This publication is part of a series of commentaries authored by advisory group members of the Just Transition Initiative (JTI). This series highlights the diverse perspectives and expertise of the JTI advisory group on different aspects of the low-carbon transition and its implications for equitable development.
The just transition to a low-carbon economy raises issues of power and voice: who gets to set goals and make decisions on how to get there. These concerns are essential in addressing issues of justice and agency in the energy transition while tackling practical questions such as what kind of jobs low-carbon industries can provide in Mpumalanga, South Africa, or which investments will redress environmental racism in Louisiana’s “cancer alley.”
Public policy and public investment will have to lead the just transition, but in the Investing in Just Transition Initiative, we focus on the roles that investors can play in supporting a rapid, deep structural economic transformation. It is not easy for investors to engage in this topic. It is hard to standardize or measure what a systemic issue like a just transition means for any particular company or project. The corporate climate scenarios that the responsible investment community has helped to generate do not focus much on work and community issues.
Still, daunting as they are, the challenges of measurement and management are more familiar and tractable to the responsible investment community than the practice of engaging workers and communities in a just transition. The International Trade Union Confederation (ITUC) approaches the just transition via the tradition of social dialogue between business, labor, and government. The environmental justice community foregrounds the voice of marginalized communities and local democratic control. Investors, however, have typically approached these issues more indirectly. The environmental, social, and governance (ESG) movement relies broadly on risk mitigation rather than multisector engagement. Financial conventions also tend to keep investors at the margins of transformative engagement.
For investors to address power and voice, they will have to play unfamiliar roles, and we need models on which to build. The Initiative for Responsible Investment has been fascinated by one example of engagement with workers: the Fonds de solidarité des travailleurs du Québec (Fonds de solidarité FTQ or the Fonds) and its approach to the just tradition. The Fonds is a place-based, mission-driven investment fund designed to “contribute to Québec’s growth by creating, maintaining, or protecting jobs through investment in small and medium-sized business in all spheres of activity.” It is funded through voluntary savings from the Québecois workforce, with approximately one in seven of the province’s workers invested in the fund, and it held $10 billion (C$13.8 billion) in net assets as of 2020. The Fonds was created by the Fédération des travailleurs et travailleuses du Québec (FTQ), Québec’s largest labor federation, in response to an economic crisis in the 1980s to mobilize workers’ capital in support of jobs in the province. Over time it has come to play an outsize role as a lender to Québec’s small and medium-sized enterprises (SMEs). The Fonds has deployed a notable amount of patient development capital, invested in a wide range of businesses across the entire province, and engaged directly in financial and economic training of Québecois workers.
The Fonds’ formal approach to climate and environmental issues began in 2015 and grew in line with the FTQ’s and ITUC’s approaches to just transition. The first stages were devoted to multi-sector dialogue that brought together unions, employers, social economy advocates, and academics to map—via research and extensive stakeholder consultation—the potential impacts of the energy transition for Québec’s workforce. The resulting report underpinned the Montreal summit for a Just Energy Transition, co-sponsored by the Fonds and the FTQ, in which public sector, labor, business, and community groups created the basis for an agreement in support of a just transition to a green economy. Though the signing of accords is a familiar role for responsible investors, the Fonds stands out in this process as an agent helping to drive planning and social dialogue.
From this work, the Fonds created an action plan that sits at the front edge of investor engagement on the just transition. The plan included, for instance, a process to reduce the carbon intensity of its public equities portfolio via an index that integrates environmental and social issues. It also included a strategy to target Québecois SMEs in clean energy and energy efficiency supply chains that are positioned to contribute to a low-carbon transition. A member of the Fonds management team, Mario Tremblay, has co-chaired the Just Transition Working Group of the Principles for Responsible Investment, and the Fonds has generally raised awareness of the topic among the global investment community.
A few pieces of the plan stand out as less familiar roles for investors. Building on the Fonds’ long-term relationships with Québecois SMEs and the participation of local and regional communities in the investment process, it began directly engaging businesses in energy efficiency and worker training. New initiatives included a grant program for energy audits and a partnership with a research institute to ensure that lessons learned are shared across enterprises. A structured engagement with workers across the Fonds’ nine regions of operation, in which workers themselves addressed what is needed for a just transition in their enterprises and communities, helped to inform strategy and to ensure awareness among workers who participate in the Fonds. The fact that workers helped to design strategy suggests one path towards rethinking power and voice in responsible investment.
There are only so many lessons to be drawn from any one place. The just transition is necessarily complex and geographically diverse, and the structural transformation entailed by the energy transition will manifest differently across places and sectors. The Fonds itself has special characteristics that have enabled worker engagement: origins in the labor movement, a developmental place-based investment mission, close and enduring ties to the workers who invest, a union-dense manufacturing supply chain, and solidarity via Québecois identity. But the Fonds’ engagement on just transition and foregrounding of worker voice offer lessons for investors, demonstrating one way to build capacity in local systems toward an inclusive dialogue around transition goals and decisions. Investors are embedded in society, and the Fonds illustrates how they have tools to actively support social dialogue. The scale and speed of change required for a just transition should prompt a rethinking of how investors can contribute.