Headwinds and structural constraints: mapping forces challenging just transition finance

Jodi Ann Wang

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This Policy Insight presents the just transition as sitting at a decisive crossroads, where, after a decade of growing prominence, including in the Paris Agreement, rhetoric has outpaced reality. As geopolitical fragmentation, fiscal strain and political polarisation grow, the space for transformative and durable policies for the just transition and its financing is narrowing. Just transition finance refers to the climate finance flows that shift economies away from carbon-intensive systems built on extractive industries while redistributing power and resources, and protecting communities’ sovereignty over development pathways. Rather than proposing any new financial instrument, in this Policy Insight the author offers a provocation: interrogating how finance mechanisms shape justice narratives, who gets to decide and access funding, what transparency regimes actually serve, and ultimately, what kinds of transitions current finance enables or prevents. The author identifies four near-term headwinds that impede just transition finance, and five deeper structural challenges from which the headwinds emerge. While it may be possible to address headwinds in the near-term, structural challenges are more embedded and systemic, making the headwinds persistent. These headwinds and structural challenges are not entirely new: but they have not yet been grounded in the locus of just transition finance. New institutional arrangements are emerging in response to these challenges but to avoid replicating past problems, we will need to approach these innovations with clear eyes and better interpret existing challenges before directly jumping into searching for solutions.

Keywords: development finance; global; financial instruments and strategies; policy reform (search for similar items in EconPapers)
JEL-codes: F3 G3 J01 N0 R14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2025-10-01
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