Financing a Just Transition

Overview

The Financing a Just Transition programme is designed to identify the role that finance can play in connecting action on climate change with inclusive development pathways. This builds on the commitment within the Paris Agreement on climate change to support a just transition for workers and communities. The programme started in 2018 with work on the role of investors in the just transition through the Investing in a Just Transition Initiative. In 2019, its scope widened to cover the role of banks through the Banking on a Just Transition project. The team has now built– up considerable experience in the practical financial implications of the just transition in different sectors and regions.

The Grantham Research Institute is currently establishing a Just Transition Finance Lab to be a world-leading centre for experimentation and excellence in the financial solutions needed for a just transition to a net zero and nature positive economy.

The Lab will have four key interlocking objectives:

• The design and deployment of financial tools and instruments for the just transition.
• The development and application of metrics to measure just transition performance.
• The identification of appropriate policy reforms to mobilise finance for the just transition.
• The construction of a strong body of illustrative and empowering case studies that demonstrate how just transition finance can be practically achieved.

The Lab is being launched in 2024.

The just transition in the international context

The just transition needs to be taken forward in every country and sector of the economy and is core to the global agenda to accelerate climate action. Here, our work commenced in 2018 with the publication of an international guide for investor action together with Harvard’s Initiative on Responsible Investment and the International Trade Union Confederation and the Principles for Responsible Investment. This is available in four languages (English, Espanol, Francais, Italiano). Building on this, in 2021 we produced a global framework of just transition expectations that investors can use to promote the transition in the companies they own. The LSE team has focused on financing a just energy transition, as well as exploring what the financial challenges of a just nature transition involve.

The real test of the just transition will be in major emerging and developing economies, where investment Currently, a key focus is how just transition principles can be incorporated into net zero transition plans produced by financial sector institutions, and into major asset classes such as bonds. The real test of the just transition will be in major emerging and developing economies, where investment needs for net zero and climate resilience are greatest while access to and cost of capital can be a challenge and social safeguards tend to be weaker. Here, we have focused on the just transition finance agenda in India, working in partnership with British International Investment and others.

Key projects and publications

• Making transition plans just: how to embed the just transition into financial sector net zero plans
• Just Transition Finance Tool for banking and investing activities
• Just Transition: Shaping the Delivery of the Inevitable Policy Response
• The Green+ Bond: How EU Sovereign and Corporate Issuers could deliver Green Sovereign Bonds with Social Co-Benefits
• Financing the just transition beyond coal
• Lessons from COP26 for financing the just transition
• Investing in a just transition – global project
• From the grand to the granular: translating just transition ambitions into investor action
• Towards a Just Transition Finance Roadmap for India: Laying the foundations for practical action
• Why a just transition is crucial for effective climate action
• An assessment of Just Transition elements in the Inevitable Policy Response

Articles and commentaries

• Here’s how to mobilize finance for a just transition and net zero
• Where are the people in transition finance?
• How a just transition can speed up the race to net-zero
• No one should get left behind
• Developing a finance roadmap for the just transition in South Africa and India
• How could sustainable finance help avoid an emerging market sovereign debt crunch?
• Why governments need to issue just transition sovereign bonds and how they could do it
• What is the cost of climate reform?
• The future of coal in a carbon-constrained climate
• Post-Covid recovery packages must quicken the pace to net-zero carbon emissions
• Time for finance to turn down the heat
• Earth Day 50 – Sustainable finance: the road ahead
• Coming back from a time of illness: how finance can learn from climate change fiction

Delivering the just transition in the UK

Since 2018, we have been working to identify how the financial sector can support the just transition in the UK. This has involved working with institutional investors, banks and other financial institutions, plus trade unions, civil society and regional organisations. A particular focus of our work has been to connect green finance and social impact investing, notably in the framework of the UK’s green sovereign bond programme. Another priority has been the local and regional dimension of the just transition as part of our membership of the Place-based Climate Action Network (PCAN). Nick Robins is also a member of Scotland’s Just Transition Commission and Brendan Curran has worked on several projects related to mobilising capital for local investment programmes, including working on Innovate UK-funded projects with PwC and Jacobs.

