The debate on financing a just transition is not short of dialogue; it is short of understanding. Governments and funders often speak different languages, leaving what truly matters lost in translation. To make this disconnect visible, we staged a negotiation simulation at London Climate Action Week 2025. Participants were split into two delegations: a government seeking USD 20 billion in holistic, nationally led financing, and funders constrained by mandates to deliver bankable, replicable, project-by-project deals. The result was a stalemate that mirrored the real world: frustration on both sides, and a system unable to deliver. The exercise confirmed this is not about goodwill or creativity, but a systemic impasse rooted in mandates, incentives, and the architecture of international finance itself.
Key messages
The simulation revealed where the real pressure points lie:
- The system is not fit-for-purpose. The current financial architecture is built for individual, revenue-generating projects. But a just transition requires long-term, non-linear, systemic investments spanning jobs, equity, and social safety nets. Trying to deliver justice through project finance is a recipe for failure.
- Justice is not an add-on. Social dimensions are often treated as “add-ons” to be covered by philanthropy or grants. Without investments in social protection and equity, transitions collapse under the weight of unemployment, unrest, and lost political legitimacy.
- Local institutions are assets, not risks. Too often, finance flows primarily through multilateral or international intermediaries, by passing national systems. This undermines ownership, ignores contextual knowledge, and slows delivery. Strengthening local financial institutions must be part of the solution.
- Mandates are the choke point. The challenge is not a lack of awareness or intent but rules, politics, and incentives that lock institutions into narrow definitions of “acceptable” finance. Until mandates evolve, negotiations will remain stuck, no matter the goodwill in the room.
- The audience recognized the fault line. Live polling showed that the deadlock came from the way the finance system is built, not from government priorities or ambition.
Call to action
Business-as-usual finance cannot deliver a just transition. What’s needed now are tools and practices designed for justice, dignity, and resilience not just returns, which means:
- Reimagining portfolios: move beyond fragmented projects to nationally led portfolios of interconnected investments that reflect real transition pathways.
- Reimagining due diligence: build risk frameworks that treat social cohesion, institutional capacity, and dignity not as side issues but as indicators of long-term resilience.
- Reimagining structuring: design financing models where returns from revenue projects can subsidize justice-oriented investments across a portfolio.