Adrian JohnsonTLDR:
- The London School of Economics (LSE) has launched the world’s first Just Transition Finance Hub to embed social considerations into financing decisions for the energy transition and net-zero goals.
- The Hub will advocate for incorporating just transition principles into green, social, sustainable, and sustainability-linked bonds to address social inequalities and maximize social co-benefits.
In the effort to address social inequalities and maximize social co-benefits in the global economic system amidst the net-zero transition, the London School of Economics (LSE) has launched the world’s first financial research and advocacy hub called the Just Transition Finance Hub. Based at LSE, the hub aims to ensure that social considerations are included in decisions made by financial institutions as they finance the energy transition and wider shift to net-zero. The teams at the hub will design financial instruments, metrics, and strategies that can be used by financiers in both the public and private sectors.
The Hub recognizes that more than 90% of global GDP is now covered by net-zero targets set by national and regional governments, and policymakers are increasingly working with financial institutions to drive decarbonization. The Hub advocates for these collaborations to also address social inequalities and ensure a just transition. There is a need to embed just transition principles into all bonds labeled as green, social, sustainable, and sustainability-linked to ensure that the transition does not exacerbate existing inequalities and to enable greater climate ambition.
It is emphasized that incremental changes to the financial system will not be enough to achieve global climate and nature goals in a just manner. The Hub urges financiers to integrate just transition requirements and allocate capital in new ways. Policymakers are encouraged to shift towards new processes voluntarily and consider mandates to support these changes on a larger scale. The team at the Hub floats the idea of embedding just transition principles into bonds as a way to ensure that the growth in green investments does not lead to setbacks in social sustainability.
Last week, S&P released new forecasting predicting that GSS+ bond issuances in 2024 could exceed $1 trillion, highlighting a growing market interest in supporting a just transition through these bonds. The Hub aims to work towards ensuring that financial decisions for climate action consider social opportunities, risks, and dialogues needed for success, to prevent negative consequences for workers, communities, enterprises, and consumers, and to advance social advancement in terms of jobs, gender equality, and community renewal.
