Money Talks in Transitions

The Role of Finance in Sustainable Transitions Explained Using TransMission.

This article is part of a series by NewForesight that delves into insights and experiences related to the use of the TransMission framework in an accessible way.

Introduction

We all know the saying “Money makes the world go round”, but can money make the world turn green? In this article, we explore the role of financing activities by different key players in transitions and discuss how financial institutions can play a role in sector collaboration and go beyond merely financing.

Transitioning to a sustainable future is a complex challenge that requires multiple conditions to be met, one of which is substantial financial support. The TransMission framework offers a comprehensive approach to managing these transitions, highlighting the critical role of resource mobilization.

Why is this important? As climate change accelerates and natural resources become scarcer, the need for sustainable solutions is more urgent than ever. Effective financing can bridge the gap between innovation and real-world implementation, ensuring sustainable practices are adopted widely and swiftly.

In this illustrative and exploratory article, we will explore key players, financial dynamics across various transition phases—following the TransMission framework—and how financial institutions can extend their role beyond traditional financing. This article builds upon our earlier TransMission framework – the Mission driven transition approach to managing complex change processes (2021) and the book “Changing the Game” (2021).

Transitions and TransMission

In the coming 30 years, we need to reform our economies and markets, making them efficient, sustainable, circular, regenerative, inclusive, and just. If you are working on a complex challenge, like the agricultural, energy, or circular transition, then you might recognize that this requires significant technological and socio-economic changes. As NewForesight, with over fifteen years of experience supporting private, public, and
platform clients worldwide in transitions, we have become an expert in navigating these complex change processes.

We have seen that across sectors, unique challenges demand tailored solutions, balancing technical innovations with socio-economic interventions. Sector characteristics, from scale to market dynamics, are different and each sector has its own policy frameworks. Together, these factors crucially influence transition strategies.

However, despite every sector being unique, they share common key principles. In the TransMission paper we explain that any sector transition follows the same key principles:

Building up and breaking down: In a successful transition, sustainable practices are built up while unsustainable ones are phased out. Specific interventions are needed for both.
Key processes: Every transition requires certain conditions to be met. These are analyzed based on 5 key processes.
One of the 5 key processes is resource mobilization. This includes financial, human, material and infrastructural resources necessary to develop and scale up promising (partial) solutions.
Phases: The building up and breaking down process goes through five
recognizable phases, each with its own dynamics and needs.

The figure on the next page summarizes the TransMission model.
For more information about this we highly recommend you read the TransMission paper or the Changing the Game book. We can also highly recommend the Changing the Game training that we regularly give at Nyenrode University or in-company.

“If we pollute the air, water, and soil that keep us alive and well, and destroy the biodiversity that allows natural systems to function, no amount of money will save us.”— David Suzuki

The Key Players in Financing Transitions

Let’s meet the key players in the world of finance! In the complex world of sustainable transitions, several key players are essential for financing these efforts. Each of these players has their own unique characteristics and contributions.

Financial organizations: These entities focus on financing, investing, and capital allocation, deploying capital based on risk and return, while responding to market dynamics and economics.

Commercial Banks: The traditional financers. Banks are relatively conversative and traditional financial institutions that provide a range of financial services, including loans, credit lines, and investment products. In the early phases of transitions, banks provide limited financing due to their risk-profile; in later phases, however, they finance large segments of the economy, including SMEs, corporates, and individuals.

Institutional Investors: The big money managers. Institutional investors–like pension funds and insurance companies—and their asset managers are conservative, long- term investors managing large capital pools. They increasingly push for ESG integration, influencing companies and markets toward sustainability. In the graph, we’ve grouped them with commercial banks, as they follow a similar financing pattern through the phases of TransMission.

Venture Capital: The risk-takers. Venture capitalists provide high-risk funding to early-stage, high-growth startups in exchange for equity. This capital can help innovation of innovative sustainable technologies and businesses. Examples include, sustainability VCs like Breakthrough Energy Ventures and other VCs like Sequoia Capital.

Private Equity: The strategic investors. Private Equity (PE) firms invest in private companies or take public companies private, aiming to enhance profitability, scale businesses, and drive transformation. They generally have a medium risk appetite, but some PE firms specializing in sustainability take on higher risks to support long-term transitions. While ESG adoption is increasing, financial returns remain the primary focus. Examples include conventional PE firms like Blackstone and sustainability focused PE firms like Carbon Equity

Hedge Funds: The fast money. Hedge funds are high-risk, short-term investors that trade in public markets, derivatives, and alternative assets to maximize returns. While some funds engage in ESG activism or carbon markets, their short-term horizon limits their influence on long-term sustainability transitions. Due to this, we do not include them in the financing analysis. Examples include conventional hedge funds like Bridgewater Associates and sustainability focused hedge funds like Generation Investment Management.

Other key players

Apart from the financial institutions, governments and corporations also play a key role in financing transitions, by shaping policy, allocating capital and driving investment.

Governments: The rule-makers and fund-givers. Governments play a crucial role in financing sustainability transitions through funding, subsidies, regulations, and incentives. They also operate Development Finance Institutions (DFIs) such as InvestNL, which focus on early-stage financing and innovation, helping to de-risk private investments in emerging technologies. Unlike commercial investors, governments prioritize public good, economic stability, and policy-driven transformation over financial returns.

Corporate Sector (Non-Financial Companies): The industry giants. The corporate sector consists of companies across industries, with most investment coming from large multinational corporations. As profit-driven businesses, they focus on scaling innovations that enhance competitiveness, efficiency, and long-term growth rather than taking high risks. While primarily focused on profitability, many corporations integrate sustainability to future-proof operations and meet regulatory expectations.

