Transition finance can only unlock private capital to decarbonise real estate and other sectors if the rules are clear, consistent and credible, says Jeff Rupp, Director of Public Affairs, INREV.
The world of sustainable investment is reaching a tipping point. Ambition is no longer the problem – implementation is. Recent years have seen a wave of new frameworks designed to accelerate the transition to net zero, from the UK’s Transition Plan Taskforce (TPT) guidance to Europe’s Sustainable Finance Disclosure Regulation (SFDR) and Taxonomy. Yet as the rules multiply, so too does the risk that complexity and inconsistency will hold back capital precisely when it is needed most.
Transition finance is emerging as a key test. Investors must now demonstrate how their portfolios align with credible decarbonisation pathways – yet the frameworks that define what qualifies as a ‘transition investment’ remain fragmented. Clear, interoperable regulation is essential to turn ambition into action. Without it, managers and asset owners face uncertainty that slows deployment and limits the impact of transition strategies.
A critical moment for transition finance
The UK’s transition planning framework and the forthcoming overhaul of Europe’s SFDR are part of a broader global effort to define and regulate transition finance. The UK’s Transition Finance Council is consulting on guidance that aims to distinguish credible transition activities from greenwashing, while jurisdictions such as Canada, Australia and Japan are developing transition-led taxonomies. The International Sustainability Standards Board (ISSB) has also published guidance to help governments implement transition-based disclosure requirements.
All these initiatives share a common objective: to make transition finance credible, comparable and scalable. Yet their simultaneous evolution has created a complex landscape for global investors. The UK and the EU, in particular, are moving in parallel but not always in sync. Without closer alignment, even the best-intentioned policies risk introducing friction rather than facilitating flow.
For institutional investors and fund managers, this misalignment can translate into hesitation. Many are holding back capital for retrofitting or other transitional assets because they lack confidence in how such investments will be treated under different regulatory regimes. What qualifies as a ‘transition’ activity in one jurisdiction may not in another. This uncertainty increases cost, complicates reporting, and ultimately delays progress toward decarbonisation.
What investors need to act confidently
For asset owners and managers alike, the ability to plan and report credible transition strategies now depends on whether regulation provides the right level of clarity and comparability.
First, clarity. The definition of a transition activity must be explicit enough to give investors confidence that their capital will be recognised as contributing meaningfully to net zero goals. Ambiguity – for instance, over what constitutes a ‘major renovation’ or how energy performance improvements are measured – leaves investors guessing.
Second, interoperability. Frameworks must be designed to work across borders. For European real estate, this is especially important given the scale of cross-border investment. Divergent reporting standards and taxonomies add administrative burden and make performance difficult to compare. If the UK and EU can ensure that fund labels, disclosure metrics and transition definitions are broadly mappable, capital will flow more efficiently.
Third, credibility. Transition finance must be rooted in evidence-based, sector-specific metrics. Blanket approaches rarely work. Real estate, for example, requires different benchmarks from manufacturing or transport. Sector-specific key performance indicators (KPIs) allow investors to measure progress accurately and avoid greenwashing. They also make it possible to structure ‘stepwise’ pathways – incremental, measurable improvements that are both practical and verifiable.
The opportunity for pragmatic regulation
Policymakers have a genuine opportunity to make regulation an enabler rather than an obstacle. That starts with recognising that transitional investments are not a compromise on ambition but a route to achieving it. By 2050, around 80% of the buildings standing today will still be in use, yet roughly 90% are not classified as sustainable. Retrofitting this stock is one of the most powerful ways to cut emissions, but funding remains constrained because of uncertainty around labelling and eligibility.
Both the UK’s developing transition finance framework and the EU’s SFDR reforms could change that. Introducing a dedicated transition label – clearly defined, evidence-based, and aligned across jurisdictions – would help direct capital towards retrofitting and other transitional assets. This, in turn, would give investors the confidence to back projects that deliver genuine carbon reductions even if they do not yet qualify as ‘green’ under stricter taxonomy criteria.
Equally important is the recognition of sector-led definitions and standards. INREV’s ESG Standard Data Delivery Sheet already provides a practical, tested framework for consistent measurement and reporting across non-listed real estate funds. Policymakers should build on these rather than reinvent them, to ensure consistency and avoid unnecessary duplication.
Finally, phased implementation can help. Transition planning is inherently iterative; regulation that acknowledges the need for progressive targets will support ongoing improvement without overburdening managers or stalling investment.
Why interoperability matters beyond regulation
For investors, clarity and interoperability are not abstract principles – they are operational necessities. The more consistent the frameworks, the easier it becomes to allocate capital efficiently and report outcomes credibly. Interoperable rules also support better stewardship: asset owners can compare transition strategies across markets, hold managers accountable and direct funding to the areas where it can have the most impact.
Crucially, consistency across the UK and Europe would send a powerful signal globally. It would demonstrate that ambitious sustainability goals can coexist with practical, investment-ready regulation. Other markets – from North America to Asia-Pacific – are watching closely as the UK and EU refine their approaches. Aligning now could establish a model for effective transition globally.
Getting the framework right
Transition finance has the potential to unlock vast sums of private capital for decarbonisation. But that will only happen if the rules of the game are clear, consistent and credible. The next phase of regulation must prioritise interoperability, sector specificity and pragmatic implementation.
The UK and EU have a unique opportunity to show how ambition and practicality can reinforce, rather than contradict, each other, and unlock transition finance.
