Transition planning has climbed rapidly up the regulatory agenda – and not before time. For investors, the next phase will be a crucial test of whether regulation can enable capital to flow or risk slowing it down. The question is no longer whether we have enough ambition; it is whether we can build a framework that allows capital to move.
Across Europe, and increasingly beyond, policymakers are rolling out new rules to govern sustainable finance. The UK’s Transition Plan Taskforce guidance, the Financial Conduct Authority’s new fund labelling regime, and the European Union’s planned overhaul of the Sustainable Finance Disclosure Regulation (SFDR) are all part of this effort. Each aims to bring credibility to the transition. But viewed together, they form a complex patchwork that leaves many investors uncertain about how their activities will be categorised and reported.
Why clarity matters for capital
For the non-listed real estate sector, where capital is often committed across borders and long investment horizons, clarity on what qualifies as a credible transition investment is essential. If definitions and disclosures are inconsistent, investors and managers risk being penalised for activities that contribute to decarbonisation but do not fit neatly into a particular label or taxonomy. The result is hesitation, delayed deployment and, ultimately, slower progress towards net zero.
The UK’s transition-planning framework, and the UK government’s broader consultation on how large corporate and financial institutions disclose their transition plans, could set a valuable example if done well. It has the potential to show how ambition and practicality can reinforce, rather than clash with, one another. For investors, the prize is a rulebook that supports real-world decarbonisation instead of adding layers of compliance complexity.
Making regulation work for investors
To achieve this, regulators should focus on three priorities. First, definitions must be clear enough to give investors confidence that transitional assets – such as retrofits or upgrades to improve energy performance – are recognised as valid and necessary steps towards net zero. By 2050, roughly 80% of Europe’s building stock will still be standing, yet 90% is not currently considered sustainable. Unlocking investment into that space could deliver the biggest impact, provided the rules allow it.
Second, frameworks need to be interoperable. Capital does not stop at national borders, and so regulation must accommodate this reality. Divergent approaches between the UK and the EU on labelling and reporting add cost and confusion. Closer alignment would make it easier for global investors to compare performance and channel funds efficiently to where they are most needed.
Third, regulation must be workable in practice. Investors want to see evidence-based, sector-specific metrics that make compliance straightforward and verifiable. One-size-fits-all targets rarely succeed. The real estate industry, for instance, requires different benchmarks from manufacturing or transport. Recognising this diversity and providing phased implementation timelines would help investors plan ahead and demonstrate measurable progress rather than scramble to retrofit reporting systems.
Investors must shape the outcome
None of these points should be seen as lowering ambition. On the contrary, pragmatic regulation is the only way to make sure ambition translates into action. If the frameworks governing transition finance are too rigid or inconsistent, they will simply push capital to the sidelines. If they are clear, consistent and credible, they will mobilise the billions required to decarbonise Europe’s built environment and wider economy.
The transition-finance debate has often been dominated by policymakers and campaigners, but investors have an equally important voice. They understand where capital is being held back, and they see first-hand how uncertainty around labelling and disclosure can stall viable projects. Investors can’t afford to be passive observers – this is the moment to shape the rules before they are written for them. The frameworks that emerge over the next 12 months will shape how easily investors can finance the transition for years to come.
Getting transition planning right
Transition planning should not be treated as another box-ticking exercise. For investors, it is the foundation for allocating capital with confidence. The clearer and more interoperable the rules, the greater the likelihood that money will flow to the assets that can deliver genuine decarbonisation – particularly retrofitting, which remains one of the most effective yet underfunded levers for emissions reduction.
As we head into 2026, the way transition regulation evolves will determine whether it becomes an accelerator or an obstacle. Investors should insist on clarity, interoperability and practicality – not as a defensive stance, but as the only way to deliver the capital mobilisation that net zero demands. This is an acid test for regulators in the UK and Europe – and they won’t get many chances to get it right.
Inrev (the European Association for Investors in Non-Listed Real Estate Vehicles) represents 513 members, including 136 of the largest institutional investors, as well as investment managers, banks, and advisors.
