Clifford Chance

With climate transition plans increasingly becoming required by investors, there is an opportunity for investors to engage with their investee companies on how the just transition is being considered and managed. Amundi Asset Management and Clifford Chance LLP, both members of the Financing the Just Transition Alliance with the Grantham Research Institute, have produced a guide with a questionnaire for investors on actively engaging with their investee companies on the Just Transition. This is an invitation to take, use and feedback on the Framework.

Summary

Many workers, communities, suppliers and consumers will be impacted by the climate transition – both the shift away from high-emitting industries and activities and the shift towards a low-carbon economy. A just transition requires putting people at the core of climate transition ambitions and ensuring that the benefits of the transition are widely shared, while also supporting those who stand to lose economically.

Investors have a significant role to play in delivering a transition through their capital allocation and investment activities, both by effective engagement with investee entities and engaging with policy development, including sector-focused initiatives. Additionally, regulations being introduced in the EU address “double materiality risk” – taking account both of transition risks impacting a company’s financial performance (outsidein impact) and transition risks arising from impacts from the investor’s activities on society and the environment (inside-out impact). These developments underscore the importance for investors of applying a just transition lens to the transition-related activities of their investee entities to minimize and mitigate any risks that may arise from the social impacts that those activities may produce.

In the absence of dedicated regulatory or market schemes addressing a just transition or how to engage with stakeholders on the just transition, we have created this framework to support investors – primarily asset managers and asset owners seeking to engage with investee entities that have made an initial commitment to climate transition. Other financial institutions, as well as corporates, should also find this guide useful in the development of their just transition plans or strategies.

The framework builds on existing guidance on supporting a just transition for financial institutions, including from the Grantham Research Institute, but seeks to adapt previous work to the needs of asset owners and asset managers who seek to assess and strengthen their investee entities’ management of transition-related social risks and opportunities.

This framework is designed to apply a just transition lens to engagement and stewardship activities, and to promote appropriate ongoing disclosures, internally and externally, concerning just transition strategies and their impacts. It facilitates engagement with investee entities on incorporating a just transition strategy into their climate plans, identifying and addressing actual and potential transition impacts on people (including their workforces, value chains, communities and consumers), engaging in dialogue with affected stakeholders, identifying opportunities and managing related risks. In turn, this engagement will support investors in meeting and assessing the alignment of their investment activities with their own just transition commitments.