Mapping the scale and scope of just transition finance in private credit and equity funds

This report develops a framework to map the scale and scope of the just transition for private equity and credit funds that have specialist expertise in sustainable and socially responsible investing. It provides evidence to inform the case for continued action on a just transition, examples of emerging practice for investors, and recommendations for policymakers.

As private capital assumes a growing share of financing for energy infrastructure – a sector with clear implications for community development, employment and land use – understanding how these investors approach the just transition becomes critical.

The report examines how 23 specialist private equity and credit funds embed just transition principles into their energy infrastructure investments, drawing on policy document analysis and semi-structured interviews with fund representatives.

Key findings

• Just transition action can occur even without explicit just transition labels or policies.
• The scope of action remains narrow and constrained but is, arguably, within the expected scope of responsibilities for private funds.
• There is an investment case for action on the just transition – and it is viewed as an important risk management tool.
• The regulatory landscape plays a key role in determining baseline levels of engagement on the just transition.
• The context of investments matters as material just transition issues vary across regions and projects.
• Several barriers inhibit greater uptake of just transition considerations in private markets, including insufficient understanding of what constitutes just transition in specific investment contexts, and lack of standardised, sector-specific metrics.

Policy recommendations

• National authorities mobilising private fund investment in energy infrastructure should develop a shared understanding of the just transition issues within their local contexts.
• Regulatory frameworks should encompass the baseline level of action on just transition for private funds to establish minimum acceptable thresholds for the just transition.
• International standard-setters seeking to advance the just transition should leverage existing sustainability frameworks to drive deeper action.