Grants / Projects we are funding

London School of Economics – Implementing the UK investor roadmap for a just transition

Grant details

Amount:£141,220

Awarded on:10/03/2020

Duration:18 months

Status:Live

Area of interest

Investment engagement

Themes covered

just transition

A just transition is essential for a rapid shift to a resilient, net zero economy in the UK. This project focuses on the role that investors and the financial sector can play. Over an 18-month period, it will implement the recommendations of the Investor Roadmap to deliver system-wide innovation.

What is the issue?

There is growing recognition of the urgent need for climate action to have a strong social dimension. On the positive front, the transition has the potential to generate additional high-quality jobs as well as help to reduce inequality and empower communities. These benefits will not flow automatically, however. If managed poorly, the transition could result not just in stranded assets, but also stranded workers and stranded communities. This could generate a political backlash which could stall the transition. The primary responsibility for ensuring a just transition rests with government, business and civil society, notably trade unions. Investors and the financial system more generally also need to take action to deliver a just transition. LSE’s work over the past two years has helped secure investor commitment and influenced policy. Globally over 150 institutions are now signed up to support the just transition, including 30 in the UK. The Committee on Climate Change and the Government’s Green Finance Strategy have both recognised the importance of the just transition in part as a result of our work.

However, a number of barriers remain. For example, there is an urgent need for a shared understanding of the critical elements of the just transition to enable investors to assess performance in the assets they hold. The just transition is starting to be included in shareholder engagement, but still has to become a routine feature of investor stewardship. Practical mechanisms for investors to allocate capital to the just transition are missing. Robust policy frameworks to crowd in investors behind the just transition also do not exist in the UK. And given the urgency of the climate emergency, the entire financial system has to be mobilised behind the just transition, not least the banking sector.

What will the project try to achieve?

The overall goal of this proposal is to stimulate and support system-level innovation that enables investors and the financial sector more broadly to deliver a just transition in the UK. The project will implement the recommendations of the 2019 Investor Roadmap. This was published in October 2019 and they will work to realise its recommendations across five areas.

  1. Developing a clear set of investor expectations on the just transition to guide investment strategy
  2. Seeking to make the just transition a core part of shareholder engagement, focusing on utilities, the building sector and banks
  3. Identifying practical ways to shift capital to specific assets, for example, through a Just Transition Sovereign Bond or a Just Transition Investment Fund
  4. Harnessing the investor voice for local, regional and national policies that translate the just transition into reality. They see significant opportunity in Scotland, where they have already collaborated with the government’s Just Transition Commission
  5. Working with investors to establish effective ways of listening to, learning from and partnering with key stakeholders affected by the transition.

The approach will involve a combination of intelligence – delivering research that supports and informs practice – as well as influencing, shaping the behaviour of investors, business and policy makers. The three main activities include research, local dialogue and convening practitioners. They will conduct high-quality research to generate outputs that can be used by investors in their decision-making. Research will include work to establish a shared set of investor expectations and explore the potential for the Just Transition Investment Fund.

Who might be interested in this work?

  • 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.