Author: Maha Khan Phillips
CFA UK panellists explored the concept of a just transition and what it means for the investment industry
Day one of CFA UK’s virtual conference, Inclusion at the Heart of ESG, kicked off with a panel discussion on the importance of a just transition in the move towards a green economy, and its role in the future of sustainable investing.
The panel, moderated by Andrew Parry, former head of sustainable investing at Newton Investment Management and member of CFA UK’s Inclusion and Diversity Network, explored a wide range of issues, from the importance of placing inclusion at the heart of Environmental, Governance, and Social (ESG) approaches, to the role of investors in prioritising a just transition.
A just transition seeks to ensure that the benefits from the shift to a green, sustainable economy are shared with everyone, while also supporting those who have the most to lose economically - communities globally who are already often the most marginalised and disenfranchised. Social inclusion and the eradication of poverty are part of the goal of a just transition.
Panel members included Sylvia Solomon, ASIP, director of ESG and business development at Equitile Investments, Nick Robins, board member at Investor Watch, Maria Nazarova-Doyle, CFA, head of pension investments and responsible investment at Scottish Widows, and Victor Hymes, managing member of Legato Capital Management. Each highlighted different issues and concerns.
Robins emphasised the fact that achieving a just transition is all about placing inclusion at the heart of climate action. “For all of us, 2022 will be the year to put this commitment into practice,” he said. He talked about the fact that the concept of just transition has moved beyond something at the ‘margin of concern’ to something really central that investors need to pay attention to for three key reasons: it’s the right thing to do; the need to build up public trust and support for the climate transition; the fact that supporting a just transition is a smart decision for investors, because it builds the social and human capital in companies.
For her part, Solomon argued that the most resilient and successful companies are those where leadership considers the broader prosperity of all stakeholders, and emphasised the need for diversity within decision-making groups. “Governance doesn’t occur in a social vacuum. We find that boards that comprise of people from the same background and career profession tend to think in the same way and are more likely to find it difficult to see how the world is changing and respond appropriately. Likewise, diverse teams can help shift the change,” she said.
Later on, Nazarova-Doyle expressed concerns that the effects of climate change will fall disproportionately on the global south, risking the exacerbation of racial, gender, and all other inequalities, and creating stranded assets and stranded regions. “Women are much more likely to be displaced by the physical effects of climate change, but when it comes to decision making around the solutions to climate change, women are severely under-represented,” she pointed out, also highlighting that people of colour and indigenous people are also under presented in devising solutions, while being most affected.
Nazarova-Doyle also stressed the scope of the challenge for pension funds and fiduciaries, saying the concept of a just transition was less well understood, leaving fewer opportunities for collaboration for those pension funds which are already grappling with the issue.
For Hymes, a key issue to address was that achieving a just transition will mean different things in different regions of the globe. “This is not something you can export to a department. Your board will have to transform, your team will have to transform, and the way they look at things will have to transform,” he said.
He stressed that the challenge was significant for both investors and stakeholders. “Profit has been our orientation, and in a way that can blind us. We need to take a journey to a new structure of profit in the future that has inclusion at its foundation,” he said.