Social Sharing
Extended Viewer
Financing the Climate Transition
Jun 10, 2024
The imperative to decarbonize the global economy in response to climate change has given rise to the concept of “transition finance.” In this report, we delve into the financial strategies necessary to move away from fossil fuels and toward a sustainable future.
Investors typically adopt two approaches: portfolio decarbonization and financing the transition of higher emitters toward low-carbon business models. Both aim to lower the carbon footprint of a portfolio in the long run but use different economic strategies to achieve this goal. The active decarbonization approach rebalances the portfolio away from high emitters, while the finance the transition approach focuses on investing in transition opportunities, i.e., companies that are leading the way in their respective sectors and transitioning their business models. This report underscores the importance of combining these approaches to balance the benefits of each.
Capital allocation strategies for portfolio decarbonization
Illustration of portfolio construction approaches for low- and high-emitting companies. Source: MSCI ESG Research.
Download report
Research authors
- Guido Giese, Managing Director, MSCI Research
- Elchin Mammadov, Executive Director, MSCI Research
- Manish Shakdwipee, Executive Director, MSCI Research
- Kumar Neeraj, Executive Director, MSCI Research
Related content
The Climate Transition Is Increasingly About Opportunity
Climate-friendly policies and regulations and the massive reallocation of capital needed in the coming years to ensure a successful shift to a net-zero economy should continue to expand the range of opportunities for both companies and investors.
Read the reportThe MSCI Net-Zero Tracker
A periodic report on progress by the world’s listed companies toward curbing climate change risk.
Explore moreClimate and Net-Zero Solutions
Quantify and understand the financial risks of climate change and take necessary action for portfolio performance optimization, risk management and regulatory reporting purposes.
Learn more