HKIMR Applied Research Report: Transition Finance Gains Traction – 60% of Institutions Active, Asia-Pacific Sentiment Strongest

The Hong Kong Institute for Monetary and Financial Research (HKIMR), the research arm of the Hong Kong Academy of Finance (AoF), today released a report titled “Navigating the Green Shift: Opportunities and the Evolving Landscape of Transition Finance.” Based on a global survey and in‑depth interviews, the study provides a data‑driven assessment of the current state, emerging trends, and future trajectory of transition finance – a segment increasingly distinct from pure green finance, focused on decarbonising high‑emitting sectors.

Survey scope and participant profile. The HKIMR commissioned a mixed‑method study involving a survey and follow‑up interviews with a diverse range of global stakeholders, including financial institutions, multilateral organisations, and industry participants. The research aims to capture how market participants define, deploy, and scale transition finance, as well as the barriers and enablers they perceive.

Active engagement and instrument preferences. The study finds that transition finance has moved beyond conceptual discussion. Sixty percent of respondents are either already active in transition finance or are actively exploring it. Among the financial instruments deployed, equity and fund investments, together with debt instruments (e.g., transition bonds, sustainability‑linked loans), represent the most commonly used channels for channelling capital to transition projects. As the ecosystem matures, however, respondents anticipate a gradual shift towards more specialised instruments – suggesting that product innovation will likely accelerate once foundational standards and taxonomies stabilise.

Blended finance as a catalyst. A key operational insight from the report concerns the role of collaborative funding models. Respondents observed that blended finance approaches – which layer concessional capital from public or philanthropic sources with commercial capital – can materially improve the risk‑return profile of transition project investments, thereby unlocking private capital that would otherwise remain on the sidelines. This finding reinforces a broader industry consensus that transition finance, particularly in emerging markets or heavy‑industry settings, often requires de‑risking mechanisms to achieve scale.

Market sentiment: cautiously optimistic, led by Asia‑Pacific. The report captures forward‑looking sentiment across regions. Globally, 74% of respondents expect the transition finance market to remain stable or grow over the next three years. Notably, optimism is strongest in the Asia‑Pacific region, where 91% of respondents anticipate stability or growth – a significantly higher proportion than in other regions. This regional divergence likely reflects both the concentration of high‑emitting industries in Asia and the active policy frameworks being developed in jurisdictions such as Hong Kong, Mainland China, Japan, and Singapore.

Policy and ecosystem implications for Hong Kong. Drawing on the survey findings and international best practices in preventing greenwashing and maintaining transparency, the report outlines several considerations to support the development of a vibrant transition finance ecosystem in Hong Kong. These include maintaining a high level of regulatory and policy clarity, deepening regional collaborations, and leveraging Hong Kong’s existing strengths in green and sustainable finance. The HKIMR positions this as a pathway for Hong Kong to reinforce its role as a leading sustainable finance hub – not merely in capital mobilisation but in setting credible transition standards.

Conclusion. The HKIMR study provides empirical evidence that transition finance is transitioning from niche to mainstream, particularly in Asia‑Pacific. While the market remains in a relatively early stage – evidenced by the anticipated shift toward more specialised instruments – the combination of strong participant engagement, positive sentiment, and emerging blended finance structures suggests a solid foundation for growth. For market participants, the report implicitly underscores the importance of taxonomy alignment, disclosure rigour, and cross‑border coordination as prerequisites for scaling credible transition finance.