The just transition - ensuring the success of the environmental transition


2021 will be a pivotal year to accelerate global efforts to curb climate change. Although global CO2 emissions dropped by 7% in 2020 due to the effects of Covid-19 lockdowns around the world, stronger action will be needed at the upcoming COP26 to keep temperature increases well below 2°C and towards 1.5°C.

But there is more to the picture than “simply” climate change. Policymakers at the COP26 should be wary of not seeing the forest for the trees, as there are other crucial elements to consider. One major factor is the social dimension of climate change: both the social impacts that climate change has on societies around the world, as well as those that result from the policies implemented to fight it. The transition towards more sustainable models of production and consumption will be successful only if it is made socially acceptable. Recent events have demonstrated this over and over again, from rejections of carbon tax increases in France, to job losses in certain fossil fuel areas that are not directly compensated by “green” jobs. The current Covid-19 crisis, which is still unfolding, and which socioeconomic ramifications remain to be fully seen and understood, will only compound this problem.

So, what is a “Just Transition”? In stylised terms, it is one in which the negative social impacts, such as job losses, are minimised, while the positive social impacts are maximised. To be sure, the concept is not entirely new: its roots date back to the 1970s in the United States, when trade unions fought for workers whose livelihoods were threatened by new environmental regulations. Since then, it has taken different forms. In international climate negotiations, for instance, some States or regions have called for a “just” contribution to fight climate change, meaning one that takes into account the fact that developed countries have overwhelmingly contributed to high levels of pollution starting from the Industrial Revolution. The 2015 Paris Agreement notably calls for actions that take into account “the imperatives of a just transition of the workforce and the creation of decent work and quality.” Finally, the Silesia Declaration of 2018 called for special consideration of coal regions. Increasingly, the topic has spread from trade unions and international negotiations to day-today democratic life: in France, the government launched a Citizens Convention for Climate, inviting selected citizens from all walks of life to brainstorm on a new generation of climate policies.

If the concept has been around for half a century, why is this time different? For one, as mentioned above, the climate crisis is now compounded by a social crisis: poverty and inequality rates have risen and may rise further as debt levels may restrict support for the poor and redistribution policies. Second, six years on from the Paris Agreement, it is clear that if we are to deliver on the ambitious climate promises made, words will need to be transformed into actions, potentially making their social impacts more salient than ever. Even more so given that the longer we fail to act decisively, the more we face the risk of a brutal described by Vivid Economics and the Principles for Responsible Investment. Having said that, the coronavirus crisis also presents a formidable opportunity to “build back better”, thereby incorporating the social dimension in new sustainable policies.

Where do we go from here? The ample debates around the “Just Transition” testify to its complexity. Indeed, such a Transition has ramifications across all sectors, countries, and social groups. One way to break it down is to look at it through four dimensions: workers, consumers, local communities and societies. Taking them in order, a Just Transition must ensure that workers in industries that are restructuring can find new employment in sustainable industries, and/or have adequate social safety nets. It is also one in which goods and services are aligned with the objectives of the Paris Agreement, and accessible to all. Local communities will be affected differently, so sharing the benefits and costs equally will be crucial. The Just Transition must take care to ensure that every stakeholder plays their role in full through constructive dialogue to coordinate actions.

But that must not prevent policymakers, and indeed the private sector as well, from working towards a Just Transition. As a financial institution, achieving this aim requires that we work on all the levers that will enable us to channel capital towards a Just Transition. That means working on a common language and definition of the Just Transition, devising methodologies and investment frameworks, improving or collecting new data points, and potentially inventing new financial instruments.

The roadmap is clear, so let’s get going!

Head of Institutional and Corporate Clients Division