Financing a Just Transition, a UK-based coalition of banks, investors and other institutions announced today the publication of Just Zero, a new report outlining how financial institutions can help support workers, suppliers, communities and consumers to benefit, and protect those who are vulnerable from the major economic shifts involved from the transition to net zero.
Acknowledging the potential economic disruption involved in achieving the energy transition goals necessary to limit the impact of climate change, the Paris Agreement embedded the concept of a Just Transition, aiming to address the social implications of delivering a net zero economy world, such as the impact on communities that are heavily dependent on fossil fuels or greenhouse gas-intensive industries. The agreement included a clause:
“Taking into account the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities.”
Prepared by a team at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science, the new report outlines what a just transition will require, points out some of the initial efforts of financial institutions to achieve a just transition and points to what is needed to achieve system-wide change. Among the key messages of the report is that the reallocation of capital required to achieve net zero can also support a just transition by creating better quality jobs, revitalising communities and reducing inequality, while financial institutions can play a significant role through the integration of environmental and social dimensions of the transition into their policies and decision-making.
The report makes a series of recommendations across the key priority areas of finance, place and policy. Finance recommendations include embedding the just transition into climate strategies and financing plans, actively seeking to finance companies with commitments to positive social impact on the road to net-zero, and integrating the just transition into engagement on corporate net-zero plans. “Place” recommendations include developing local climate finance hubs in order to connect the demand and supply of capital for net-zero and the just transition, and providing blended financial and non-financial support to SMEs in local areas. For policymakers, recommendations include implementing a Green Jobs plan to achieve a just transition for workers in the high carbon economy, making the just transition a core element of the government’s net zero strategy, incorporating social considerations into fiscal policy for climate action, and strengthening the social dimension of the UK’s Green Finance strategy.
Prof Nick Robins, at the Grantham Research Institute on Climate Change at the Environment at LSE, and lead author on the Just Zero report, said:
“In the UK, the just transition can best be seen as the policy glue that connects net-zero with the Government’s levelling-up agenda. It’s not only the right thing to do and necessary also to build public support for bold climate action, but for financial institutions it’s also strategically smart as it will build stronger and more resilient investments.”
Click here to access the Just Zero report.