The transition to net-zero greenhouse gas emissions needs to be an inclusive process, delivering social justice for workers, communities and consumers: this is the agenda of the just transition. This report sets out the role that investors can play in delivering a just transition in the UK. It seeks to understand the growing momentum in favour of a just transition and to illustrate the implications through a set of place-based examples from Yorkshire and the Humber, before setting out recommendations for investor action. These recommendations are based on the framework set out in our global guide, Climate Change and the Just Transition: A guide for investor action.

The report contains forewords by Professor Nicholas Stern (Chair of the Grantham Research Institute), Fiona Reynolds (Chief Executive Officer of the PRI) and Paul Nowak (Deputy General Secretary of the TUC).  It is authored by Nick Robins, Andy Gouldson, William Irwin,  Andrew Sudmant and James Rydge.

An accompanying 8-page brief, ‘Financing inclusive climate action for a just transition in the UK’, summarises the report’s main findings and messages (see downloads).

Headline issues

  • The UK must strive for a ‘just transition’ as it works to deliver net-zero greenhouse gas emissions by 2050.
  • For institutional investors, contributing to a just transition is both the right and the smart option, making portfolios more robust.
  • The just transition represents a strategic opportunity to connect the environmental, social and economic dimensions of climate action.

Summary points

  • To deliver the UK’s new legislated target of reducing greenhouse gas emissions to net-zero by 2050, the country must strive for a ‘just transition’, inclusive of workers, communities and consumers. All parts of the economy will be affected and the net-zero transition will be strengthened by strong participation and engagement.
  • For institutional investors, contributing to a just transition offers a way of reducing systemic risks, realising fiduciary duties, identifying material value drivers and generating positive social impacts. It also responds to the growing demand from end investors to connect their savings with societal benefits as well as financial returns.
  • The just transition has become a recognised priority in the UK but as yet there is little experience of what it means in operational terms. To address this, our analysis is rooted in the place-based realities of the Yorkshire and Humber region (see maps). Our examples show that a shared approach is needed to evaluate business performance on the just transition; that there is a crucial role for local ‘anchor institutions’ with scale and community links; and that system-wide innovations, such as new regulations or markets, are needed.

We have developed a roadmap of priority actions that identifies where investors can make a real difference, highlighting five areas and building on the framework contained in our global investor guide to the just transition:

  • 1 – Investment strategy: Investors need to place the just transition into the heart of their strategy and signal its importance along the investment chain.
  • 2 – Corporate engagement: Investors should incorporate just transition goals and aspirations into their engagement with the companies they own.
  • 3 – Capital allocation: Investors can shift their allocation of capital towards assets that are aligned with the just transition.
  • 4 – Policy advocacy and partnership: Investors should use their voice to call for governments in the UK to introduce a strategic framework for the just transition.
  • 5 – Learning and review: Investors should build capacity to deliver experimentation at scale for the just transition with effective monitoring, evaluation and sharing of outcomes.

Investing in a Just Transition Initiative

The Investing in a Just Transition initiative was launched in February 2018. Investing in a Just Transition is working to identify the role that institutional investors can play in connecting their action on climate change with inclusive development pathways. The initiative is led by the Grantham Research Institute on Climate Change and the Environment and the Initiative for Responsible Investment at the Harvard Kennedy School, in collaboration with the Principles for Responsible Investment (PRI) and the International Trade Union Confederation (ITUC).

Investing in a Just Transition UK Project

The Investing in a Just Transition UK project: In 2019 the Grantham Research Institute and the Sustainability Research Institute (University of Leeds) started a process of research and dialogue to identify the specific role that investors can play in the just transition in the UK. This part of the project is being delivered in collaboration with the PRI and the Trades Union Congress (TUC).