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Kieron Boyle on the practicalities of aligning investments to a just transition

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Published: 21 May 2024

Kieron Boyle, CEO of the Impact Investing Institute, talks to Paula Garrido about the Just Transition Criteria, a practical tool aimed at guiding investors on incorporating just transition principles into their investment strategies.

Kieron Boyle: “We won’t achieve the net-zero transition unless the politics work too.” | Impact Investing Institute

Paula Garrido (PG): What are the Just Transition Criteria, and why do we need them?
Kieron Boyle (KB): The Just Transition Criteria are a tool to help mobilise more capital for a fair and inclusive transition to a net zero economy. They’re needed for two reasons.

The first reason is that we won’t achieve the net-zero transition unless the politics work too. Across the world we’re seeing pushback on green finance from those who feel left behind – so we need to show what’s in the transition for people and communities.

The second reason is that while many investors want to support a just transition, they are unsure how to go about it. Where do they get started? And what does better look like? The Criteria were designed to respond to both challenges. They help financial markets actors align their investments with the three key elements of a just transition: advancing climate and environmental actions, improving socio-economic distribution and increasing community voice. And they’re a very practical tool.

What makes the Criteria distinct is that they were co-created by over 20 of the world’s largest financial actors – from global asset managers to public development finance institutions – as well as civic society actors and NGOs like the International Labour Organization.

PG: How do the Criteria align with existing regulatory practices?
KB: The whole philosophy of the Criteria was for a tool that could be used immediately and improved over time. That’s the only way we’ll achieve the scale of change needed – we can’t let the perfect become the enemy of the good, but we also need to be clear-eyed that the current status quo doesn’t end well.

As a result, the Criteria provide a strong and practical framework for investors while leaving enough room to be flexible to changing regulatory practices. They can be used alongside existing regulations and work well with new regulations – like the UK’s Financial Conduct Authority’s new Sustainability Disclosure Requirements. We’re also keeping them updated as regulatory practices evolve over time.

PG: Any examples of best practice among funds or other institutional investors who are further along in their journeys of implementation of the Criteria?
KB: Our Just Transition Finance Challenge has grown to more than 25 global financial institutions with over £5trn (€5.8trn) of assets under management, that are committed to financing a just transition in the UK and emerging markets. That’s already a meaningful amount of money on the global stage and we’re only just getting going.

The community of practice includes global asset managers like HSBC, Federated Hermes and Fidelity International; asset owners like NEST, Scottish Widows and the Environment Agency Pension Fund; and development finance institutions, like British International Investment.

We also know that more than 250 organisations worldwide are engaging with the criteria. There are lots of great examples. For instance, one of the world’s largest asset managers, Schroders, launched a real estate impact fund in the UK, which invests in affordable housing, town centre regeneration and supporting increased employment in deprived areas. Their investment and asset management includes early and regular community engagement. In a developing market context, GAWA Capital, has used our Criteria to develop a €300m fund that invests in innovative companies that make vulnerable communities more resilient to climate change.

PG: What is stopping other asset managers or institutional investors from applying a just transition lens to their investment strategies?
KB: Given that the Criteria are freely available, nothing should be!

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.

Kieron Boyle, Impact Investing Institute

PG: Why is it crucial to incorporate social aspects into the transition to net zero?
KB: 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 tackling those challenges. And they need to, both to avoid systemic risks that will destroy value and to access the huge economic opportunities in reaching underserved markets.

While every investor needs to think in these terms, a great place to start would be climate-focused funds. Globally, £2.2trn are invested in these. By 2025, we would like to see over half of these investments adopt a just transition approach, combining climate action with creating and securing opportunities for people and communities to thrive in a transformed global economy. 

PG: What further steps are needed in order to accelerate the  mindset shift needed for providers of catalytic capital to prioritise local communities and social equity when investing in the transition to a greener economy?

KB: It’s excellent to see such a range of actors – development finance institutions, multilateral development banks, governments, philanthropies, and others – deploying catalytic capital to mobilise private investment for a just transition. We need to see more of this. And we need more effective partnerships with local actors if we want to deploy catalytic capital as effectively as possible.

This article is part of the ‘Impact Investing and the Just Transition’ report, a collaboration between Impact Investor and our sister publications IPE and IPE Real Assets.

You can download a digital copy of the report here.

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