The Debt Capital Market’s Role in Financing the Transition Towards Net Zero

Below is an excerpt from ISS ESG’s thought leadership paper: The Debt Capital Market’s Role in Financing the Transition Towards Net Zero. The full paper is available for download from the Institutional Shareholder Services (ISS) online library.

KEY TAKEAWAYS

• Transition finance is critical to support a global acceleration towards Net Zero.
• Hard-to-abate sectors can be game changers for global decarbonization efforts.
• Governments, individuals, corporations, and capital market participants all have a role to play in facilitating collective efforts to finance a global transition towards Net Zero.
• ISS’ Second Party Opinion (SPO) service can provide an independent opinion on sustainable debt instruments’ sustainability quality and alignment with established industry standards.

Countries from around the world are coming together at COP27 in the Egyptian city of Sharm El-Sheikh on 6-18 November to plan actions towards achieving the world’s collective climate goals. The topic of transition finance is receiving increased attention in the context of the Paris Agreement. The G20 Sustainable Finance Working Group’s meeting in Bali in September has raised awareness on this topic, with a focus on improving the credibility of financial institution commitments and scaling up sustainable finance instruments.

The recent publication of the OECD Guidance on Transition Finance has also given the market further insights, guidance, and consistency in understanding those issues relevant for the transition path forward. In this context, Second Party Opinions (SPOs) are seen as an effective mechanism to assess the sustainability quality of debt issuances. SPO reports are typically viewed alongside issuers’ sustainability frameworks, and the opinions outlined in these reports help capital market participants to understand whether issuers’ targets and action plans are aligned with industry best practice decarbonization strategies. SPOs can also offer a view on the quality of companies’ Transition Finance Frameworks, thereby providing an independent opinion on corporations that are setting strategies and raising funds to achieve their climate transition-related goals.

Explore ISS ESG solutions mentioned in this report:

• Use ISS ESG’s Second Party Opinion (SPO) Services to provide sustainability, green and social bonds with a credible and independent assessment of their sustainability quality.