The world today faces an uncomfortable paradox. Global financial wealth has surpassed $400tn — four times global GDP — yet we are falling markedly short in directing capital towards securing the stability of our planet and the resilience of our societies.

This mismatch is becoming more visible as scientific evidence of planetary instability accumulates. The Stockholm Resilience Centre’s 2025 update finds that seven of the nine planetary boundaries have now been breached, with ocean acidification the latest to cross into the danger zone. Climate-related disasters are rising sharply in frequency and cost: in 2023 they triggered more than $380bn in global economic losses, only a third of which were insured. The risk that certain forms of climate exposure may soon become uninsurable is no longer far-fetched.

The distributional consequences are equally concerning. The regions most exposed to climate shocks — predominantly in the Global South — are also the least equipped to absorb them. These countries face a financing gap of roughly $30tn over the coming decades, a sum that represents just 7 per cent of global financial wealth but continues to elude them. Last year, they attracted only 10 per cent of cross-border investment flows. Capital continues to accumulate where it is least needed, and remains absent where it would be more impactful.

Complicating matters further is the loss of momentum across sustainable finance. After a decade of rapid expansion, ESG-labelled strategies are now experiencing significant outflows and political backlash. Some reassessment is healthy. But the vacuum left by the retreat of ESG risks weakening the market-based tools needed to address systemic global risks. The question is not what went wrong with ESG; it is how to rebuild a credible pathway for aligning institutional capital with long-term economic resilience.

One answer may lie in what is being described as Transition Investment (TI). Unlike traditional responsible investing models, this approach focuses explicitly on the commercial opportunities that arise from addressing systemic risks — from energy insecurity to climate adaptation, food systems, and health resilience, targeting improvements measured against realistic baselines rather than absolute metrics.

The concept of “impact delta” illustrates the distinction. An additional wind farm in a market already saturated with renewables has a negligible carbon footprint but delivers diminishing marginal gains. By contrast, upgrading a coal plant in Kenya — while increasing absolute emissions — may generate far larger incremental climate benefits relative to the country’s existing energy mix. In many emerging markets, this marginal improvement is where both impact and value creation concentrate.

For TI to be credible, it must deliver non-concessionary, market-rate returns. Philanthropy and public finance remain essential, but they are nowhere near the scale required to close multi-trillion-dollar gaps. TI’s thesis is straightforward: solving deep structural challenges reduces long-term risk and unlocks new commercial opportunities. The impact is not a cost; it is a driver of returns.

This orientation naturally draws capital toward emerging and lower-income economies — the geographies where unmet needs are greatest, productivity gains can be highest, and the marginal value of investment is most significant. If the strategy can be executed with rigour, it may represent the early contours of a new asset class within private markets.

The most likely participants are large asset owners: sovereign wealth funds, pension funds, insurers, and family offices. These institutions, often “universal owners,” hold portfolios so broad that their financial performance is tied to the health of the global economy itself. They have a material interest in preventing systemic shocks. TI offers a way to mitigate these risks without compromising fiduciary obligations. From a Middle Eastern perspective, particularly among sovereign funds with growing exposure to emerging markets, Transition Investment could also reinforce South–South capital flows at a moment when geopolitical fragmentation is reshaping the global financial architecture.

For this market to develop, it will require investment partnerships that can combine the development finance ecosystem’s experience with private markets’ discipline. Robust analytical capabilities and transparent measurement frameworks will be indispensable.

But the direction of travel is clear. The urgency of planetary and societal risks is rising. The pool of global capital capable of addressing them is vast. Transition Investment attempts to provide a commercially grounded bridge between the two. It deserves serious consideration from institutions that recognise that long-term value and global resilience are increasingly inseparable.