The just transition: transforming the financial system to deliver action

Published on February 20, 2024
Nick Robins, Brendan Curran, Oleksandra Plyska, Sangeeth Raja Selvaraju, Sophia Tickell, Jodi-Ann Wang
Launch report of the LSE Just Transition Finance Lab

This report is an invitation to those who want to accelerate the global transition to a resilient, net zero and nature-positive economy in a socially inclusive and fair way. It is directed at leaders and practitioners who want to harness the power of finance to make this happen. The report marks the launch of the Just Transition Finance Lab, which has been established by the Grantham Research Institute on Climate Change and the Environment at LSE to support this shift.

The report outlines the geopolitical urgency of the just transition and the growing number of initiatives seeking specifically to harness finance to address the challenge. It also illustrates the raw reality that financing the just transition is still an emerging field and has yet to achieve critical mass. The report goes on to identify systemic obstacles to progress and how the Lab intends to contribute to surmounting these barriers. Finally, the report sets out four initial priority work areas for the Lab in its first year, 2024.

Main messages
  • To accelerate the global transition to a resilient, net zero and nature-positive economy in a socially inclusive and fair way, we need to harness the power of finance – this necessitates a significant shift in direction.
  • The Just Transition Finance Lab has been launched in support of this goal.
  • The vision of the Lab is the transformation of the global financial system to achieve progress on climate and wider environmental goals through a people-centred approach.
  • The Lab’s launch comes at a time of increasing acknowledgement of the imperative of the just transition – from governments, development banks, trade unions, leading companies, commercial banks and investors. But financing the just transition is still an emerging field.
  • A failure to achieve a just transition could also result in negative impacts for workers, communities, enterprises and consumers, undermining trust and setting back progress on climate action.
  • Incremental changes to ‘finance as usual’ practices will not be enough. A transformation of the nearly US$500 trillion global financial system is needed to bring the just transition to life.
  • The financial world needs to price in just transition requirements and allocate capital to achieve this goal. The structural role of finance needs to be refreshed, which will require a change in both mindset and operating practices.
  • The Lab has set four priorities for 2024:
    • 1. Design and deploy financial instruments and strategies.
    • 2. Establish effective metrics to measure performance.
    • 3. Identify and achieve necessary policy reforms.
    • 4. Stimulate breakthrough innovations and generate case studies.
  • The transition happens in particular places, each with their own specificities, and so the Lab will explore how its four goals come together to deliver financial system transformation at the national and sub-national level. The focus in 2024 will be on the UK and India.