MOBILISING PRIVATE SECTOR FINANCE
4.2
Transforming the ěãÖãØÞÖáèîèéÚâ an inclusive, people- centred approach
Achieving a just transition means putting people at the centre of all action – and, while awareness is building of the need to act, finance needs to be mobilised and approached differently. Nick Robins, professor in practice – sustainable finance, London School of Economics and Political Science
F rom presidents to grassroots activists, workers to investors, the just transition is increas- ingly recognised as essential for accelerating climate action. The task is how to reallocate financial flows so that climate goals are achieved alongside positive social outcomes, particularly through additional invest- ment in the Global South. The meeting of the 29th Conference of the Parties to the United Nations Framework Con- vention on Climate Change must make breakthroughs on international goals and mechanisms, national frameworks and transition planning for business and financial institutions. The just transition puts people at the heart of building a net zero and resilient economy. A top priority is to maxim- ise the opportunities of climate action to cut inequality and end poverty, by expanding clean energy jobs, ensuring they come with decent working con- ditions and bringing universal energy access in all parts of the world. It also means anticipating and addressing the social risks of the transition, such as avoiding stranded workers and com- munities as fossil fuels are phased out, and ensuring the race for critical min- erals respects human rights and brings genuine local development. Inclusion is essential The centrality of participation is crucial. Those affected must be meaningfully involved in decision-making, through social dialogue in the workplace, broad stakeholder engagement along global value chains, and free prior and informed consent by Indigenous peoples. In every
country and every sector, the transition will not happen on time unless it is fair. Awareness of the just transition has been building across the $450 tril- lion in assets sitting within the global financial system. Some finance minis- tries with fiscal space are linking fiscal incentives to good jobs and community benefit (as in the United States). A hand- ful of pioneering just energy transition partnerships have been agreed in South Africa, Indonesia, Vietnam and Senegal, but the roll-out of actual public and pri- vate finance from developed countries has been slow. Institutional investors with tens of trillions in investments have made sup- port for the just transition a core net zero expectation of the companies they invest in. But at the end of 2023, only 3% of the most carbon polluting companies held by these investors had released plans involving stakeholders. A recent assess- ment of nearly 40 major banks found that although some had started, none had explicitly committed to decarbon- ise in line with just transition principles. In the developing world, international flows of public and private investment are going in the wrong direction, with mounting debt often crushing the ability to turn aspirations for a just tran- sition into reality. A transformational approach is required, one that confronts the structural inequalities that prevent the just transition from taking off, not least in Africa. Getting on the right track A systemic solution is needed that shows how the full spectrum of finance from public through blended to private
IN EVERY COUNTRY AND ÀÑÀÍÔÎÀ¾ÏÊÍ THE TRANSITION WILL NOT HAPPEN ON TIME UNLESS IT IS FAIR.
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Financing a Just Transition
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