Understanding transition in taxonomies: The building blocks of credible decarbonisation

One of the clearest messages emerging from Belém was that credible transition pathways   are essential if global climate goals are to stay within reach.  

Following COP30, there is growing emphasis on how financial frameworks can better support the decarbonisation of all sectors, a priority highlighted across ministerial discussions, side events and market dialogues in Belém. Yet, approaches to defining and assessing transition remain inconsistent.  

Taxonomies are at the heart of the transition discussion, and as the landscape evolves, so too does the conversation around how they can identify a credible and ambitious transition. 

Climate Bonds’ recent report, “Transition in Taxonomies: Understanding the mechanisms that facilitate transition in taxonomies”, brings precision to this space by identifying the shared tools that taxonomies around the world are already using, sometimes implicitly, to guide transition. 

A moment of consolidation for the taxonomy landscape

Over the past months, Climate Bonds has introduced several tools to help the market navigate the growing complexity of taxonomies — from Taxonomy 101 and our new taxonomy landing page to the Principles for Taxonomy Interoperability, developed through global collaboration. 

Each of these initiatives responds to the same market need: clearer, more comparable, and more actionable guidance for a world where taxonomies are multiplying. 

The report builds on that foundation. It takes the conversation a step further by exploring how taxonomies can credibly support transition, a topic that has become increasingly central since COP29. 

 
Clarity on transition is essential 

Reaching net zero requires deep structural change in sectors such as steel, cement, aviation, chemicals and heavy transport. These sectors cannot transform at the same pace as those with readily available low-carbon alternatives. 

Policymakers are turning to taxonomies to guide this journey, not only by identifying what is already “sustainable”, but by signalling what credible progress looks like over time. However, two challenges persist: 

1. Which activities should be considered transitional?
2. How should criteria reflect the dynamic nature of transition rather than treating alignment as a static yes/no outcome? 

This report addresses those questions by analysing real examples from taxonomies across Europe, Asia-Pacific, Africa and Latin America. 
 

The six mechanisms shaping transition within taxonomies 

Despite diverse design choices, our research reveals that countries are converging toward a shared set of tools, whether or not they name them explicitly. We call these the six Taxonomy Transition Mechanisms: 

1. Revision of criteria over time – ensuring criteria remain aligned with emerging science and technology.
2. Forward criteria – setting future performance guidance that offer predictability and direction.
3. Shading (tiers) – allowing multiple ambition levels to reflect different starting points.
4. Measures – identifying specific technologies and practices that materially reduce emissions.
5. Sunset dates / phase-down guidelines – signalling when certain technologies or activities should retire.
6. Transition plan requirements – linking activity-level eligibility to credible entity-level decarbonisation strategies. 

These mechanisms appear across all taxonomy archetypes of a taxonomy: traffic light systems (e.g., Singapore, ASEAN), binary models (e.g., EU, Rwanda, China), and mixed approaches like Australia. 

A foundation for interoperability and credible transition finance 

The six mechanisms identified in this report provide a shared conceptual foundation for comparing taxonomies and support more consistent assessments across borders. By making implicit design choices explicit, the report strengthens global efforts to align taxonomy approaches without limiting national flexibility.  

Clearer treatment of transition also enhances the integrity of transition finance: it helps ensure that investments support meaningful decarbonisation rather than incremental improvements, that long-term planning aligns with science-based pathways, and that transition labels maintain credibility.  

Towards a more coherent global transition narrative 

Transition cannot remain an abstract concept. It must translate into clear expectations, credible pathways and transparent signals to the market. 

With this report, Climate Bonds aims to help policymakers, investors and issuers navigate this complexity, and to support a more coherent, globally aligned understanding of what transition looks like in practice. 

This is the next step in strengthening the global taxonomy ecosystem: 
ensuring that as taxonomies expand, they also converge where it matters — around clarity, ambition, credibility, and the ability to resist greenwashing. 
 
To explore the findings in more depth, join our upcoming open webinar on Thursday, 22 January (14:00 GMT / 15:00 CET). The session will unpack the key ideas behind the report, discuss how transition is being operationalised across taxonomy frameworks, and consider what this means for policymakers, investors and market participants. Register for the webinar here.  
 
Download the full report now – translated versions will be available soon. 
 

‘Till the next time,  
Climate Bonds