Climate Transition Bond Guidelines (CTBG): A new era for sustainable finance

An external reviewer’s perspective on the CTBG 

In response to the growing urgency of global climate action, the International Capital Market Association (ICMA) published the Climate Transition Bond Guidelines (CTBG), introducing a new label in the sustainable finance landscape. Distinctively, these guidelines can be applied not only to use of proceeds bonds—where the capital raised is earmarked for specific climate transition projects—but also to sustainability-linked bonds, which tie financial and structural features to the issuer’s achievement of pre-defined climate transition objectives. This dual applicability empowers issuers and investors with greater flexibility to support the credible transition of high-emitting sectors toward net zero, expanding the market’s toolkit beyond traditional green bonds.

The CTBG provide a clear and credible framework for issuers, investors, and stakeholders across the financial sector, serving as a strategic extension to the established Green Bond Principles (GBP). By setting out internationally recognised standards for transparency, disclosure, and strategic planning, the CTBG aim to ensure that bond proceeds and sustainability-linked commitments genuinely finance activities crucial to achieving the Paris Agreement and broader net-zero commitments.

The CTBG outline key elements for a credible transition, including the articulation of a robust climate transition strategy, the disclosure of relevant climate-related governance and performance metrics, and the demonstration of alignment with science-based targets. By doing so, the guidelines seek to foster market integrity, minimise the risk of greenwashing, and empower investors to make informed decisions that support the real economy’s shift towards sustainability. As sustainable finance becomes an ever more vital tool in addressing climate change, the introduction of the CTBG by ICMA in November 2025 represents a pivotal development in the evolution of capital markets. This article explores the CTBG from the vantage point of an external reviewer, highlighting both the strengths and potential challenges inherent in the guidelines.

The purpose and scope of CTBG

The CTBG seeks to standardise the issuance of climate transition bonds by outlining clear criteria related to transparency, disclosure, and the environmental integrity of eligible projects. By doing so, the guidelines aspire to increase investor confidence and ensure that capital raised is genuinely directed towards activities that facilitate a credible and measurable transition to net zero.

External reviewers: ensuring credibility and integrity

External reviewers play a pivotal role in the effective implementation of the CTBG. The CTBG recommend that external reviews shall be involved at all stages of a Climate Transition Bond - i.e. at pre-issuance, when putting together a Climate Transition Bond framework, and post-issuance, when reporting on the allocation of proceeds of the Climate Transition Bond and the associated impact). Their independent assessments provide assurance that issuers are not only adhering to the guidelines but are also making meaningful progress against their stated transition objectives. The CTBG recommends that external reviewers are involved on the following key areas:

• Verification of transition plans: external reviewers shall scrutinise the issuer’s transition strategy, evaluating its alignment with internationally recognised climate targets and sectoral pathways.
• Assessment of proceeds use: External reviewers are tasked with verifying that bond proceeds are allocated exclusively to eligible transition activities.
• Ongoing reporting and transparency: External reviewers shall ensure that issuers provide regular, comprehensive updates to investors, including quantitative and qualitative measures of progress / impact from a climate transition standpoint.

Challenges, considerations and importance of independence and expertise

While the CTBG represents a major advance in the climate transition finance landscape, it is not without its challenges. External reviewers are likely to face difficulties in interpreting sector-specific transition pathways, particularly where scientific consensus is evolving. Moreover, the global nature of capital markets means that harmonisation with other regional standards will be critical to avoid confusion and fragmentation.

For the CTBG to achieve its objectives, the independence and technical expertise of external reviewers is paramount. External reviewer must be equipped with the requisite knowledge of climate science, industry decarbonisation trajectories, and financial reporting.

Conclusion

The Climate-Transition-Bond-Guidelines (CTBG) have the potential to transform the sustainable finance market, directing capital towards the urgent task of decarbonising the global economy. By embedding rigorous external review and assurance processes, the guidelines can help ensure that climate transition bonds deliver real-world impact and maintain investor trust. As the market evolves, the role of external reviewers will remain central to safeguarding the integrity and effectiveness of climate transition instruments.