Scaling up investments in clean energy is essential to achieve a 1.5°C pathway. The International Energy Agency (IEA) estimates that this would require around USD 4.5 trillion to be invested annually by the early 2030s. Previous WBA research suggests that real economy companies could potentially mobilise USD 1.3 trillion in low carbon investments to close this gap. Financial institutions are central, as their decisions on allocating capital to low-carbon solutions — and, critically, withholding finance from fossil fuel activities — will determine how far and how fast the real economy decarbonises. In the face of the systemic risks posed by climate change, financial institutions have a unique responsibility to ensure that the global economy transitions in an orderly, resilient and economically credible way.

Transition plans are emerging as a critical tool for aligning the financial system with climate objectives. In order to be credible and drive effective capital reallocation, transition plans need to include ambitious targets to financing low-carbon solutions and lay out a clear commitment phasing out the financing of fossil fuel activity. Our latest analysis of 400 of the world’s most influential financial institutions (covering banks, insurance companies, asset managers, asset owners including development finance institutions) shows that the global financial system is beginning to build the architecture for transition planning, but capital allocation and fossil fuel phase-out remain far behind what is required for an orderly and resilient economic transition.
 

For every institution with a transition plan addressing financial activities, there are two others without one.  

Our results suggest that a critical mass of financial institutions is doing transition planning: just over a third (146) of the 400 companies have climate transition plans addressing at least some of their financial activities – where their real impact lies—including metrics and targets to drive and monitor progress or embedding transition planning in their governance structure. Regionally, just over 60% of those headquartered in Europe & Central Asia have such a plan, in sharp contrast with those based in North America (18%), with East Asian institutions (42%) in between. Our analysis found that an additional 49 financial institutions have less relevant transition plans covering only the emissions of their own operations, while over half of the assessed institutions lacked even the basics of transition planning. Together these results highlight a strong miss-alignment in the near-term financial activities, particularly in some key markets. 

In order to be credible, transition plans must also prioritise the inclusion of short-term (by 2030) targets for financing low-carbon solution aligned with a 1.5°C pathway. Our research shows that for every transition plan with a well-defined financing target, there are four others without one. Among institutions with transition plans, about a quarter (47) have embedded one or more such targets, while only 2% of those without a transition plan have them. This gap is pronounced between banks and asset managers, with a fifth of banks’ transition plans reporting a time-bound financing target for low-carbon solutions aligned with 1.5°C, and less than 3% of asset managers doing so. Insurers and pension funds rank in-between with 10% and 7% of their respective transition plans including a financing target. This matters because it allows investors, regulators, and policymakers to determine whether capital is being reallocated at the speed and scale the transition demands.

Follow the money 

We found that financial institutions with a transition plan are about eight times more likely to provide clarity on the share of financed activity allocated to low-carbon solutions than those without one. In total, 26% (103) of the investigated financial institutions provide such clarity – a figure that has remained unchanged since the last time we evaluated the same set of financial institutions in 2025. On the side of reporting financed fossil fuel activity, only 15% of financial institutions did so according to our latest financial system benchmark, further reinforcing the long way ahead for public disclosure to catch up. Overall, while we see evidence for different aspects of transition planning, none of the companies demonstrated both sufficient ambition in capital allocation and sufficient reduction of their financed emissions –which would be needed to score above “D” (initial planning) in our assessment.

Despite the limitations of public disclosure, our assessment allows us to suggest that low-carbon activities represent on average a modest 2.7% of the total financed activities of the 400 financial institutions. Against this reference point we observe some regional variations: financial institutions headquartered in Europe & Central Asia and North America perform above the global average by putting 3.6% and 3.2% of their total financing towards low-carbon activities, respectively. In contrast, East Asia and & Pacific shows greatest need to catch up as financial institutions record the lowest share of low-carbon financial activity as share of total at just over 1%.

Marginal fossil fuel phase out plans as bottleneck of plan credibility 

Transparency on low-carbon financing must be paired with credible fossil-fuel exit commitments, enabling regulators to monitor portfolio diversification. Without clear commitments to halt new fossil-fuel financing and phase out existing exposure, transition plans lack credibility.

Our analysis finds that the shift away from financing fossil fuels remains limited. Only two companies, ING and Zürcher Kantonalbank, demonstrate robust fossil-fuel (coal, oil and gas) restrictions, including commitments to both phase out existing exposure and cease new financing flows. However, our data shows that financial institutions are capable of making commitment aligned with this level of ambition. This highlights the urgent need for this leading practice to be scaled up, in order to align with the demands of a 1.5°C economy. During the recent Transition Away from Fossil Fuels (TAFF) conference in Santa Marta, governments, businesses and civil society highlighted that credible transition planning requires financial institutions to demonstrate how capital allocation decisions support a managed transition away from fossil fuels. As our analysis confirm, fossil-fuel policies remain uneven, with many institutions not yet applying comprehensive and unconditional restrictions, which is a requirement for a credible transition plan.