A just transition is the process of minimizing the negative impacts and maximizing the positive impacts for all people as we evolve towards a low-carbon, circular, ecologically sustainable and equitable economy. These impacts must be distributed fairly to all.
Social impacts are increasingly shaping investment performance, project viability and the ability to deploy capital at the scale required for the global energy transition. The low-carbon transition cannot be financed at the scale required without addressing social impacts. Without addressing risks to people, project investment is constrained, and projects are more likely to face delays, disputes and cost overruns.
Financial institutions that fail to manage social risks associated with the transition expose themselves to operational, legal and reputational risks. Those that proactively integrate social impacts into financing and investment decisions will be better positioned to overcome capital flow barriers, improve project bankability, seize emerging investment opportunities and support a more orderly transition.
This report makes the case for why a just transition matters to financial institutions and the practical ways it can be embedded into investment and risk management.