Philanthropic Foundations and Impact Funds: The mission-driven funders. These actors provide grants, soft loans, or catalytic capital to support sustainability transitions, often focusing on systemic change, justice, and innovation. Their capital is generally patient, risk-tolerant, and driven by mission rather than profit. They often fund areas underserved by markets and collaborate with other financiers to unlock larger investments. Examples include the Stichting DOEN, Triodos Foundation and the Gates Foundation.

These key players collectively create a financial ecosystem that provides necessary support during the various stages of sustainable transitions. From policy-making powerhouses to innovative investors, they are essential in ensuring that sustainable transitions are not just a dream but become an achievable reality.

The Role of Key Players Through the Phases of Transition

Now that we’ve explored TransMission and the key players in financing transitions, let’s connect the dots! Finance evolves across the phases of transition, with each player stepping in at crucial moments to scale solutions and overcome roadblocks. The figure on the next page illustrates the current role of the different key players in the different phases of TransMission. It visualizes the typical involvement of key players and
outlines the financing dynamics across each phase of the transition.

The Different Financial Instruments

Now that we know who the main players are, let’s explore the financial instruments they can use to support the transition. To effectively support sustainable transitions, a variety of financing types and strategies are necessary. Understanding these options can help stakeholders choose the best financial instruments for different phases of the transition:

Equity Instruments

Common and Preferred Stock – Company ownership shares, offering voting rights or dividends.
Venture Capital and Private Equity – Investments in startups and private firms in exchange for ownership stakes.

Debt Instruments

Loans and Credit Lines – Bank and institutional lending, sometimes tied to performance metrics.
Bonds (Including Green and Sustainability Bonds) – Fixed-income securities funding projects, with green bonds dedicated to environmental impact.

Other Instruments

Public-Private Partnerships (PPPs) – Long-term collaborations between governments and private entities to fund infrastructure and public services.
Grants and Subsidies – Non-repayable funds from governments, NGOs, and institutions to support innovation, development, and public-benefit projects.

This overview is not exhaustive but provides a relevant selection for transition finance. Short-term and speculative instruments like commercial paper, hedge funds, and derivatives are therefore excluded.

The Role of Different Financial Instruments Through the Phases of Transition

We’ve explored the key financial instruments driving the transition, and each plays a unique role, evolving across the phases of TransMission. The matrix on the next page maps how each supports the transition, from early innovation to full-scale adoption.

Beyond Financing: Highlighting the Role of Banks in Sector Collaboration

We all know that money makes the world go round, but can banks help steer it in a more sustainable direction? While their primary role is financing, banks have the network, influence, and expertise to do much more. By actively engaging in sector-wide collaboration, they can help industries transition to sustainable models—benefiting both the economy and their own long-term stability.

The Need for Sector Collaboration

Many industries face large-scale, systemic challenges that require deep structural change—from decarbonizing energy and transportation to greening supply chains and reducing waste. However, no single company or institution can tackle these transitions alone. Banks, as central players in the economy, are uniquely positioned to bring industries together and drive collective action.

Why Banks Play a Key Role

Banks are more than just financial intermediaries—they are connectors, risk managers, and industry influencers. In the early phases of transitions, when risks are relatively high and their financing role is limited, banks can contribute by actively engaging in sector-wide collaboration. As transitions move to more mature phases, they can take up their role as financiers of the new system. Banks can accelerate sector transitions through:

Extensive Business Networks – Banks work with companies across industries, making them natural facilitators of sector-wide collaboration.
Financial Influence – Through lending conditions and investment policies, banks can incentivize businesses to adopt sustainable practices.
Risk Management Expertise – Banks analyze long-term financial risks, allowing them to guide industries away from stranded assets and regulatory pitfalls.
Capital Mobilization – Banks can structure financing solutions that de-risk sustainable investments, making them more attractive to businesses.

The Benefits for Banks

Engaging in sector collaboration and systemic change is not just about responsibility—it’s a strategic business opportunity. Banks that take an active role can:

Expand Business Opportunities – Leading the transition opens new revenue streams, from sustainability-linked loans to green financing products.
Mitigate Financial Risks – Supporting industries in adapting reduces exposure to default risks, stranded assets, and regulatory uncertainty.
Strengthen Client Relationships – Banks that help businesses transition position themselves as long-term strategic partners rather than just lenders.
Enhance Reputation and Market Leadership – Playing a leadership role in sustainable finance builds trust, brand value, and competitive advantage.

Conclusion

Money talks—but it can also drive real change. As we’ve seen, financing transitions isn’t just about funding projects, it’s about orchestrating systemic change. Each key player has a distinct role in each phase of the transition and understanding this helps orchestrate capital flows strategically to drive systemic change.

Banks, in particular, can take a unique role in sector collaboration, using their networks, financial influence, and risk expertise to bring industries together and accelerate sustainable transformation. Through strategic engagement, banks can align stakeholders, set industry standards, and drive investment toward scalable solutions.

And this isn’t just a responsibility—it’s a business opportunity. Shaping the transition is not only a must, but a competitive advantage for those who lead. The future belongs to those who finance it wisely.

The TransMission framework provides a structured approach to navigating these complex transitions, ensuring that financial resources are mobilized effectively. By aligning financing with long-term sustainability goals, we’re not just adapting to change—we’re shaping the future. Because in the end, a sustainable world isn’t just an option—it’s the only way forward.