This discussion paper explores why investors should contribute to the ‘just transition’ as the world’s economy decarbonises, and how they can do so. It is the first output of the Investing in a Just Transition project, co-designed by the Grantham Research Institute on Climate Change and the Environment and the Initiative for Responsible Investment.

There is currently a lack of robust analytics and guidance to enable investors as a group to play an effective role in the just transition. This is a gap that the Investing in a Just Transition project aims to fill.

Key messages

  • Investors will play a critical role in the implementation of the Paris Agreement and they are increasingly taking action to respond to climate change risks and opportunities.
  • However, most investor strategies on climate change have yet to incorporate a robust social dimension.
  • The transition to a zero-carbon economy needs careful management so that the transition is not just environmentally effective and economically efficient, but also socially inclusive.
  • There is a growing body of policy and market experience with understanding of the ramifications of the just transition.
  • There are a range of reasons why investors could consider an active role in the just transition, which taken together provide a compelling case for investor action.
  • Investors could take action to promote the just transition in four different areas: investment strategy, investment engagement, capital allocation and policy dialogue.

The paper also poses a number of questions. Based on the feedback gained from stakeholders on these questions, along with further research and engagement, the project team will build an increasingly robust evidence base. This will involve:

  • Deepening the review of the landscape of how investors could best contribute to the just transition.
  • Holding two consultation meetings to gather stakeholder perspectives on investor guidance and policy recommendations.
  • Conducting two place-led pilot studies on the role of investors in specific regions in the UK and the US. (We also welcome expressions of interest to conduct pilots in other countries.)
  • Releasing a draft case for action along with investor guidance at the PRI in Person conference and Global Climate Action Summit in September 2018.
  • Presenting a consolidated case for investor action and draft guidance for investors at the UNFCCC Katowice Climate Change Conference (COP24) in December 2018.

The Investing in a Just Transition project will be delivered in partnership with the Principles for Responsible Investment (PRI) and the International Trade Union Confederation. The project is funded by the PRI, the Friends Provident Foundation in the UK and the Surdna Foundation in the US.

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