ESG Viewpoint: Investing in a Just Transition
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ESG Viewpoint: Investing in a Just Transition

It’s essential we consider the social dimension as we transition to a low carbon world. We explore the investment implications of a Just transition

  • The energy transition is underway. With it comes a host of opportunities for businesses and investors as we build the low carbon economy.
  • The transition brings many social impacts with it, and these will require effective and proactive management.

  • We are engaging with companies on their plans for a just transition and are looking for evidence of strategic thinking and concrete action. We outline the key components of a successful strategy.

  • We explore what a just transition means from an investment perspective, including the opportunities within our social bond strategies.

Why a ‘Just Transition’ matters to investors

The energy transition is underway. A rich seam of opportunities for businesses and investors is emerging as we build the low carbon economy, while the risks and dilemmas we will need to navigate are also becoming ever more evident. As signatories to the Net Zero Asset Managers Initiative1 and the Just Transition Finance Challenge2, we are committed to considering these fully as we embed the changes into our investment analysis.

As the transition progresses, consideration of the social dimension is critical. Significant risks to local communities and livelihoods need to be mitigated to avoid social unrest; investment is required in the skills to deliver green growth; and the thoughtful planning and building of trust and social licence with communities, customers and wider stakeholders must be put in place to ensure a just transition, with minimal negative impact on the worst off in our communities. Effective and proactive management of the social implications of transition will build resilience and underpin the ability to deploy capital at scale. As investors, we need to understand what this looks like and be clear in our expectations for the fair treatment of people.

What do we mean by a ‘Just Transition’?

‘Just transition’ is a term that acknowledges and addresses the human implications of the energy transition, both in transitioning ‘out’ of carbon intensive infrastructure and transitioning ‘in’ to new energy sources, products and services. It is not a firm set of rules but rather a concept and an ambition, though ‘guidelines for a just transition’ were published by the International Labor Organisation (ILO) as part of the 2015 Paris Agreement and represent a basic framework for good practice.3

It is generally accepted that there are three core elements of a just transition, as articulated by the G7-backed Impact Taskforce, which are: advancing climate and environmental action; improving socio-economic distribution and equity; and increasing community voice.

As investors, these topics arise in our discussions with companies within the broader context of engagement around workforce management, customer and wider stakeholder relations and general business planning.

What's next?

It is evident that a ‘just transition’ matters greatly, and investors, the corporate sector and society as a whole will benefit from giving the social dimension of transition the attention it requires. These issues take time and considerable effort to plan for, but we are already seeing market leaders take important steps. Our expectations for companies driving the transition to outline meaningful strategies are increasing as we move forward. We will continue to engage for progress, and to work on a robust assessment of related risk and opportunity in our investment analysis.

We expect the scope to broaden. The concept of a just transition is often limited in application to the fallout of closure of high carbon power generation, but we believe it has much wider applicability. We can extend the principles to the whole social side of climate change adaptation and mitigation as companies plan for supply-chain resilience, from shifts in agriculture sourcing to garment factories in South Asia exposed to physical climate risk.

There are challenges in tackling this topic. Social and environmental targets can sometimes come into conflict, and we must work hard as investors to avoid contradictory expectations on companies while supporting meaningful efforts to navigate the difficulties. A just transition to net zero can only really be achieved through a collaborative approach between all stakeholders, and we are fully committed to playing our part as investors.

Despite the challenges, it is also clear that the opportunities generated by the low carbon energy transition have the potential to be extraordinary, for both investors and society. It will require effective management of the social issues for that potential to be realised and lay solid foundations for growth. We will continue to develop our thinking on the topic of a just transition and to work in support of its success.

Interested in learning more?

Considering the social dimension of the transition to a low carbon world is essential.  We explore the investment implications of a Just Transition, outline what a successful strategy looks like and detail the results of our engagement with companies around their plans. 

Download the full ESG Viewpoint to learn more.

31 Januar 2024
Vicki Bakhshi
Vicki Bakhshi
Director, Responsible Investment
Letitia Byatt
Social Impact Analyst
Alice Evans
Alice Evans
Responsible Investment Strategist
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ESG Viewpoint: Investing in a Just Transition

1 The Net Zero Asset Managers initiative – An international group of asset managers committed to supporting the goal of net zero greenhouse gas emissions

2 Just-Transition-Criteria.pdf (impactinvest.org.uk)

3 Guidelines for a just transition towards environmentally sustainable economies and societies for all (ilo.org)

Risk Disclaimer

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.

 

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

 

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

 

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

 

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

 

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

 

In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.

 

In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.

 

In Switzerland: Issued by Threadneedle Portfolio Services AG, an unregulated Swiss firm or Columbia Threadneedle Management (Swiss) GmbH, acting as representative office of Columbia Threadneedle Management Limited, authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).

 

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

 

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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Risk Disclaimer

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.

 

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

 

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act 2001 (Cth) and relies on Class Order 03/1102 in respect of the financial services it provides to wholesale clients in Australia. This document should only be distributed in Australia to “wholesale clients” as defined in Section 761G of the Corporations Act. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

 

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

 

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

 

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

 

In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.

 

In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.

 

In Switzerland: Issued by Threadneedle Portfolio Services AG, an unregulated Swiss firm or Columbia Threadneedle Management (Swiss) GmbH, acting as representative office of Columbia Threadneedle Management Limited, authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).

 

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

 

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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