As part of the Path to COP28 campaign, GEFI, in partnership with DIFC, hosted a private Just Transition round table to delve into the various dimensions of a just transition, including finance, energy perspectives, and agriculture.
This blog post provides a summary of the key points discussed during the event, shedding light on the role of finance in achieving a just transition and addressing the transition’s various dimensions, and the challenges, opportunities, and necessary actions required from financial insitutions and governments for achieving an equitable transition.
The Essence of Just Transition
The concept of the just transition can be understood in terms of the intersection of two Sustainable Development Goals (SDGs): SDG 8, which focuses on decent work, and SDG 13, which addresses climate change. A well-managed transition is vital, as it not only ensures the creation of better jobs but also improves health, reduces inequality, and helps avoid climate catastrophes. Conversely, a poorly managed transition can negatively impact workers, communities, and countries, lead to stranded assets, and create political turmoil and opposition to climate action.
Finance and Just Transition
One crucial aspect highlighted during the round table was the necessity for finance to be readily available, accessible, and affordable to support a just transition, as frequently suggested by Dr Sultan Al Jaber, COP28 President-Designate. Currently, private climate finance flows from North to South are still below $10 billion annually, indicating the need for significant increases across sectors (particularly in agriculture) and geographies (notably in the Middle East). Participants stressed the importance of leaders in this market to help drive economic security through green technology to facilitate the transition.
Finance Sector Perspectives and Actions
Within the finance sector, participants emphasised the importance of the just transition. Asset managers play a critical role through policy advocacy, engagement with businesses and capital allocation. Job security was highlighted, and the role of energy companies in facilitating the transition was discussed, emphasising the need for government involvement. Financial institutions can provide green home financing, contributing to the recovery of affected areas. Additionally, community consultation was deemed essential to address the tangible sense of injustice and ensure meaningful dialogue. The round table emphasised several actions for finance, including strategy, engagement, capital allocation, policy advocacy, and impact measurement and disclosure.
Energy Perspectives and Challenges
Energy security emerged as a crucial dimension of the just transition. The development of a hydrogen economy garnered attention, with discussions revolving around the demand for hydrogen exports in the Middle East and the challenges faced in Africa due to a lack of energy experience, as well as the need for off-take agreements. Participants emphasised the need for scaling up investments, highlighting the chicken and egg problem: without scale, costs remain high, impeding investment, and further hindering scale.
The Role of Governments and Measurement
The role of governments in the just transition was a topic of significant interest. Governments can play a crucial role through proactive industrial policy, regulation, and potentially by acting as first-loss capital. The challenge of measuring social impact was acknowledged, and the need for finding effective language to communicate impact to clients was emphasised. The development of a toolkit to bridge gaps in language and metrics between finance and civil society was proposed, facilitating a comprehensive understanding of the social and environmental aspects of the transition.
Additionally, leadership from entities such as the European Union (EU) and the United States was highlighted, citing initiatives like the EU Green Deal and the Inflation Reduction Act. The latter was described as an economically driven program focused on green technologies.
Ensuring a Just Transition
The round table emphasised the importance of anticipatory measures to address and assess social risks and opportunities and to manage the impact of the transition on various stakeholders. Meaningful dialogue and participation from all affected stakeholders, including workers, suppliers, consumers, and communities, were identified as crucial factors. Additionally, the significance of incorporating the just transition into finance sector climate plans, investor stewardship with businesses, and capital allocation toward just transition assets was underlined.
The Just Transition Round Table shed light on the critical aspects of achieving a sustainable and equitable future. It emphasised the need for accessible and affordable finance, the role of energy perspectives, the actions required from the finance sector, and the crucial involvement of governments. By implementing meaningful strategies, engaging stakeholders, and allocating capital effectively, financial institutions can pave the way for a just transition that prioritises decent work, addresses climate change, and fosters a better future for all.