Transition finance can only unlock private capital to decarbonise real estate and other sectors if the rules are clear, consistent and credible, says Jeff Rupp, Director of Public Affairs, INREV.
The world of sustainable investment is reaching a tipping point. Ambition is no longer the problem – implementation is. Recent years have seen a wave of new frameworks designed to accelerate the transition to net zero, from the UK’s Transition Plan Taskforce (TPT) guidance to Europe’s Sustainable Finance Disclosure Regulation (SFDR) and Taxonomy. Yet as the rules multiply, so too does the risk that complexity and inconsistency will hold back capital precisely when it is needed most.
Transition finance is emerging as a key test. Investors must now demonstrate how their portfolios align with credible decarbonisation pathways – yet the frameworks that define what qualifies as a ‘transition investment’ remain fragmented. Clear, interoperable regulation is essential to turn ambition into action. Without it, managers and asset owners face uncertainty that slows deployment and limits the impact of transition strategies.
A critical moment for transition finance
The UK’s transition planning framework and the forthcoming overhaul of Europe’s SFDR are part of a broader global effort to define and regulate transition finance. The UK’s Transition Finance Council is consulting on guidance that aims to distinguish credible transition activities from greenwashing, while jurisdictions such as Canada, Australia and Japan are developing transition-led taxonomies. The International Sustainability Standards Board (ISSB) has also published guidance to help governments implement transition-based disclosure requirements.
All these initiatives share a common objective: to make transition finance credible, comparable and scalable. Yet their simultaneous evolution has created a complex landscape for global investors. The UK and the EU, in particular, are moving in parallel but not always in sync. Without closer alignment, even the best-intentioned policies risk introducing friction rather than facilitating flow.
For institutional investors and fund managers, this misalignment can translate into hesitation. Many are holding back capital for retrofitting or other transitional assets because they lack confidence in how such investments will be treated under different regulatory regimes. What qualifies as a ‘transition’ activity in one jurisdiction may not in another. This uncertainty increases cost, complicates reporting, and ultimately delays progress toward decarbonisation.
What investors need to act confidently
For asset owners and managers alike, the ability to plan and report credible transition strategies now depends on whether regulation provides the right level of clarity and comparability.
First, clarity. The definition of a transition activity must be explicit enough to give investors confidence that their capital will be recognised as contributing meaningfully to net zero goals. Ambiguity – for instance, over what constitutes a ‘major renovation’ or how energy performance improvements are measured – leaves investors guessing.
Second, interoperability. Frameworks must be designed to work across borders. For European real estate, this is especially important given the scale of cross-border investment. Divergent reporting standards and taxonomies add administrative burden and make performance difficult to compare. If the UK and EU can ensure that fund labels, disclosure metrics and transition definitions are broadly mappable, capital will flow more efficiently.
Third, credibility. Transition finance must be rooted in evidence-based, sector-specific metrics. Blanket approaches rarely work. Real estate, for example, requires different benchmarks from manufacturing or transport. Sector-specific key performance indicators (KPIs) allow investors to measure progress accurately and avoid greenwashing. They also make it possible to structure ‘stepwise’ pathways – incremental, measurable improvements that are both practical and verifiable.
The opportunity for pragmatic regulation
Policymakers have a genuine opportunity to make regulation an enabler rather than an obstacle. That starts with recognising that transitional investments are not a compromise on ambition but a route to achieving it. By 2050, around 80% of the buildings standing today will still be in use, yet roughly 90% are not classified as sustainable. Retrofitting this stock is one of the most powerful ways to cut emissions, but funding remains constrained because of uncertainty around labelling and eligibility.
Both the UK’s developing transition finance framework and the EU’s SFDR reforms could change that. Introducing a dedicated transition label – clearly defined, evidence-based, and aligned across jurisdictions – would help direct capital towards retrofitting and other transitional assets. This, in turn, would give investors the confidence to back projects that deliver genuine carbon reductions even if they do not yet qualify as ‘green’ under stricter taxonomy criteria.
Equally important is the recognition of sector-led definitions and standards. INREV’s ESG Standard Data Delivery Sheet already provides a practical, tested framework for consistent measurement and reporting across non-listed real estate funds. Policymakers should build on these rather than reinvent them, to ensure consistency and avoid unnecessary duplication.
Finally, phased implementation can help. Transition planning is inherently iterative; regulation that acknowledges the need for progressive targets will support ongoing improvement without overburdening managers or stalling investment.
Why interoperability matters beyond regulation
For investors, clarity and interoperability are not abstract principles – they are operational necessities. The more consistent the frameworks, the easier it becomes to allocate capital efficiently and report outcomes credibly. Interoperable rules also support better stewardship: asset owners can compare transition strategies across markets, hold managers accountable and direct funding to the areas where it can have the most impact.
Crucially, consistency across the UK and Europe would send a powerful signal globally. It would demonstrate that ambitious sustainability goals can coexist with practical, investment-ready regulation. Other markets – from North America to Asia-Pacific – are watching closely as the UK and EU refine their approaches. Aligning now could establish a model for effective transition globally.
Getting the framework right
Transition finance has the potential to unlock vast sums of private capital for decarbonisation. But that will only happen if the rules of the game are clear, consistent and credible. The next phase of regulation must prioritise interoperability, sector specificity and pragmatic implementation.
The UK and EU have a unique opportunity to show how ambition and practicality can reinforce, rather than contradict, each other, and unlock transition finance.
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