reflects the scale of Barclays’ ambition, and as at the first half of 2024 had already mobilised $123.8bn. Barclays introduced its Transition Finance Framework in early 2024, recognising the need to outline and provide clarity around how it classifies finance as transition, thereby facilitating clear disclosure of its progress toward its $1trn goal.