14 Jul 2020
Recommendations for ‘just transition’ to net-zero carbon emissions
The banking and finance industry welcomes a new report which sets out how the sector can work together to drive an environmentally sustainable economic recovery and deliver a just transition to net zero.
The report, Financing climate action with positive social impact: How banking can support a just transition in the UK, is produced by the Grantham Institute at the London School of Economics (LSE) in partnership with UK Finance, with funding from HSBC and LSEs’ KEI Fund.
Under the Paris Agreement on Climate Change a ‘just transition’ will see the interests of workers being upheld in the shift to a resilient, net zero economy by 2050. The report highlights that in practice this means that to successfully combat climate change it will be necessary to design a transition that is fair and seen to be fair, that can uphold living standards, and generate a range of benefits for business and society.
This latest research is published as part of The Banking on a Just Transition project, a pilot initiative based on a process of research and collaborative dialogue between stakeholders, including banks and other financial institutions, as well as policymakers, business, trade unions and civil society. The project has included place-based consultation workshops in Belfast, Birmingham, Bristol, Cardiff, Cornwall, Edinburgh and Leeds.
The banking and finance sector will be crucial to making the just transition a reality. The Grantham Institute’s report sets out recommendations for how the industry can build on existing initiatives and support this goal:
- Leadership: Board-level commitment to ensuring that the just transition is incorporated into institutional strategies and culture.
- Purpose: Ensure the just transition is central to the industry’s core purpose and business model, and that it is embedded in its strategic objectives.
- Strategy: Create a clear institutional action plan for how banks can operationalise the just transition.
- Customers: Serve customers by developing a core portfolio of financial products and services that help them achieve net zero in a socially inclusive manner.
- Place: Continue to work with key stakeholders in different parts of the country to respond to the diverse needs throughout the just transition.
- Policy: Engage actively with policymakers to encourage the right environment for the just transition and system-wide innovation.
- Partnership: Engage in dialogue with government, business, trade unions and civil society to integrate emerging needs and develop breakthrough partnerships.
- Accountability: Report on progress towards our just transition goals in each firm’s Strategic Report in the Annual Report and Accounts.
Responding to the report, Bob Wigley, Chair of UK Finance, said: “Achieving the UK’s net-zero carbon target by 2050 is a difficult but critical target that requires coordinated action across industries. This important report from the Grantham Institute sets out clear steps for how the banking and finance industry can play a central role in delivering this goal through a just transition and we commit to acting upon its recommendations.
“As the UK now focusses on the economic recovery from the Covid-19 pandemic, there is significant opportunity for these growth measures to be aligned not only to the net-zero target but also to be approached in a fair, just and inclusive way. At the same time, if we are to build back better then we need to do so in a way that benefits regions, cities and communities the length and breadth of the UK.
“Banking and finance firms already play an important part in supporting local networks comprising of corporates, SMEs, local authorities, universities and other sources of expertise. As part of this, we will continue to work with the Green Finance Institute, as well as other new or repositioned investment institutions, to help mobilise capital in a way that takes account of local community needs. We also call on the government to back the report’s recommendations for how it can support the just transition.”
Alison Rose, CEO, NatWest Group said: “Early this year we launched our strategy to be a purposeful bank. NatWest is committed to playing a leading role in addressing the climate challenge while helping people, families and business transition to a low carbon economy. With this in mind we support the LSE Grantham Financing Climate Action with Positive Social Impact report and commit to playing an active part in the Just Transition Alliance.”