This report contends that investing in a just transition is set to be the best way to manage the strategic risks and opportunities flowing from the shift to a prosperous, low-carbon, resilient, and inclusive global economy. It highlights the influential role played by investors as the fiduciaries of assets and allocators of capital. The report also suggests how strategies for tackling the growing threat of climate change need to incorporate the full range of environmental, social, and governance (ESG) dimensions of responsible investment. This guide draws from an international review of investor approaches and dialogues with investors to provide a framework that can be applied both by individual institutions and through collaborative initiatives to help investors place just transition principles at the center of their climate strategies.
The article, using several examples of investor actions from around the world, highlights some strategic motivations for investors to pursue this work, including: broadening the understanding of systemic risks from climate change; updating the fiduciary responsibility to capture interrelated environmental and social drivers of long-term performance; recognizing the material drivers of long-term value; and identifying new growth opportunities in areas that combine climate and social goals. Based on these motivations, the article suggests five core areas of action for investors, including investment strategy, corporate engagement, capital allocation, and policy advocacy. The article also provides initial questions for investor engagements with companies on the just transition and highlights the need to build in a process to learn from the emerging experience and the lessons of practice, in terms of corporate engagement, capital allocation, and policy advocacy.