A new report from the Investor Group on Climate Change (IGCC) released today highlights the important role of investors in a just transition to net zero emissions for Australian communities and workers.
Empowering Communities: how investors can support an equitable transition to net zero details the opportunities and challenges for investors in helping ensure a just transition for those communities that are currently economically-tied to fossil fuel industries.
The net zero emissions transition is inevitable and represents a huge opportunity to create new jobs and boost economic growth, but only for those countries that get ahead of the curve, the report finds. Governments, companies, investors and all other stakeholders must act to minimise hardship for affected workers in fossil fuel sectors and communities where jobs will be lost, and ensure they are not overly disadvantaged or left behind.
“We know the transition is underway. It is foreseeable. It should therefore be manageable,” says Rebecca Mikula-Wright, IGCC Chief Executive Officer.
“Investors and governments have an opportunity to act today to prioritise a just and orderly transition if we want Australia to emerge a winner in the global race to net zero.”
Based on research by EY Australia, the report finds that the fossil fuel industry faces a range of inevitable domestic and international drivers which have the potential to adversely impact some communities. Unlocking new opportunities in line with a net zero carbon economy is crucial to ensure a just transition where affected workers and communities are prioritised and supported.
The report also emphasises failing to take meaningful action on climate change is anticipated to pose greater economic, social and environmental costs than the investment required to achieve net zero carbon emissions by 2050.
Investors have a critical role to play alongside insurers, lenders and other capital providers, in helping Australia’s energy sector decarbonise. Government action and adequate policy signals will reduce uncertainty in capital markets and de-risk investment opportunities.
“A combination of climate action and social inclusion, which can create decent and quality jobs, net zero emissions and thriving communities, should be a priority for investors, the Federal Government and all other stakeholders,” says Rebecca.
The release of the report comes as the global transition to net zero emissions by 2050 becomes no longer a matter of if, but how it will be managed. With many of Australia’s major trading partners making net zero commitments, including China, Japan and South Korea, Australia’s coal and gas industries are exposed to a significant decline in demand.
The report provides an actionable toolkit for investors to support and benefit from a just transition by pursuing action in five areas:
- Investment strategy and capital allocation: Investors to seek opportunities to allocate capital towards risk adjusted investment opportunities that support just transition outcomes
- Disclosure: Disclose metrics according to the Task Force for Climate-related Financial Disclosure (TCFD) framework, including social and climate-related metrics
- Corporate engagement: Implement and embed just transition principles and protocols that promote fair and decent work in directly owned assets and ongoing asset management
- Advocacy and partnerships: Participate in collaborative initiatives to ensure just transition outcomes
- Impact measurement and evaluation: Assess and monitor positive and negative outcomes for workers and communities associated with the transition to net zero emissions to identify risks, opportunities and just transition priorities
To date, over 161 global institutions with $US10.2 trillion in assets under management have committed to support a just transition, through capital allocation, investment strategies and policy advocacy positioning.
As the world transitions to a net zero economy, Australia is at a critical juncture to reconsider its climate commitments ahead of COP26 this November.