Bridging climate and social – why and how to invest in a just transition

The ‘Gilet Jaunes’ protests against the French carbon tax on diesel fuel were a stark reminder that climate and social issues are interdependent. We won’t succeed in tackling climate change without addressing issues to do with economic justice, equality and inclusivity – and likewise, we won’t tackle social issues without facing up to the huge impact climate change will have on lives and livelihoods.

This year, we’ve heard stark warnings from the IPCC on the dangers of temperatures rising above 1.5C. Preventing climate change from reaching these catastrophic levels requires an urgent and coordinated transition to a zero-carbon economy by 2050. This shift will create transitional challenges for workers and communities: research shows that 10 per cent of workers are likely to need re-skilling and approximately 28,000 jobs in carbon-intensive industries could be lost in the North of England by 2030.

The ‘just transition’ is the concept of ensuring that the movement to a low-carbon economy is both fast and fair, taking account of core social priorities such as employment.

In 2018, charity invested assets totalled £108.4bn. Most of these are in public equities (stocks in companies) which literally build the world around us. Jonathan Gillett, trustee of Polden-Puckham Charitable Foundation explains the power of linking your invested assets with your mission: “Obviously, all charitable organisations are working to make a positive contribution to the world. Whatever their mission, any investments held will be having an impact not only on the environment but also on society. Trustees can seek to minimise the negative impacts of their investments and maximise the positive ones and so attempt to align their investments with the desire to make a positive contribution – their mission.”

As charitable investors, members of the Charities Responsible Investment Network (CRIN) – a network of UK based charities coordinated by ShareAction representing approximately £6bn assets under management – have been utilising the power of their invested assets to support a just transition. “To be resilient the transition must be just, and as investors we must mitigate the risk of ‘stranded communities’ and ‘stranded people’ as well as ‘stranded assets’, ensuring no one or place is left behind," Colin Baines, investment engagement manager of Friends Provident Foundation, writes.

Achieving a just transition should be high on the agenda of socially focused charities, to mitigate challenges for communities and workers arising from the shift to the zero-carbon economy.

It should also be a priority for environmental charities. Andrea Marandino, sustainable finance and corporate risk manager at WWF, explains why the just transition is rapidly emerging as an essential element in the successful transition to a zero-carbon economy: “At WWF, we believe that failing to ensure a just low-carbon transition would slow or stall climate progress, and contribute to economic stagnation and political instability. We are committed to integrating the just transition not just into our environmental projects on the ground but also into our pension and investment beliefs.”

Members of the CRIN have been supporting the just transition by asking their asset managers to incorporate social questions into their climate change engagements, joining the 24 investors – representing US $3.1 trillion in assets – who have signed the Just Transition Investor Statement, and investing in community energy projects.

“When the just transition initiative appeared [...] we were keen to learn more and signed up at the beginning of this year. Our asset managers are also signatories to the just transition declaration and we are writing to them to ask how they plan to take action on our behalf in terms of investment strategy, corporate engagement and capital allocation," Gillett says.

Baines explains how Friends Provident Foundation has been integrating social dimensions into their climate change activity, both in their shareholder and asset manager engagement, and asset allocation: “We have been engaging with the energy utilities market looking at the ‘3D energy transition’ to a decarbonised, decentralised and increasingly democratised energy system, with a focus on business model resilience and just transition. We are covering worker and community relations, worker redeployment and retraining, site reuse, and community reinvestment.

"Our asset allocation has included several direct investments in community owned renewable energy, which contribute to decarbonisation but also empower communities, often creating an income stream to address local issues such as fuel poverty. It is vital for investors supporting a just transition to put an emphasis on place, to look at how the rapid and far-reaching changes needed across the economy will impact workers, communities and consumers, and to ensure equitable and sustainable outcomes.”

The Esmée Fairbairn Foundation believes that people are the key to tackling the environmental challenges we face today. Investment director, Matthew Cox, explains: “We are now considering how to help a wider range of charities and social enterprises, including other funders, to engage with the concept and consequences of a just transition. Their knowledge and reach will be key to making a fairer future for everyone.”

Achieving a just transition is crucial to a resilient and successful shift to a net-zero economy and preventing catastrophic climate change. Charities should use all available resources to support a fast and fair transition, including their invested assets. To find out how you can take action, read Investing in a Just Transition initiative’s newly launched investor roadmap here or contact the Charities Responsible Investment Network.

Isobel Mitchell is a network officer for the ShareAction Charities Responsible Investment Network.

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