Accelerating the Transition through Sustainable Finance

Pauline Hascoet Sustainable Finance Solutions, Mizuho EMEA

Caitlin Pallett Sustainability Strategy, Mizuho EMEA

We are witnessing a transformation in the geopolitical landscape that is reshaping international alliances, trade relationships and political priorities. This is influencing investment strategies, and sustainability is no exception.

Climate policies and investments are amongst those being recalibrated, with a greater urgency to find solutions that combine climate transition, energy security, and global competitiveness. Governments and market participants have identified sustainable finance as a key enabler to support scaling of clean energy, diversify supply chains and reduce exposure to volatile fossil fuel markets, serving each of these aims.

Global Collaboration

Global cooperation towards sustainability objectives has become challenging as sentiment and priorities have diversified over the last year. However, where objectives are shared, cross-regional alliances have evolved to be more pragmatic, focused, and centred on accelerating implementation.

EU and Japan, two of the largest capital markets, have both reaffirmed their commitment to reduce emissions during this decade in line with the Paris Agreement and have committed to deepen climate-related cooperation initiated under the EU-Japan Green Alliance. Representatives are expected to meet throughout 2026 to discuss strategies for industrial decarbonisation, climate adaptation, carbon pricing and carbon credits, carbon capture use and storage, and sustainable finance.

Global alliances such as this support design and implementation of stable, multi-decade decarbonisation policies. Complementary measures such as tax incentives, carbon pricing, and regulatory frameworks provide important market signals and create an enabling environment for the real economy transition.

Transition planning

Longer-term national decarbonisation policies have significant influence on the transition planning process for corporates and financial institutions, as both can more confidently invest in solutions that have clear government support.

A good example is Japan’s 7th Strategic Energy Plan created by the Ministry of Economy, Trade and Industry. This outlines how clean energy will increasingly contribute to the power mix to achieve net zero by 2050, clarifying the role of emerging technologies such as energy storage, carbon capture and storage, and hydrogen.

Not all nations are working towards net zero by 2050, with some targeting 2060 or later to ensure a just transition that accommodates development requirements. The APAC region includes countries with 2050, 2060, and 2070 targets, which influences the transition planning of corporates and FIs operating in the region. This adds a layer of complexity to transition planning and requires a degree of flexibility for institutions with global operations.

Corporates in hard-to-abate sectors leverage national or supranational transition strategies as reference points when developing transition plans grounded in credible, sector-specific assumptions. Such strategies can help companies set pathways that reflect realistic timelines for technology investment, scale-up and deployment, while also improving their ability to manage the strategic and financial risks associated with business-model transformation.

These strategies also provide a benchmark against which financial institutions can assess the ambition, feasibility and credibility of corporate transition plans to identify and manage portfolio transition risk. Through robust transition assessments, financial institutions can bridge ambition and action by mobilising capital to support the real‑economy shift to net zero.

Financial institutions leverage national decarbonisation strategies to identify financing and advisory opportunities and inform their own transition objectives, notably supporting sustainable finance delivery targets.

Broadening the scope of sustainable finance with transition finance

Transition finance has emerged as a critical enabler of the global decarbonisation agenda. The market is increasingly recognising that a significant share of the real-economy transition will require financing of activities that are not yet fully green. Nonetheless such activities represent critical steps towards net zero, particularly for energy, steel, cement, and across broader industrial value chains.

While sustainable finance labels have historically focused on green, social and sustainability-linked, a number of financial institutions have expanded their sustainable finance targets to include transition finance. Dedicated guidance on transition finance has recently emerged, including from the APLMA, LMA and LSTA collaboration and ICMA. This market guidance creates new opportunities to support high-emitting companies in their transition, enabling a more comprehensive decarbonisation of the real economy.

In parallel, a growing number of national and supranational frameworks recognise the importance of channelling capital towards transition activities, both through labelled and conventional instruments. This is reflected, for example, in the evolution of SFDR 2.0 in Europe and in Japan’s Basic Guidelines on Climate Transition Finance, both of which aim to provide greater clarity and credibility around transition-related investments. This is complemented by the UK’s Transition Finance Council Transition Finance Guidelines, which set out a principles-based approach to underpin credible transition pathways and strengthen transparency for investors.

There is no lack of guidance to support transition finance, either in labelled or non-labelled format. Perfection is the enemy of progress and acknowledging regional specificities and challenges, whilst building on existing resources, will accelerate financing towards the transition.