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The Actuary The magazine of the Institute & Faculty of Actuaries

Global investors ‘just transition’ to low-carbon economy

Aviva, HSBC and Hermes are among a group of institutional investors with over $5trn (£3.9trn) in assets backing a ‘just transition’ for workers when tackling climate change.

Investors to help ensure workers benefit from low-carbon transition ©Shutterstock
Investors to help workers benefit from low-carbon transition ©Shutterstock

The group said in a statement today that “insufficient attention” had been given to the social impact of moving to a low-carbon economy and the need for an inclusive transition.

In response, the investors argue that strategies to tackle climate change should include the full environmental, social and governance (ESG) aspects of responsible investment.

An accompanying report from the London School of Economics outlines systemic risk, fiduciary duty, material value drivers and alignment with social objectives as reasons for investor action.

This was launched at the COP 24 climate summit in Katowice, Poland, where officials from around the world are negotiating how best to implement the Paris Agreement.

“As investors, we commit to take action to support the just transition by integrating the workforce and social dimension in our climate practices,” the statement says.

“Investors can make an important contribution as stewards of assets, allocators of capital and as influential voices in public policy to make sure the transition produces inclusive and sustainable development.”

Although today's report concludes that ambitious climate action will boost prosperity and create net new jobs, these benefits will not happen automatically.

The investor group has committed to include workforce and community issues in climate-related engagement, and develop systems to communicate progress on the just transition.

In addition, they pledged to share best practices, and design investment mandates across asset classes that link decent work and inclusive growth with climate action.

This “complex agenda” for investors will require strategic engagement within investment institutions and also multi-stakeholder collaborations, the group added.

Aviva’s UK chief responsible investment officer, Steve Waygood, said: It’s critical that the transition is swift enough to mitigate the growing risks of climate change.

“We recognise that the more social justice questions are considered, the faster the transition will ultimately be – we need to collectively ensure that no one is left behind.”

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