From the grand to the granular: translating just transition ambitions into investor action

Published on July 22, 2021
Nick Robins, Sabrina Muller, Katarzyna Szwarc

More than five years after the Paris Agreement, high-level commitments to a just transition to a resilient, net zero economy are being translated into practical action by a small but growing number of governments and businesses, often working with trade unions and other stakeholders. Investors are also recognising their responsibility and role in delivering a just transition. The task that lies ahead is how to translate this high-level ambition into operational steps that investors can take to deliver both integrity and impact.

This report sets out a framework of just transition expectations that investors can use in conducting due diligence and assessments of companies, engaging with portfolio holdings and allocating capital.

The framework is based on international standards and emerging practice and it is applied to five companies in the European electric utilities sector to learn lessons for wider adoption.

The report closes by highlighting areas for priority action by investors and others as the just transition moves from the margins to the mainstream of the climate agenda.

An accompanying 8-page policy brief summarises the key points.

Key messages
  • The just transition is a critical enabling factor in reaching net-zero greenhouse gas emissions.
  • Governments hold the primary responsibility for making the just transition happen, with business, trade union and civil society also playing their part.
  • Investors can also play a significant role by making sure that the social dimension is fully integrated into their assessment, stewardship, capital allocation and policy activities.
  • Clear just transition expectations are needed to enable investors to fulfil this role with integrity and impact.
  • Drawing from international standards and work by social partners and stakeholders, this report presents a seven-point framework focusing on: strategy, workers, supply chain, communities, consumers, policy and disclosure.
  • The framework provides the basis for understanding emerging practice and is applied to analyse work to date by five European utility firms: Enel, EDF, SSE, E.ON and ZE PAK.
  • An acceleration in investor action to support the just transition is now needed ahead of and beyond the COP26 climate summit, particularly to ensure a convergence around common approaches and to deliver real results on the ground.

This report was made possible through financial support from the Candriam Foundation.