Investing in a just transition

Overview

The transition to a resilient, low-carbon economy holds out immense potential for economic development and job creation. The Investing in a Just Transition initiative is designed to identify the role that institutional investors can play in connecting their action on climate change with inclusive development pathways. This builds on the commitment within the Paris Agreement on Climate Change to support a just transition.

The Initiative launched its global project in February 2018 to identify the case for investor action and provide initial guidance for investors. This has been co-designed by the Grantham Research Institute and the Initiative for Responsible Investment at the Harvard Kennedy School. The global project is being delivered in partnership with the UN-backed Principles for Responsible Investment (PRI) and the International Trade Union Confederation.

The initiative is also exploring the investor role in the just transition in different countries and regions. A UK project was launched in July 2018. This is being driven by the Grantham Research Institute and the University of Leeds in partnership with the PRI, the Friends Provident Foundation and the Trade Union Congress.

Why is this project needed now?

The shift to a resilient, low-carbon economy will deliver significant economic, environmental and social gains. The latest report of the New Climate Economy, for example, concludes that low-carbon growth could deliver economic benefits of $26 trillion to 2030 and generate over 65 million new low-carbon jobs.

These benefits will not happen automatically. At a macro level, the benefits will far outweigh the costs. But there could be significant transitional implications for key sectors, regions and countries. Poorly managed, this could result in ‘stranded workers’ and ‘stranded communities’ as well as ‘stranded assets’. In addition, the full social benefits for workers and communities of low-carbon growth may not be realised without a conscious focus on standards and dialogue.

Investors with over $82 trillion in assets under management are committed to responsible investment, in other words integrating environmental, social and governance (ESG) factors into decision-making. Climate change is a priority issue for many and investors are increasingly taking action through shareholder engagement, capital allocation and policy dialogue. Most have yet to incorporate a robust social dimension into their climate strategies, however. So far, there has been a lack of robust analytics and guidance to enable investors to play an effective role – a gap that this initiative will work to fill.