Five questions to Colin Baines, Friends Provident Foundation
Colin, what does “Just Transition” mean?
Our programme of engagement with the energy utilities sector is calling for formal Just Transition strategies to accompany net zero targets and transition plans. A ‘Just Transition’ ensures that social issues are taken into account in moving to a low carbon economy, ensuring risks are managed and opportunities seized. If rapid decarbonisation is not accompanied by ‘Just Transition’ measures, it may have negative impacts such as unemployment from closed coal-fired power stations, thus negatively affecting the welfare of entire communities.
What do ‘Just Transition’ measures look like?
Comprehensive Just Transition strategies should cover workers, communities, consumers, and supply chains. On workers for example, they should prioritise worker retraining and redeployment as well as site redevelopment of former fossil fuel power stations. But they should also embrace the transition’s opportunities, such as the provision of good quality green jobs, supporting domestic supply chains, and sharing economic value with local communities, such as shared ownership models for onshore renewables, such as solar arrays or wind farms.
Which companies have you been engaging so far?
We have been engaging the energy utilities market in partnership with Royal London Asset Management and Shareholders for Change since 2019. We have engaged the utilities EDF (France), Scottish Power (UK), Scottish and Southern Energy (UK), RWE (Germany), E.ON (Germany), Centrica, Drax, and National Grid (UK).
As a result of our engagement, in November 2020, Scottish and Southern Energy (SSE) became the world’s first energy company to adopt a formal Just Transition strategy. E.ON has since also integrated just transition commitments into its climate-related disclosures. We are confident we will secure other formal strategies ahead of the COP26 talks in November 2021.
Where can investors start? Is there any toolkit for engagement on ‘Just Transition’ you would recommend?
Friends Provident Foundation is grant funding the ‘Investing in a Just Transition initiative’ led by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics (LSE). Launched in February 2018, the initiative is working to identify the role that institutional investors can play in connecting their action on climate change with inclusive development pathways. LSE also co-ordinates the ‘Financing a Just Transition Alliance’, with over 40 banks, investors, financial institutions, universities, and trade unions. Investors can find useful reports and guides and may be interested to join the Alliance here.
Along with Royal London Asset Management, we have produced a set of ‘Investor expectations for energy utilities’ Just Transition strategies’, which we would encourage other investors to adopt in their engagement of the sector.