Here’s how investment managers can aide the just transition

Two reports set out recommendations for the industry including engaging with companies on their supply chains

Calls for the transition to net zero to be ‘just’ are strengthening with the recent publication of two reports setting out recommendations for the investment industry to help achieve this.

The first is LSE and The Grantham Research Institute on Climate Change and the Environment’s Just Zero: 2021 Report of the UK Financing a Just Transition report.

In its chapter on what financial institutions can do to help support a just transition it recommends embedding it into climate strategies, and engaging with companies on their expectations when it comes to this strategy, the business’ workers, supply chains, communities and consumers, giving several case studies of investment managers doing just that across several sectors.

The case studies are taken from members of the Financing a Just Transition Alliance (FJTA). In November 2020, more than 40 banks, investors and other financial institutions joined forces with universities, civil society and trade unions to launch the FJTA, the first grouping of its kind in the UK.

The report also looks at place-based investing, which The Good Economy has previously found to be a way for private capital to play a role in both the building back better and the levelling up agenda in the UK. It recommends embedding place-based investing in net-zero strategies, and supporting SMEs and innovative local solutions. Finally, it includes policy recommendations for regulators.

See also: – Place-based impact investing will become a main theme

The second report is Rathbone Greenbank’s Financing a Just Transition: Putting people and communities at the heart of sustainable investment’. It assesses the potential for direct job losses as a result of the transition to net zero, as well as job gains in sectors that have the potential to expand as a result of the transition.

The report said that by 2025, the job changes across these industries mean that the UK is projected to see a net change of an additional 15,900 jobs as a result of the shift to a net-zero carbon economy, rising to 120,100 by 2030, and 236,000 by 2050.

Many of these new jobs will be in low-carbon electricity and energy, while losses will be seen in areas such as fossil fuel production. At a regional level, the report said not all local areas across the UK will enjoy this success to the same extent, nor at the same time, “meaning it is vital to consider the wider social impact of the transition on each community”.

Echoing recommends made by the LSE and Grantham Institute report, Rathbone Greenbank said the investment industry should make the just transition central to all investment strategies, allocation capital to communities that need it most, use investor action to challenge companies on their just transition strategy, bolster due diligence into fast-growing sectors, and continue to monitor and reassess the just transition.  

John David, head of Rathbone Greenbank Investments, said: “There has never been a more pressing time to adapt our economy to a low-carbon future. As well as being vital to building a more sustainable future for us all, the transition to net zero offers the prospect of bolstering the UK jobs landscape. However, with around 7 million direct jobs found in UK industries that account for a high proportion of greenhouse gas emissions, we cannot ignore the social impact of the transition.”

Kate Elliot, head of ethical, sustainable and impact research at Rathbone Greenbank Investments, added: “If we are to achieve a ‘just transition’ to net zero in the UK, we must prioritise long-term social inclusion and resilience, through education, reskilling and retraining for workers, otherwise we risk an incomplete strategy. Unsurprisingly, this is especially vital in the areas of the UK that are most reliant on greenhouse gas intensive industries, so that as we decarbonise the economy, this does not come at a human cost. As investors, we can translate these just transition ambitions into action. Through collective action, we have a critical role to play in securing a more sustainable future for both people and planet.”

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Natasha Turner

Natasha is global deputy editor at ESG Clarity, part of the Bonhill Group, and has been a financial journalist for six years. She has been shortlisted for Story of the Year and Investment Journalist of...