In the latest in our series, 'From the Front Lines', Matter spoke with Vicky Sins of the World Benchmarking Alliance about their Just Transition Benchmark, and its relevance for investors.
This is the latest in our series ‘From the Front Lines’, in which we explore expert perspectives from those at the cutting edge of understanding the intersection between companies, planet and society. We will hear from representatives of the sources we work with at Matter, who form the bedrock of how we operate. In this edition, Matter sat down to speak with Vicky Sins, Decarbonisation and Energy Transformation Lead at the World Benchmarking Alliance (WBA) to understand more about their Just Transition Benchmark, and its significance for investors.
A successful transition is a just transition
Across governments, civil society, the financial industry, big business and beyond, momentum has gathered behind the climate transition. From initiatives and goals including the Paris Agreement, the Science Based Target Initiative and the Net Zero Asset Manager and Net Zero Asset Owner Alliances, there is growing consensus behind the need to transition to a sustainable economic, and an ever-increasing understanding of the necessary steps to get there.
A transition which is sustainable for the long-term can only be achieved, however, by striking the right balance between economic, environmental and social components.
This is the view of the World Benchmarking Alliance (WBA), an organisation, launched in 2018, which aims to build a movement to measure and incentivise business impact towards a sustainable future that works for everyone. The WBA has created a series of benchmarks focussing on seven transformations that need to take place to put society and the global economy on a sustainable path to achieve the SDGs. The latest of these focusses on the Just Transition, assessing the world’s most influential companies in high-emitting sectors on what they are doing to respect the rights of workers, communities and the most vulnerable as they work towards low-carbon goals.
According to Vicky Sins, Decarbonisation and Energy Transformation Lead at World Benchmarking Alliance, “Decarbonisation of our global economy will only succeed if climate justice includes solution for workers and communities, also known as a ‘Just Transition’”. The Just Transition emphasises that you cannot separate the ‘E’ from the ‘S’, if a transition is to succeed long-term. The concept of a just transition has long been discussed by environmental and labour movements but has gained prominence in recent years due to its inclusion in the preamble to the 2015 Paris Accord. Additionally, at COP26, it's profile was raised further when 30 countries signed the Just Transition Declaration.
Sins elaborates, “A ‘just transition’ envisions resilient and thriving workers and communities carrying out green and decent jobs, while limiting the global temperature increase to 1.5°C above pre-industrial levels in line with the Paris Agreement. A successful transformation means rapidly phasing out fossil fuels from high-emitting sectors, while creating new industries, new skills and new jobs through investment”.
A just transition must be participatory and multi-stakeholder at its core
Achieving a just transition is not the responsibility of one single party. All actors in the ecosystem need to be onboard to make the transition a success. As Sins explains, “Governments, for example, need to establish an enabling policy environment, incentivise positive practices and support green infrastructure. Companies must play a crucial role as well: they must anticipate potential job changes and losses and support their workers in developing the skills needed to transition successfully into future jobs in green industries, contribute to social security systems that are fit for purpose in a dynamic environment, and support governments through lobbying and advocacy efforts.”
Similarly, the financial sector must help drive the Just Transition. As the gatekeepers of capital, Sins explains, companies themselves are being enabled by the financial ecosystem. In addition,“financial actors also facilitate action towards the just transition through targeted stewardship and engagement”.
"If we are to deliver on a resilient and sustainable future, there is a significant step up in ambition needed... Most stakeholders agree on transition pathways and the steps needed to decarbonise to meet Paris. Yet, making sure this is done in a way that leaves no one behind, is falling behind.”
Above all, however, a transition can only be truly just if it is participatory, as Sins argues, it is essential that “the people at the heart of the current carbon-intensive systems are identified and engaged as agents of change”. This requires meaningful negotiation between, at a minimum, employers and the workers, unions, or representatives, as well as the communities that are impacted.
A lack of data and accountability is holding the Just Transition back
As awareness grows around the just transition, private and financial sector accountability lag behind.
