Tools for Financial Institutions Navigating the Energy Transition

Building transition intelligence with a pathway selection guide and repository

Financial institutions increasingly recognize that understanding how clients and investees are affected by — and respond to — the energy transition is essential to remain competitive and manage risk. But gaining deep transition intelligence is not easy. The impacts of the transition vary widely across sectors and geographies, shaped by economic conditions, supporting infrastructure, and policy environments. While the transition will touch nearly all companies, the pace and feasibility of change will look very different depending on these factors.

One of the most effective ways for financial institutions to make sense of this complexity is through leveraging transition pathways — forward-looking descriptions of how sectors or regions might evolve under different scenarios — to support their assessments of companies. Pathways can help financial institutions answer fundamental questions, such as:

• How might policies or market developments enable the deployment of critical technologies?
• Do a company’s investment plans align with what is feasible or likely in a given region?
• Are corporate climate commitments credible and compatible with their institution’s own strategy?

Despite their value, pathways are not yet widely integrated into corporate transition assessments. Many financial institutions lack the expertise, capacity, and tools to identify the right pathways, interpret their assumptions, or use them at scale.

RMI’s new tools

To address these challenges, RMI is launching two complementary tools in the coming months to make pathways more accessible and useful for financial institutions:

1. A 5-step guide for pathway selection
   This practical guide helps practitioners navigate the wide array of existing pathways — from national commitments to detailed technology roadmaps — and identify the ones best suited to their needs. It makes what is often a technical, resource-intensive process more consistent, actionable, and accessible to institutions that may not have deep in-house expertise.
2. An interactive pathways repository
   This platform brings the 5-step process to life. It allows users to pose the questions they need answered and be matched to the most relevant pathways for a sector and region. The repository will help users to extract the benchmark data they need to contextualize a company’s transition goals and plans. A pathway’s assumptions and characteristics will also be clear so that users can easily identify how it was built and understand how to interpret results. The first version focuses on Southeast Asia’s power sector, but it is designed to scale easily across regions and industries.

The advantages of a multi-pathway approach

Currently, most financial institutions use pathways only to benchmark company climate targets against global scenarios. But the potential goes much further. With the right tools, pathways can help institutions:

• Contextualize ambition at regional and national levels
• Evaluate the feasibility of company targets
• Identify the technologies, policies, and infrastructure needed to meet commitments
• Engage more effectively with clients on transition strategies
• Spot opportunities to deploy capital where it will accelerate impact

The ecosystem still needs more granular pathways across sectors and geographies, but much more can be done with what already exists. RMI’s tools are designed to lower barriers, improve transparency, and unlock more meaningful insights — helping financial institutions better manage risk, seize opportunities, and direct capital to the transition.

If you would like to learn more about our work and the pathway repository, contact Estefania Marchan – emarchan@rmi.org.

 

This article was informed by the contributions of Nicky Halterman, Aubrey McKinnon, Jacob Kastl, and Lloyd McKenzie.