Just Transition to a Clean Energy Economy

Elements of a just transition

Investors have increasingly adopted the language of Just Transition as an integrated component of their climate engagement and investment strategies, the inclusion of concerns for “stranded workers” and “stranded communities” into climate strategies addressing “stranded assets,” as witnessed by the growing group of signatories to the Principles for Responsible Investment’s Investor Statement on a Just Transition. But the topic is still new, and specific, widely-adopted investor practices have yet to develop.

In order to meet the demands of a clean energy economy, investors must address not only the changes in business plans and practices necessary to stay within the 1.5°C limit, but must do so within a “Just Transition” framework that links their support for necessary climate action with commitments to labor standards, human rights, and inclusive growth—with a focus on the workers and communities who contribute to and are affected by the transition. 

For investors, this means both identifying the appropriate roles they can play to support a Just Transition, and embedding their work in the broader exchange among policymakers, corporations, labor, community advocates, and investors that will generate the details of the Just Transition.

The electric utility sector in the US is responsible for roughly 1/3 of current emissions, yet is one of the sectors that can most easily decarbonize. Decarbonizing the sector is important because the ‘electrification of everything’ paradigm poses significant energy reduction opportunities for other sectors of the economy, by fueling electric vehicles, heating, and manufacturing. For these reasons, investor engagement with the utility sector is a crucial strategy for GHG reduction.


 

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