From brown to green: transition finance takes center stage in the push for net zero

With trillions needed to decarbonize high-emitting sectors, transition finance offers a pragmatic path to net zero. But greater clarity, collaboration, and deeper capital flows are urgently needed to accelerate progress.

Successive COP summits have highlighted a stark truth at the heart of climate discussions: more capital investment is needed, and fast. The Climate Policy Initiative estimates that global climate finance needs to reach $9 trillion annually by 2030 to align with the goals outlined in the Paris Agreement. This represents a sixfold increase from the estimated $1.5 trillion mobilized in 2023.

Transition finance – investment directed at decarbonizing high-emitting, hard-to-abate sectors such as heavy industry, transport, and oil and gas – is a critical part of the solution. For investors, it represents a multi-trillion-dollar opportunity. For governments and industries, it offers a path to net zero that is both necessary and potentially transformative. 



Transition finance is at a pivotal moment, with policy alignment, legal certainty, and cross-sector collaboration emerging as key to unlocking essential capital.

Momentum remains strong despite political shifts

Recent shifts in the political and regulatory landscape, including the United States’ retreat from certain international climate commitments, have introduced uncertainty. Yet while short-term headwinds have delayed some investments, the long-term business case for climate finance remains strong. Decarbonization continues to be a strategic priority for most major economies and global corporations. Europe, for instance, has maintained its regulatory trajectory despite fears that a recent push for “simplification” might dilute sustainability rules. In the end, core policies held. Combined with enduring public support and investor interest, this has fueled demand for transition finance tools that deliver both credible returns and measurable emissions cuts.

Transition finance in action

1. Better regulation and reporting
Effective regulation is key to scaling transition finance. Without clear, consistent, and comparable climate disclosures, capital cannot be deployed efficiently. Encouragingly, global standards are converging. The International Sustainability Standards Board (ISSB), building on the Task Force on Climate-related Financial Disclosures (TCFD), has introduced a baseline framework for climate reporting. Europe’s Corporate Sustainability Reporting Directive (CSRD) is being phased in, reinforcing ESG accountability. In India, top listed companies have been required to publish climate-related sustainability reports since 2023 – a milestone for emerging markets. These regulatory advances matter. Regulations that are too lax risk greenwashing; too rigid, and they deter investment. The emerging trend toward pragmatic, harmonized standards is boosting investor confidence.

2. Transition finance in the GCC
Nowhere are the challenges and opportunities of transition finance clearer than in the Gulf Cooperation Council (GCC) region. Long dependent on fossil fuels, GCC economies are pivoting toward climate-aligned investment. Banks in the UAE and across the region report surging demand for transition-linked instruments—loans, bonds  , and sukuk – supporting emissions reductions in energy, industry, and infrastructure.

Efforts are underway to craft region-specific transition finance guidelines. The Loan Market Association, working with regional and international banks, is developing frameworks to define eligible projects and ensure transparency. A first wave of labeled transition bonds and loans is expected in the GCC within the next year. If underpinned by credible standards, these could help position the region as a global leader in financing the “brown-to-green” transformation of hard-to-abate sectors.

3. Maturing carbon markets

After years of uneven development, carbon markets are gaining momentum. COP29 reached agreement on standards for generating carbon credits. If implemented successfully, this could lay the foundation for a robust global framework. National initiatives are also accelerating.  is evolving into a mandatory trading platform, backed by a $1 trillion government decarbonization fund. In the Gulf, countries including the UAE, Qatar, and Saudi Arabia are preparing domestic carbon markets.

These initiatives, alongside models in the EU and China, signal a growing consensus on the role of carbon pricing in financing the net zero transition. Well-functioning carbon markets do more than price emissions – they stimulate innovation, raise public revenue, and attract institutional capital. If COP30 builds on this momentum, carbon markets could become a central pillar of transition finance. 



Unlocking transition finance’s full potential

Despite recent geopolitical uncertainties, banks and investors remain committed to sustainable finance. The key bottleneck is the lack of investable, large-scale projects. Many institutional investors seek opportunities with solid risk-adjusted returns, but green initiatives, particularly in emerging markets, are often too small, fragmented, or complex to attract mainstream capital.

One solution is to bundle smaller projects into standardized investment vehicles. This requires innovative structuring and close public-private collaboration. Regulatory alignment is also crucial. And incentives such as tax credits, concessional finance, and sovereign guarantees can help shift the risk-return balance in favor of transition investments.

Deploying climate capital at scale also depends on coordinated policy signals from major economies. Markets must remain stable, climate targets credible, and cross-border technology transfers easier –not harder.

Green finance has grown over a hundredfold in the past decade, but that alone won’t deliver net zero. High-emitting sectors need tailored investment solutions. While debates over definitions and greenwashing continue, momentum remains strong. To meet the climate challenge, the world must continue to define, promote, and deploy transition finance without delay.

Each year, Abu Dhabi Sustainability Week (ADSW) brings together leaders from business, finance, academia, and government to form ADSW Advisory Committees. As a platform for high-level dialogue and knowledge exchange on pressing sustainability topics, these committees provide insights to reflect the complexity and interdependence of sustainable development challenges. 

To address the most pressing issues in climate finance, a new summary paper distills key insights on geopolitics, carbon markets, regulatory shifts, and the evolving role of transition finance. Drawing on expert voices, it offers a timely snapshot of where the Middle East – and the world – stands in the global journey toward net zero.