The Financing a Just Transition Alliance

In November 2020, the Grantham Research Institute established the UK’s Financing a Just Transition Alliance (FJTA), which brings together over 50 banks, investors and financial institutions with universities and trade unions to translate the growing commitment to a just transition across the financial sector into real world impact. The Alliance presented the findings of the first year of its collaboration at COP26. One result of its work has been the establishment of the Just Transition Working Group (which the Institute co-chairs) as part of the UK Government’s Transition Plan Task Force. Current priorities involve looking at sector- specific just transition finance priorities in agriculture and in housing.

Alliance members:

Abundance Investment
Aberdeen Standard
Amundi Asset Management
Aviva Investors
Barclays
Belfast Climate Commission
Big Society Capital
Bridges Fund Management Limited
British Business Bank
Brunel Pension Partnership
CANDRIAM
CCLA
CDC
Charity Bank
Church Commissioners
Church of England Pensions Board
Climate-KIC
Ecology Building Society
EdenTree Investment Management
Edinburgh Climate Commission
Ethex
Federated Hermes
Finance Innovation Lab
Food, Farming and Countryside Commission
Franklin Templeton
Friends Provident Foundation
Green Finance Institute
HSBC UK
Impact Investing Institute
Impax Asset Management
Institutional Investor Group on Climate Change
Investor Forum
L&G
Lloyds Banking Group
Local Authority Pension Fund Forum
Nationwide
NatWest
Nest
Principles for Responsible Investment
Pure Leapfrog
Rathbone Greenbank Investments
Responsible Finance
Royal London Asset Management
Santander
ShareAction
South West Mutual Limited
Thirty Percy Foundation
Triodos UK
TUC
UK 100
UK Finance
UKSIF
Unity Bank
Yorkshire and Humber Climate Commission

The Place-Based Climate Action Network, as well as the Grantham Research Institute, London School of Economics, are also members.

Key projects and publications

• Making the Future – second Just Transition Commission: initial report (Scottish Government)
• Just zero: 2021 report of the UK Financing a Just Transition Alliance
• Investing in a just transition – UK project
• Banking on a just transition
• Financing small and medium enterprises to support a just transition to net-zero emissions in the UK
• Financing a just transition to net-zero emissions in the UK housing sector
• The UK’s Green Gilt: Demonstrating the contribution to jobs and levelling up
• The Green+ Gilt: How the UK could issue sovereign bonds that deliver climate action
• The road to Net-Zero Finance (Sixth Carbon Budget Advisory Group)
• PCAN Report: Turning words into action: How Community Municipal Investments can create a new sphere of civic engagement that will galvanise local action in the fight against the climate emergency
• PCAN Report: Trends in Local Climate Action in the UK
• A net-zero emissions economic recovery from COVID-19
• Strategy, investment and policy for a strong and sustainable recovery: An action plan
• Delivering strong and sustainable growth in the UK: A special decade for innovation and investment
• Response to the Consultation on the Financial Regulation Review’s Proposals for Reform by HM Treasury
• Growing clean: Identifying and investing in sustainable growth opportunities
• Financing people-centred climate action: a Just Transition Bond for the Northern Ireland Housing Executive
• Making transition plans just: how to embed the just transition into financial sector net zero plans
• Enabling place-based climate action in the UK: The PCAN experience
• Sowing seeds: How finance can support a just transition in UK agriculture

Articles and Commentaries

• Net Zero is the catalyst for delivering levelling up (PCAN website)
• Unlocking the missing middle: how local finance hubs can supercharge green investment (PCAN website)
• The new UK Infrastructure Bank can drive the just transition: here’s how
• Net-zero: the £1 trillion-plus opportunity to create social value in the UK
• Cumbria is one place that could really benefit from a green recovery plan
• Financing net-zero: mobilising the money for action on the ground
• Scaling up finance for the just transition beyond coal
• In today’s time of energy and climate crisis, here’s the double punch sustainable finance needs to deliver
• How to mobilise finance for a just transition and net zero
• Financing people-centred climate action: a Just Transition Bond for the Northern Ireland Housing Executive
• Solidarity is the key to unlocking a just transition
• The $468 trillion climate question: how the financial system is starting to shift
• A green transition for UK steel can tackle regional inequality
• India: becoming a sustainable finance maker
• A rethink of finance is required to make climate action fair
• Grantham Research Institute and Climate Bonds Initiative partner to assess the needs for bond instruments for a ‘just transition’