INSIGHT by the Impact Investing Institute
The world is facing two great challenges – the transition to a low carbon economy and rising social inequality. Neither can be solved without addressing the other. Capital markets have a major role to play in being part of the answer, but many investors that can deploy capital at scale are not clear on the steps they need to take to tackle both of these issues.
| A practical tool for fund managers
In partnership with 21 global financial institutions, the Impact Investing Institute designed a ‘first of its kind’ practical tool for fund managers who want to invest in a transition to a net zero world that prioritises the needs of the planet and the people living on it.
| Making it easier to design financial products
The Just Transition Criteria make it easier for fund managers to design financial products that can deliver on the three critical elements of a just transition, as defined by the G7-backed Impact Taskforce:
〉Advancing climate and environmental action – including greenhouse gas emission mitigation, reduction and removal
〉Improving socio-economic distribution and equity – through, for example, inclusive opportunities for decent jobs
〉Increasing community voice – through, for example, engagement and dialogue with affected communities that are often excluded and marginalised
The Just Transition Criteria also help asset owners to identify investment products and solutions that are aligned with a just transition.
Globally, an estimated 2.2 trillion GBP are invested in sustainable funds with a focus on climate (Morningstar). Within the next five years, the Institute would like to see over half of those funds invested for a transition to net zero that combines climate action with creating and securing opportunities for people and communities to thrive in a transformed global economy.
| Co-created and tested
With that goal in mind, the Just Transition Criteria were co-created and tested in collaboration with 21 asset managers and asset owners who control over 4 trillion GBP of assets and participate in our Just Transition Finance Challenge. As part of a public consultation, the Institute also worked with a wide range of NGOs and social investors to reflect their views on how the Criteria can be most impactful.
| Designed to be used along existing standards
The Criteria have been designed to be used with existing standards and frameworks for sustainable and impact finance such as the UK’s Financial Conduct Authority’s proposed Sustainability Disclosure Requirements and investment labels as well as the EU’s Sustainable Finance Disclosure Regulation. The Criteria are applicable across geographies, investment strategies and asset classes.
Sign up here to receive updates on the Just Transition Criteria – including real-life use cases – and the Just Transition Finance Challenge.
How to align investments with a just transition
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.