CSR – Just Transition Initiative

Summary

The report describes the current state of the just transition discourse amongst businesses and proposes a path forward for businesses and investors to integrate just transition considerations into business decisions. The authors identify the just transition as a critical enabling factor in reaching net zero, noting how governments are increasingly recognizing that climate policies that do not take into account the effects on employment, communities, and consumers run the risk of failure. According to the authors, as the strategic case for just transitions has deepened, leading companies in the energy system have begun to formalize their responses as part of wider climate change strategies., 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.

The report presents a seven-point framework that combines the governance dimension for businesses (in terms of strategy, policy dialogue, and transparency) with a stakeholder component (including workers, communities, supply chains, and consumers). The intention is for this framework to be used in investment assessments and due diligence, shareholder engagement and stewardship, as well as the capital allocation decisions for portfolio companies. The framework is applied to analyze the work accomplished to date by five European international power utility firms.

The report identifies key lessons, including that businesses acknowledge some of the core foundations of just transitions, though the strategic approach is still emerging, with and that transparency and disclosure on just transitions is still lagging. It also points out how it is likely that investors will increasingly expect an active interest from companies to promote just transitions through public policy advocacy. Furthermore, supply chain realities loom large, in terms of generating quality green jobs for local people and also making sure that sustainability and human rights due diligence are intensified in international sourcing from developing countries. The authors highlight the need for community engagement to move from traditional corporate social responsibility activities to a more transformational model that is built upon co-creation. The report concludes with some critical next steps needed, including: promoting convergence around common approaches; modeling to help identify priority areas for investors; understanding better the role of participation and investor dialogues in just transition plans; along with clarifying the investor role in just transitions in emerging and developing economies.

Summary

This report, a product of the India Just Transition Finance Roadmap (JTFR) project, identifies some priority actions that financial institutions can take to support climate action that also delivers positive results in terms of livelihoods and sustainable development. It involves a review of existing practices, an assessment of exposure by sector and region, and the identification of some priority actions for the finance sector. The authors describe the just transition agenda as the “connective tissue” that binds climate goals with social outcomes.

The authors highlight how India simultaneously confronts the challenges of multiple economic transitions—urbanization, digitalization, and the shift to zero carbon. They identify the distributional impacts on Indian states in sectors that are expected to be the most impacted, including: coal mining, electricity generation, agriculture, manufacturing and industry, along with transportation. Using the four dimensions of social risk arising from the net zero transition—namely livelihoods, energy access, public finance, and human development, they find that Madhya Pradesh, Jharkhand, Chattisgarh, Uttar Pradesh, Bihar, Odisha, Telangana, and Rajasthan will be the most affected by the zero-carbon transition.

The authors suggest that the framework shows a possible mapping of risks to investments, highlighting the role that financial sector players, regulators, and policymakers need to play in ensuring that a just transition is achieved. Furthermore, they highlight how the framework can be used to provide guidance for investors to understand company operations in vulnerable regions, and whether there are any investment strategies capable of mitigating the risks in these regions. It can also provide guidance for investors seeking to align capital allocations with the just transition framework. From their conversations with investors, the authors identify how the just transition is still at an early stage of development in India and needs definition and how it needs to be placed in a core sustainable developmental context. Furthermore, the conversations also reveal that policy action is a crucial catalyst for a just transition and that shareholder engagement on just transitions is increasing.