Given the imperative to mobilise private investment at the scale required to address climate change, the effective deployment of funding, policies, and frameworks becomes paramount (COP28). The potential for significant growth in private climate finance, compared to public finance, reflects the abundant private capital available globally, juxtaposed against the limited public funds. To truly lead on the international stage and translate its ambitious climate agenda into tangible actions, the European Union has the opportunity at the upcoming G7 meetings to champion its ambitious vision for the global decarbonisation, aiming to prioritise a collaborative approach to the effective deployment of funding, policies, and frameworks that support the transition to a low- carbon economy.
Read the policy briefing “G7 Financial Ministerial: the critical role of Transition Plans and the need for a systemic approach to finance”
Read the policy briefing “Italian G7 Presidency: the critical role of Transition Plans and the need for a systemic approach to finance”
Echoing Enrico Letta’s recent report on the European Single Market, the transition to a low-carbon economy presents a compelling case for collective action. While the costs associated with this shift are systemic, with impacts beyond EU borders, the benefits are extensive, reaching citizens, businesses, and workers. This is not just an environmental necessity, but it needs to be seen as an economic opportunity in the context of an increasingly sustainability-focused global landscape.
Placing Transition Plans (TPs) at the heart of the G7 finance agenda represents a great opportunity for the European Union as well as G7 countries to boost their competitiveness. A coherent approach on requirements across G7 countries to TPs (for States, Corporates and Financial Institutions) can re-orient align financial flows towards resilient and sustainable economic systems, whilst securing competitiveness in the process.
In July 2023, the EU Commission published a communication on transition finance, providing an initial and non-binding definition of what transition plan means. The EU is now at the forefront of transition finance legislation. To drive global progress and coherence, the EU’s ambitious approach to TPs should be replicated at G7 level, bringing forward a coherent vision that can inspire a unified approach on transition plans.
Moreover, transition plans are increasingly being recognised as an essential and strategic tool within and outside the EU. By using TPs, public and private entities can decarbonise and strengthen the resilience of their operations, whilst attracting more investments. If correctly implemented and appropriately integrated in regulatory frameworks, TPs become key instruments in guiding public and private capital flows. They enable all economic market players – from governments to companies and financial institutions – to align their strategies with clear objectives and meet their low-carbon commitments. This alignment not only contributes to emissions reduction, but also to the effective and orderly management of climate-related risks. TPs are also a driver of innovation and competitiveness: they translate targets into concrete plans which then shape the size of new markets and enable investable projects to surface.
The context in which G7 operates requires to look beyond national borders and adopt coordinated approaches on a global scale. While the G20 remains the chief forum for global economic coordination, the G7 plays a critical role in influencing the international debate through setting ambition. Therefore, G7 should higher the ambition on transition plans and, at the same time, bringing relevant support for strong G20 outcomes.
This is even more relevant in 2024, considering the G20 Task Force on a Global Mobilization against Climate Change (TF-CLIMA) set up by Brazil and the well- established SFWG. The TF-CLIMA puts national transition plans and financial frameworks aligned with the Paris Agreement at the heart of the G20 finance, climate and Sherpa tracks. Supporting Brazil’s G20 presidency serves the G7’s geopolitical and geoeconomic interests. The TF-CLIMA fosters a new collaboration within the G20, aimed at unlocking agreements and driving the substantial shift in national investment and financial reforms needed to reach Paris Agreement commitments.
To make the most of this new setting, G7 finance and climate tracks should align their strategy, find a common position and support a systemic approach to defining and financing national transition plans. Such a systemic approach developed by G7 is critical to give confidence, build trust and inform next set of finance and climate decisions at COP29 and COP30 on the New Collective Quantified Goal on Climate Finance (NCQG) and the Nationally Determined Contributions (NDCs).
Read the policy briefing “G7 Financial Ministerial: the critical role of Transition Plans and the need for a systemic approach to finance”
Read the policy briefing “Italian G7 Presidency: the critical role of Transition Plans and the need for a systemic approach to finance”
Photo by Towfiqu barbhuiya
