Governments and listed companies must put as much thought and planning into bringing local workers and communities with them to a low-carbon future as they do to decarbonisation itself, the Australian Council of Superannuation Investors (ACSI) says in its latest report: A just transition to a clean energy economy – investor expectations and policy recommendations.
The report outlines investor expectations of listed companies as they move away from emissions-intensive operations and the policies governments must put in place to support a just transition for all.
“The transformation to a low-carbon economy is inextricably linked with profound social and economic change but, so far, little has been done to holistically assess and manage these impacts,” said Louise Davidson, ACSI CEO.
“In some regions, the communities and workforces in regions are at real risk of being left behind.”
For ACSI, a ‘just transition’ means a climate, societal and economic transition to a low-carbon economy that is timely, fair and meets the goals of the Paris Agreement.
As universal owners of capital, institutional investors cannot fully diversify away from the impacts of a poorly managed transition and ACSI members increasingly consider it part of their fiduciary duty to support a just transition. Aside from the obvious necessity of considering the human impact of the transition, the wellbeing of communities has a clear material link to the strength of the economy and financial outcomes.
The risks of an unjust energy transition range from significant economic losses and greater social support costs due to higher unemployment to potential political instability and even higher energy costs. Companies which do not adopt good practices risk their social licence to operate, and could also face commercial disadvantage, all of which also present material financial risks for investors.
“Companies in emissions-intensive industries and regions need to work with the local workforces and communities to take advantage of the opportunities the transition presents – benefits such as innovation, new markets, reskilling and regional competitive advantages,” Ms Davidson said.
“These activities and plans need to be reported to investors, so investors can be confident the transition is being managed appropriately, and at present, this kind of reporting is very scarce.
ACSI calls on affected listed companies to:
- acknowledge the challenge and commit, with appropriate board oversight, to addressing the just transition in the context of the company’s approach to net zero and the Paris Agreement;
- engage widely with stakeholders;
- make its response context-specific to the region and operations affected;
- make a plan and then measure and report the impact of their plan, including issues such as how many workers have been retrained, redeployed or made redundant, and
- actively advocate for, and work towards, a just transition through partnerships, membership organisations and policy work.
“Australia has a real opportunity right now to advance social change and establish an economy that is not only cleaner but more fair, co-operative, and sustainable, which will lead to better long term investment returns,” Ms Davidson said.
“We’re at a critical moment, and it’s vital that local people are involved in building their own future in a low-carbon world. But importantly, companies and communities can’t do it alone – there is a fundamental role for governments of all levels.”
The research calls for a range of governmental policies and actions which would support a just transition:
- A federal just transition framework setting out a clear pathway towards a just transition across Australia, including mechanisms to implement the approach, and the roles and responsibilities of key stakeholders.
- An independent national Just Transition Authority to advise the Federal Government and coordinate just transition planning.
- Appropriately resourced local Just Transition Agencies in areas affected by the closure of fossil fuel operations. In consultation with a wide range of stakeholders, local just transition agencies should develop a clear plan for the region covering both the direct mechanics of support for workers and communities as well as broader economic development and diversification.
- An enabling policy and legal environment including standards and guidance for high-emission companies on managing a just transition, and reporting to government, investors and other stakeholders. A coherent and complimentary policy environment should be the aim.
- Sufficient funding for a just transition: in addition to public funding, governments and policymakers should work with the private sector to facilitate the provision of private capital.
- Monitor the transition governments and just transition authorities should set clear targets and objectives, monitor their progress against these targets and report regularly and transparently.
- Mitigate any disproportionate impacts on vulnerable people and communities.