The Just Transition Finance Lab and The Grantham Research Institute on Climate Change and the Environment released ‘Sustainable finance for a just transition in India: the role of investors’ (July 2024) which delves into the role of investors in financing a just transition in India. It is also of relevance for companies seeking to implement a just transition in India - and beyond.
Human Level’s Take: There is growing momentum behind the just transition in India. Without it, we face a risk of stranded people - as people in high-carbon sectors are not brought along in the transition. Interesting examples in India include the Jharkhand Just Transition Task Force (JTTF) as well as the Swachh Aakash Campaign launched by the Self-Employed Women’s Association (SEWA). How can we further grow this momentum? A recent report by the Just Transition Finance Lab and The Grantham Research Institute on Climate Change and the Environment delves into what investors can do - with a number of implications for companies too. In particular, the report delves into the opportunity of reporting frameworks for a just transition, even if the reporting frameworks themselves don’t reference a just transition. In this case, the Indian Business Responsibility and Sustainability Reporting - although the same holds true for a range of other reporting frameworks beyond India as well. The report also delves into the opportunity for embedding just transition into climate transition plans. There is a role for companies and their investors - as well as for a range of other stakeholders: “To be fully effective, [just transition] must be part of a system-wide approach that involves public policy, public and development finance and other stakeholders.”
Key points from the report:
- A just transition in India: The report delves into the opportunities and challenges from greening India’s economy. It highlights the need to understand and act upon the potentially profound socioeconomic consequences of the transition in India. There is “a risk of stranded assets and people in high-carbon sectors such as coal, and of a narrow greening of the economy that does not take people into account.” Therefore, financing the just transition will be key. The report highlights that the just transition “is becoming increasingly embedded in India’s climate policy framework and initial action to make it come alive is underway at the state level, among companies and within civil society.” Therefore, there is a need to focus on the money: current domestic fiscal and capital resources are insufficient to deliver the scale of investment required for a just transition in India. India will need approximately US$200 billion every year in investments up to 2030 (compared to US$31.4 billion the country is currently receiving for clean tech investments). And in addition to an increase in the scale of financing, there is a need to shift from an environmental approach to financing, to a just transition approach, that seeks to capture human rights - including of workers and communities - and enables their participation in the transition process. The report provides three levers that investors can use to advance a just transition in India related to company reporting, integrating just transition into transition plans and transition finance, and harnessing India’s green, social, sustainable and sustainability linked (GSS+) bond market.
- Reporting on just transition: The report recommends that investors encourage companies “to use the Indian Business Responsibility and Sustainability Reporting (BRSR) disclosure regime as a homegrown framework for reporting on just transition.” Even though the BRSR does not explicitly reference the just transition, it does request reporting on a number of social issues - a number of which are relevant for just transition. The report specifically references the following: “ integrity, supply chain, employees, stakeholders, human rights, communities and consumers.” These provisions “provide a domestically produced framework for companies to show they are connecting the environmental and social dimensions of the transition.”
- Integrating just transition into transition plans (and transition finance): The report delves into how India’s companies and financial institutions are adopting net zero targets, and the need to bring just transition into this process. This includes considering three elements: (1) describing how companies will make net zero delivery part of their core business model and governance, (2) how people will be put at the centre (including through stakeholder engagement), and (3) how capital and operating expenditure (CapEX and OpEX) will be allocated to make the just transition to net zero a reality. (The third lever that the report discusses relates to investors investing in India’s green, social, sustainable and sustainability linked (GSS+) bond market. The report discusses the opportunity to develop frameworks for issuance that connect the climate aspects of GSS+ bonds with the implications for workers, communities and consumers to generate positive impact as well as value creation.)
