In November, SSE was the first UK company to publish a Just Transition strategy – a strategy for how it will address the social implications of a transition to a low carbon economy.
In the case of SSE, the transition will have an impact on their workforce, requiring re-training and redeployment, and on their customers, resulting in higher energy bills to support investment in new energy infrastructure. By planning for these challenges in advance, SSE is helping smooth the path towards their low carbon future.
The UK’s sixth carbon budget, published in December 2020, establishes that in the long term, the transition will bring many benefits to UK households, including better insulated homes, cars becoming cheaper to drive, cleaner air, quieter streets, more access to green spaces and more opportunities for improvement of health.
However in the short term, the transition could lead to job losses and further increases in electricity costs before they begin to fall, with an expected addition of more than £100 by 2030 to the average annual energy bill for a typical household.
For this reason, Royal London Asset Management and Friends Provident Foundation have issued a public call for energy utility companies to put in place formal Just Transition strategies to address the human and economic impact of the transition towards a low carbon economy.
We are asking companies to put these plans in place by COP26 in November 2021. We have also written an ‘investor expectations paper’ explaining the impact in different business energy utility segments: generation, transmission and retail. It also sets out the core issues we think are material for companies and stakeholders; for example, energy affordability, supply chain localisation, site regeneration and workers’ reskilling.
We hope other investors will join us. Ultimately, we want to avoid creating ‘stranded people’ and ‘stranded communities’ alongside ‘stranded assets’. I’m sure we can all agree that the best way to pull ourselves out of the coronavirus crisis is by building a greener, more resilient and low energy future, but we cannot do this without the support of energy consumers and employees.
The climate movement needs to get better at bringing disadvantaged groups along on the journey, addressing legitimate concerns about fairness and inequality, and gathering support from workers in the real economy to make the transition together.
As responsible investors we have a duty to help ensure companies are making the transition in a socially responsible way. Populist sentiment is growing, driven by the significant challenges people face in their day to day lives. These challenges will be amplified and could become intractable because of the economic and social consequences of coronavirus, and so we have to act now.
There are real risks of social backlash to the energy transition, which may deter it from happening or significantly slow the pace of change. We do not have the luxury of time, and we cannot wait for the pandemic to be over to prepare ourselves and our communities for this change. A just transition is everyone’s business.