"To state what should be obvious, finance will only move when there's an economically viable business case"

By DOUG SHERIDAN

Bloomberg writes, transition finance a term intended to describe the allocation of capital to activities that will ultimately help cut carbon emissions in the wider economy exists in something of a regulatory gray zone.

At the same time, financing corporate decarbonization has been identified as a huge business area, with Apollo Global Management, Inc. recently suggesting the energy transition may represent a $50 trillion investment opportunity in the decades to come.

Against this backdrop, some of Wall Street's biggest banks are designing transition-finance frameworks to define eligible assets and activities. Lenders include Wells Fargo and Citi..

JPMorgan, meanwhile, is opting out.

Linda French, JPMorganChase's global head of sustainability policy and regulation, says it's far from clear that calling something a transition asset will unlock capital. Ultimately, she says, the approach ignores the fact that investors are less concerned with definitions and more interested in proof that capital allocations yield results.

"To state what should be obvious, finance will only move when there's an economically viable business case" French said in an interview. “Taxonomies and disclosure frameworks on their own do nothing to finance flows, and even risk becoming a distraction."

French says the problem with transition-finance frameworks is similar to the hurdles that the narrower and more clearly defined arena of green assets has faced.

"Fundamentally, it's a rehash of the green finance conversation. Once you've defined relevant economic activities, then finance will begin to flow to those activities," she said. As an approach, it downplays the fundamentals of financial logic, she said.

It's a conversation that feeds into an increasingly tense backdrop for climate finance. Pure green investments such as solar and wind have largely proved a losing bet in recent years, with the S&P Global Clean Energy Index down almost 40% since the beginning of 2023. In the same period, the S&P 500 Index has gained more than 50%.

"This isn't about 'transition finance, it's about whether companies investing in transition can access the finance they need," said JPMorgan's French. “And if the economics don't work for Companies to invest in transition, then what are we even talking about?"

Our Take: We find it humorous how many professional this or that's opine on "what it takes" to transition the entire world off of fossil fuels. As if they've ever experienced such a transition before... or mapped this one out in an Excel spreadsheet on their laptop. The truth is they've absolutely *no idea* what it takes... or how to do it. No one does. Seems like JP Morgan gets this.