Stewarding a just transition: frontiers of practice in listed equities
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This report analyses emerging best practice on just transition in listed equity markets, drawing on the practices and policies of a subset of investment managers (IMs) focused on sustainable and socially responsible investing. It examines how just transition considerations are being embedded within investment policies and practices, and identifies the current frontiers of just transition practice in this asset class.
Listed equity markets represent one of the most significant pools of capital with direct exposure to sectors central to a low-carbon transition, and therefore also to just transition risks and opportunities. While climate considerations and now relatively well established within listed equity markets and strategies, the integration of just transition considerations remains comparatively nascent. Understanding what is happening at the forefront of current just transition practice in listed equities is therefore both timely and necessary.
The report draws on a review of policy and reporting documentation, alongside a series of semi‑structured interviews with 26 IMs leading on sustainability practice in listed equities. The sample is not representative of the entire market, but rather, a selection designed to explore the evolving frontiers of just transition practice in listed equities, as well as the key opportunities and barriers to further progress.
Key findings
- There are several examples of well-developed policies on just transition in listed equity investment, and within the sample of IMs examined, just transition is widely recognised.
- In practice, just transition remains a low priority, with activity concentrated in a few leading IMs, and focused mostly on the energy and mining sectors.
- Just transition has been addressed mainly through investor engagement, spanning both opportunistic and long-term engagement by individuals and coalitions of IMs, although evidence of impact remains limited and anecdotal.
- IMs’ ability to effectively engage on just transition is diminishing as geopolitical fragmentation generates headwinds for climate action, compounding the structural limitations of investor stewardship.
Insights for investors
- IMs can target outsized impact through strategic, collaborative and opportunistic approaches to engagement on just transition.
- Long-term, sustained engagement is necessary to build company awareness and capacity to develop just transition strategies and implement sufficient disclosure.
- IMs and investors can play an interlocutor role between standards setters, civil society and corporations to advance just transition practice on several fronts.
Policy recommendations
- National governments should operationalise the just transition commitments outlined in their Nationally Determined Contributions (NDCs), providing a clear baseline for just transition practice by companies.
- Multilateral and international NGOs should provide stable and coherent anchors for just transition, including concrete examples of good practice.
- Financial regulators should encourage consideration of the intersection of social and environmental risks in investment strategies, building on existing disclosure frameworks to minimise regulatory burdens.
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