SMFSC Raises Standards for Transition Finance

The San Marino Financial Standard Council (SMFSC) — a financial self-regulatory association committed to promoting transparency, honesty, and responsibility in global finance — has announced new measures to raise standards in transition finance, emphasizing the principles of clarity, coherence, and collaboration.

The Council’s initiative aims to ensure that capital directed toward sustainability transitions — particularly in energy, infrastructure, and industrial sectors — is used credibly, consistently, and in alignment with global climate goals.

“Transition finance must be grounded in integrity,” the SMFSC said.
“Investors, firms, and regulators all share a responsibility to ensure that sustainability claims reflect measurable progress, not marketing ambition.”

Defining Clarity in Transition Finance

SMFSC noted that the lack of clear and harmonised definitions around “transition” activities has created confusion and inconsistency across financial markets.
The Council’s proposed framework calls for:

• Explicit criteria for what qualifies as transition-aligned investment;
  
• Transparent disclosure of interim targets and emissions pathways;
  
• Verification of transition claims through independent data and reporting;
  
• Clear communication to investors on the balance between short-term performance and long-term sustainability goals.
  

“Clarity begins with honesty,” the Council stated.
“Transition finance should communicate real progress — not promises.”

Ensuring Coherence Across Standards

SMFSC’s proposals also seek to improve coherence between existing ESG, climate, and sustainable finance frameworks.
The Council emphasised that effective transition finance must complement, not compete with, existing environmental and social standards.

To achieve this, SMFSC will:

• Align its Guiding Principles for ESG and Sustainable Investment Funds with international taxonomies and disclosure frameworks;
  
• Encourage standardised data methodologies to avoid duplication or conflict between reporting regimes;
  
• Promote cross-border dialogue to ensure that transition finance definitions are comparable and interoperable.
  

“Fragmentation undermines trust,” SMFSC noted.
“Coherence allows investors to allocate capital confidently toward genuine transition activities.”

Driving Collaboration Across the Financial Ecosystem

Recognising that effective transition finance requires coordinated action, SMFSC will deepen cooperation with:

• Financial institutions, to embed transition risk assessment and disclosure in investment processes;
  
• Industry associations and auditors, to improve assurance standards for sustainability reporting;
  
• Public agencies and international regulators, to promote shared principles and joint oversight;
  
• Academia and data providers, to enhance understanding of transition metrics and methodologies.
  

These partnerships will form the foundation of a Transition Finance Working Group, which will publish best practice recommendations in 2026.

A Commitment to Integrity and Impact

As a self-regulatory body, SMFSC reaffirmed that transition finance must deliver genuine environmental and social outcomes, not merely compliance-driven labels.
The Council called for firms to adopt a long-term accountability mindset, supported by transparent reporting and ethical governance.