What is the issue?
The transition to a low-carbon economy requires action across the financial system to be effective, efficient and inclusive.
Commitment to a just transition is part of the Paris Agreement. Policy awareness is growing in the UK of the need to connect climate action, finance and the needs of particular places. Investors are increasingly taking action on the risks and opportunities of the climate transition. A small, but growing number of investors have recognised the need to integrate the social dimension, but overall awareness in the investor community of their role in delivering a just transition remains low. Connecting the environmental and social dimensions of the transition could produce more resilient investment portfolios as well as a stronger pipeline of place-based green investment opportunities. However, a failure to integrate the social dimension into investment strategies could contribute to the creation of ‘stranded workers’ and ‘stranded communities’ as well as ‘stranded assets’. This could slow the transition itself and contribute to inequality, economic stagnation and instability.
At present, there is not a clear articulation of why investors need to support the just transition or how they can do this in an effective way. This leads to a set of challenges that need to explored and answered. These range from questions of systemic risk and portfolio returns, the development of human capital and promotion of labour standards as well as how to encourage place-based green investing that brings community benefit and builds lasting local capacity.
What will the project try to achieve?
The project has three aims:
- Develop a strategic case for investor action for the just transition. The project will provide evidence and convening activities to mobilise investors, raise their awareness and ability to take a comprehensive and integrated approach to the low-carbon transition.
- Evaluate the transition exposure and investment profile in a specific UK region. The project will seek to strengthen the capacity of one specific region to understand the role of investors in delivering a just transition in its area. The project will focus its regional work on Yorkshire, working with the University of Leeds.
- Provide best practice guidance for investors in terms of shareholder engagement, capital reallocation (including place-based investing) and policy reform. The project aims to achieve broader policy outcomes in the UK, by building on the government’s Green Finance Task Force, particularly its recommendations on place-based investing. The project will also lay out a long-term strategy that underpins investor action on the just transition into the 2020s.
Who might be interested in this project?
- The UK investor community.
- UK policy makers both locally and nationally
- Trade unions and business organisations
- Civil society groups focusing on climate change and community renewal.