Investors look to develop Just Transition Label

A coalition of public and private asset owners and managers have announced plans to develop a set of criteria to underpin a new Just Transition Label for investment products that deliver the three critical elements of a just transition.

The initiative is part of the Just Transition Finance Challenge, launched by the Impact Investing Institute, with the support of the City of London Corporation.

The challenge brings together global financial institutions with over £3.6tn of assets and assets under management, including the Environment Agency Pension Fund, Nest, Railpen and Scottish Widows.

The initiative is hoped to mobilise more public and private capital into investments that support a just transition to net zero in the UK and other developed and emerging markets.

In particular, it is expected to help investors to respond to the growing demand for sustainable finance products and the "urgent" need to address the climate crisis, while offering an opportunity for differentiation and visibility of vehicles that advance a just transition.

The group argued that actions must meet three "critical" elements to advance a just transition: advancing climate and environmental action, improving socio-economic distribution and equity, and increasing community voice.

The founding participants will also be supported in including this set of criteria in the design of financing vehicles and investment mandates, across major asset classes and developed and emerging markets.

The challenge is closed to new participants until the first slate of products has been announced later this year, although the group has said it welcomes feedback on the proposed criteria for the Just Transition Label, which will shared for consultation this summer.

Nest head of responsible investment, Diandra Soobiah, highlighted the Just Transition Finance Challenge as "an important project", which should help produce a "workable framework" to show investors are taking meaningful steps towards a just transition.

“Investors should want to demonstrate that they’re financing a just transition, reassuring members and customers that the social dimension is an important part of aligning portfolios with net zero," she stated.

"We encourage more asset owners and managers to consider adopting the framework, not just for new products but existing funds too.”

Adding to this, Railpen head of sustainable ownership, Michael Marshall, stated: “Supporting and steering the climate transition is integral to Railpen.

"Understanding and managing the social impact of the transition across companies and their supply chains is key to securing our members’ future. As a founding participant of this initiative, we are thrilled to be part of the knowledge-building and criteria development process.”

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