As part of London Climate Action Week 2026, the TPI Global Climate Transition Centre (TPI Centre) at the London School of Economics and Political Science (LSE) and the UN Environment Programme Finance Initiative (UNEP FI) co-hosted two workshops designed to facilitate dialogue between banks and investors on navigating dependencies in transition planning.

Held at the London Stock Exchange Group on Wednesday 24 June 2026, the two workshops brought together over 25 participants, including representatives from global banks, institutional investors, asset owners and regulators. Their opinions were canvassed through discussions during facilitated roundtable sessions held under the Chatham House Rule. Here are the key insights that emerged:

Banks are enablers of the transition to a low-carbon economy. Participants noted that banks have agency to support the transition by integrating climate considerations not only into risk analysis, but also into product and service design, client engagement and financing structures. Policy support and client readiness, however, are essential for banks to contribute effectively to the transition.

Climate-change-related context varies significantly across regions. Both banks and investors valued common standards and frameworks to ensure comparability across institutions. However, they also pointed to the need for context-sensitive application of these frameworks that accounts for regional and local infrastructure, policy environments and sectoral dependencies. The complexity and heterogeneity of banks' business models mean that no single metric can capture their climate performance, which is better understood across a set of complementary indicators.

Climate targets remain relevant despite their limitations. Five years on from the 26th UN Climate Change Conference of the Parties (COP26) in Glasgow, participants reflected that some of the targets set at the time lacked a clear delivery pathway. In a changing political environment, publicly stated targets can draw greater scrutiny from some policymakers and clients in jurisdictions where climate action has become politically sensitive. Even so, participants highlighted that climate targets still serve important purposes: they signal intent to external stakeholders, orient internal decision-making, measure progress, and help meet regulatory requirements, particularly in Europe.

The case for acting on climate change-related financial risks needs to be clearer. Excluding mortgages, banks in most developed economies tend to lend over periods of two to eight years, shorter than the horizons over which climate risks are generally expected to materialise in most sectors, except in agriculture and real estate. This mismatch, together with acute data limitations, indicates that climate-related risks do not yet translate straightforwardly into a financial rationale within banks' existing risk frameworks. Supervisory exercises by the European Central Bank and the Bank of England point in the same direction, though both institutions caution that their estimates likely understate the underlying risks associated with climate change.

Bank engagement with policymakers can help shape the conditions for the transition. While banks cannot drive the transition alone, the multisectoral expertise they gain from financing different segments of the economy puts them in an ideal position to engage policymakers and play a key role in making transition investments bankable. For investors, however, assessing this engagement from the outside can be difficult: bank lobbying policies rarely address climate-related issues specifically, and where they do, the language is often vague.

Existing frameworks provide a foundation to bridge the gap to 2030. Investors and banks mentioned frameworks developed by UNEP FI, the Institutional Investors Group on Climate Change and the TPI Centre as starting points for their analysis. Banks reported using these tools to inform internal scoring processes, while also developing their own approaches to capture local and sectoral context. Investors described using them as an initial assessment before conducting institution-specific research, noting that the range of business models requires supplemental analysis.

The primary barrier to scaling up transition finance is the absence of a viable business case, not a shortage of capital. Banks maintained that they need an adequate risk-return profile to deploy capital. Leading banks actively collaborate with public authorities to make climate projects bankable, for example, through blended finance, guarantees, indemnities and letters of credit. They also help clients build the business case for these investments where opportunities exist. Supportive policy, such as a predictable carbon price, is essential to making these projects viable, particularly in hard-to-abate sectors.

Sustainable finance instruments are at different stages of development. Green finance frameworks and green bond reporting are becoming more established among large banks. Participants observed that transition finance, by contrast, lacks agreed frameworks, particularly outside Europe, and emerging-market contexts are frequently absent from existing approaches. Keeping green and transition finance distinct was seen as important to preserve the integrity of green finance products. Investments in adaptation and resilience remain largely undeveloped. Where investments such as renewable energy projects generate predictable cash flows and are readily bankable, adaptation and resilience measures often lack clear revenue streams and are highly project-specific, limiting both their bankability and scalability. Across these instruments, weak key performance indicators undermine the ability of use-of-proceeds financing structures to drive change.

The purpose of labelled instruments may be shifting. Labelled products do not seem to attract lower rates. As yields on green and transition products align with those of conventional instruments, some participants questioned their purpose. They suggested that labelling may now serve a more practical internal tracking function for banks for meeting financing targets, rather than as a market mechanism for pricing transition risk or rewarding credible decarbonisation pathways.

Taken together, the sessions highlighted banks' role as enablers of the transition. By working with policymakers, public bodies and investors, banks can help address some of the dependencies of the transition to a low-carbon economy and make climate investment bankable.

In parallel to this workshop, the TPI Centre also co-hosted two workshops designed to facilitate corporate-investor dialogue with the Transition Pathway Initiative (TPI) and the World Business Council for Sustainable Development. 

Finally, as ever, we welcome your feedback. If you attended the event, we would be grateful if you could fill out the post-event survey. It will take only a few minutes.

 

Photo credit: BrianAJackson on iStock