Green Transition and Portfolio Strategies: The Challenge of Balancing Green Finance and Transition Finance

This thesis explores the role of the financial sector in the green transition, which is crucial in order to mobilize the investments needed to meet the goals set by international climate commitments and avoid environmental and economic losses. The analysis focuses on the balance between green finance, directed toward already sustainable activities, and transition finance, aimed at decarbonizing high-emitting sectors. A central theme is the challenge of divesting from brown firms: although this may appear as a straightforward solution to climate change, it risks slowing down the progress of the green transition. Some high-emitting sectors are still essential to the functioning of our society and, if properly financed, they possess significant potential for emission reductions. This thesis argues for a more inclusive approach, based on credible corporate transition plans and robust regulatory frameworks, which are still underdeveloped in the field of transition finance. The work critically assesses the current EU sustainable finance framework and its limitations in addressing the needs of transitioning firms. A core section presents the diverse financial products available to support both green and transitioning firms, including green bonds, sustainability-linked instruments and transition bonds, while also examining investors’ motivations, the trade-off between sustainability and returns, and the presence of a “greenium”, or sustainability premium, in the market. To complement the theoretical analysis, the thesis includes the study of two case studies: A2A’s EU Green Bond (2025) and SNAM’s EU Taxonomy-aligned Transition Bond (2023). These are compared across several dimensions, including use of proceeds, issuance size, yield to maturity, and market reception. This comparison is useful in order to illustrate the structural gaps that still hinder transition finance from reaching the maturity and credibility that green finance has now achieved on the market. The final section discusses future developments, highlighting the need for inclusive, transparent and credible frameworks to advance the green transition.