“Currently there is no public accountability mechanism for how the private sector is performing in this area.”, Sins explains. “If we are to deliver on a resilient and sustainable future, there is a significant step up in ambition needed. The ‘S’ in ESG is currently being spoken about as the lagging factor on which we need to make progress. Most stakeholders agree on transition pathways and the steps needed to decarbonise to meet Paris. Yet, making sure this is done in a way that leaves no one behind, is falling behind.”
This is where the WBA Just Transition benchmark comes in.
WBA intends to assess 450 companies by 2023 on their contribution to a just transition by assessing their alignment with the goals of the Paris Agreement alongside their approach to addressing their alignment with the goals of the Paris Agreement alongside their approach to addressing the social challenges of a low-carbon transition.
These 450 companies represent some of the largest emitters in the world. As Sins explains, “It is estimated that these 450 companies employ over 24 million people, and thus hold immense influence to power a just transition”. Currently, however, according to WBA findings published in 2021, these companies suffer from an “absence of a holistic approach to decarbonisation planning, where emissions reduction is considered hand in hand with respect for human and labour rights to ensure a just and equitable low carbon transition.”
On top of this, the WBA recently launched their fourth Climate and Energy Benchmark, which focusses on the ‘Transport’ sector. The benchmark measures and ranks the world’s most influential transport companies on their just and equitable low-carbon transition. The results show a “striking and systemic lack of action by companies to prepare for and mitigate the social impacts of decarbonising. Alarmingly, all companies score 0 on just transition planning, placing a workforce of around 10 million people at risk.”
Initiatives such as the WBA’s just transition and transport benchmarks are key to building understanding around company Just Transition performance, and what it tangibly means to hold companies accountable for achieving the just transition. The importance of this,according to Sins, cannot be overstressed. “An increased push towards transparent reporting on the impact of decarbonisation and transition plans of companies on workers and communities is needed to be able to hold companies and their stakeholders to account.”
Maximising data reach via collaboration with Matter
Within the financial industry there is growing interest in what it takes to invest in the just transition. In the UK, the Just Transition Finance Challenge, led by the Impact Investing Institute, has been backed by 18 financial institutions. Additionally, in France, Finance for Tomorrow last year launched ‘Investors for a Just Transition (IJT).
These initiatives, and the financial industry as whole, face a common problem in bridging the just transition data gap. The collaboration between Matter and WBA begins to bridge this. On Matter’s platform, with a click of a button investors can upload a portfolio and see portfolio and entity level Just Transition performance. This data comes directly from the subject matter experts at World Benchmarking Alliance.
Collaborations such as this, which democratise and broaden the use cases of data essential in achieving a just transition, Sins believes has the potential to achieve significant impact. “Working with Matter to unlock the relevance of our company-level just transition data for investors has the potential to inform company engagement and increase financing to support a just and equitable transition.”
Initiatives like WBA’s Just Transition Benchmark are essential in providing investors with the practical tools they need to translate interest and momentum into action, and to realise a truly just transition. At Matter, we are committed to continue working with WBA and other organisations working to advance our understanding of the intersections between companies, planet, and society.
WBA’s expertise is not limited to the Just Transition, with benchmarks ranging from human rights, to digital inclusion, gender and sustainable agricultural practices. We work closely with WBA to incorporate all of their benchmarks onto our platform, bringing their insights to the fingertips of investors and portfolio managers in an intuitive and actionable manner. Keep your eyes peeled for the addition of further WBA benchmarks to Matter’s platform.
Vicky Sins is responsible for leading the Climate and Energy Benchmark to support the decarbonisation of the economy and the Energy transition. She believes in private sector contribution and responsibility by demonstrating how companies in high carbon-emitting industries are contributing to the Paris Agreement and SDG 13, with the aim to enable the required transformation to a low carbon economy. If you would like to know more about the work of the World Benchmarking Alliance, you can visit their website here
If you would like to understand more about how Matter works with expert sources from the fields of civil society,academia, think tanks and beyond, you can read more here