Lauren Muusse, Investor Engagement Lead at World Benchmarking Alliance, says investors must work together to drive an energy transition that prioritises people.
In the race to achieve net zero carbon emissions by 2050, many companies are jeopardising success by leaving workers and communities behind. The decarbonisation of our global economy is most likely to succeed in the short timeframe required if those most affected by the transition are brought on the journey.
A ‘just transition’ envisions resilient and thriving workers and communities, existing within the 1.5°C boundaries set out in the Paris Agreement. In practice, this includes initiatives like providing green skills training for those currently working in the fossil fuel industries or creating new sources of employment for communities based around oil and gas facilities.
A mass transition to renewable energy that is fair for employees and communities is not only the right thing to do, but also the best way of getting to where we need to go. For responsible investors, it’s how to ensure the long-term viability of their investments and safeguard against wider financial market instability.
A wake-up call for investors
With this in mind, 54 major investors are now calling for significant steps to be made to plan for a just transition in the oil and gas sector. They are signatories of the recent Investor Statement on Just Transition from the World Benchmarking Alliance (WBA), which has been published as a result of WBA’s Just Transition Assessment which examines the performance of the world’s most influential high-emitting companies.
The assessment reveals a lack of action from these powerful companies when it comes to identifying, preparing, and mitigating the social impacts of their low-carbon strategies. As a result, they are not only potentially putting millions of workers employed in these industries at risk of unemployment – but also hampering their own ability to reach net zero in time.
This should be a wake-up call for investors and businesses alike. If the rights of workers in oil and gas industries – or in all other sectors dependant on fossil fuels – aren’t respected, then we risk destabilising the urgent transition to renewable energy necessary for meeting global climate goals.
For the transition to be just, companies must anticipate how decarbonisation will affect their employees and the communities in which they operate – and plan accordingly. This will require engaging in dialogue with local authorities, workers, trade unions and other stakeholders.
From an investor perspective, this means applying pressure on businesses to build worker and community rights into their green transition plans. The evidence shows that it’s not just oil and gas companies who are neglecting worker rights, as our recent Transport Benchmark attests. It revealed an alarming and systemic lack of corporate preparation and action in the transport sector when it comes to mitigating the human and social impacts of the shift to renewable energy.
We assessed 90 transport companies, consisting of 25 airlines, nine rail companies, six road companies, 17 shipping businesses and 33 multimodal companies. Those we analysed include American Airlines, Japan Airlines, Ryanair, Qatar Airways, Maersk, Royal Mail and FedEx. Worryingly, all companies scored zero when it comes to planning for a just transition.
As things stand, a significant percentage of livelihoods in the transport sector are tied to fossil fuels – including millions of delivery drivers, aviation engineers and factory workers making petrol and diesel vehicles. When it comes to decarbonisation, they must be considered. Otherwise, transport businesses are creating a situation in which their workers could hold up the urgent progress required.
People and planet
Investors must pull together to address this dangerous lack of planning. They must make use of the significant influence that they have to drive companies to prepare for a just transition. This includes measures being put in place to engage in dialogue with local authorities, workers, unions and other stakeholders, with particular attention to vulnerable groups. The various collective investor initiatives working towards this are all welcome and critical. The WBA Investor Statement for a Just Transition was done in coordination with Climate Action100. One way of supporting the growing movement amongst investors calling for change is to join the WBA’s Collective Impact Coalition on the Just Transition, which provides a means of collaborating with peers and other stakeholders to drive positive impact.
Sustainability is about both people and the planet. The two are fundamentally intertwined and a siloed approach on the topics no longer holds up. Investors should use their significant collective might to ensure that the substantial benefits of moving to a green economy are widely shared. If they don’t, the ultimate success of the energy transition hangs in the air. If we want to reach net zero in time, no-one should be left behind.