Emerging Insight: From a climate transition to a just transition

As the global community intensifies its efforts towards climate action, it is encouraging to witness the growing focus on the comprehensive management of climate transition and its social implications—factors that were initially overshadowed by the immediate and urgent need to reduce emissions. 

Imagine a coal miner who left school to work, now facing job loss with few options for transition in a community that depends on that industry. Consider a taxi driver, reliant on an aging vehicle being phased out for cleaner alternatives, unable to afford an upgrade and at risk of losing both business and livelihood. Or think of reforestation projects for carbon offsets, where workers may be on precarious contracts despite their essential contribution to climate cause, or where land grabs may disrupt vulnerable communities. These are just a few examples. While urgent climate action is essential, abrupt changes can leave workers, business owners, and entire communities exposed.

© ILO/OIT Victoria García-Madrid

When the coal mine shut down, it was a total disaster. There was no work. Young people started to leave, the villages became desolate, businesses closed.

Cristina Carro, a quarry truck driver from Castile and León, Spain

A just transition maximizes positive economic, social and decent work gains and minimises and mitigates negative impacts. It ensures that both the processes and outcomes of the transition are inclusive and fair. Promoting a just transition to a low-carbon economy is essential to sustain the momentum of climate action, but also to reduce the physical and financial risks of climate change. 

With the financial, human, and technological resources to influence and support both individuals and companies through this transformation, financial sector actors can play a pivotal role in making a just transition possible.

Here are key steps for implementing a just transition strategy:

• Understand the local transition dynamics, social impacts, risks, and opportunities affecting sectors, clients, investees, and stakeholders along with the social impacts generated by the organizations’ portfolio and its climate transition strategy.    
• Leverage stakeholders’ knowledge to develop a holistic strategy that incorporates social aspects of the climate transition and puts people at its heart.   
• Tailor the product offering to address local challenges, priorities and just transition financing needs, while customising green finance and risk management solutions to meet the specific needs of affected and vulnerable groups. 
• Incorporate relevant social considerations in investment decision making and risk management processes to minimize potential negative social consequences, avoid higher-risk investments and identify resilient investment opportunities.   
• Leverage stewardship and engagement activities to encourage clients, investees, and partners to develop ‘just’ corporate transition strategies, adopt socially and environmentally sustainable practices and conduct meaningful stakeholder consultations.  
• Engage in strategic partnerships with like-minded financial institutions and organizations, leveraging collective resources, expertise, and comparative advantages. 

The ILO collaborates with pioneering financial institutions, industry networks and academia to accompany the sector in developing and implementing just transition aligned approaches. To find out more about how banks, investors and insurance companies can put a just transition strategy into action and learn from the pioneers:  

• Just Transition Finance - Tool for banking and investing activities 
• Just Transition Finance - Pathways for banking and insurance
• Enhancing the social dimension in transition finance: Towards a just transition