Sustainable Finance News from the Grantham Research Institute, LSE

Jay Owen SRI/ESG News, Beyond GDP, Transforming Finance

December 2018

This month’s update features a call for investors to join the growing community practising responsible investment to achieve a ‘just transition’. We also feature our new Just Transition investor guide, an assessment of climate action by high-carbon corporations and a report on sustainable growth in the UK. Finally, if you’re attending the final week of the UN Climate Conference check out some of the events we’ll be running or speaking at.

Why financing a just transition is the next frontier in responsible investing

Fiona Reynolds, CEO, Principles for Responsible Investment and Sharan Burrow, General Secretary, International Trade Union Confederation

Investors and workers around the world face an existential challenge: how to make the transition quickly and equitably to a resilient zero-carbon economy. Fiona Reynolds and Sharan Burrow call on investors to join the growing community practising responsible investment to achieve a ‘just transition’. This post is part of the Sustainable Finance Leadership Series.

At first sight, the worlds of investment and of work can appear to be very distant from one another. Financial markets remain driven by short-term factors, where workers are often regarded simply as a cost of production to be minimised.

A growing number of institutional investors, however, see this as a parody of what is needed to successfully deliver long-term returns. Indeed, more and more of the world’s leading funds recognise that it is from the careful management of human capital in the workplace that businesses can generate the profits needed to pay pensions and grow the world’s savings. Research has shown that investments in training and development, health and safety, employee engagement, diversity and inclusion, and workforce composition and staffing are associated with increased workforce productivity, reduced staff turnover and higher customer satisfaction.

Beyond the financial materiality of social factors, investors also have responsibilities to ensure that international labour standards and human rights principles are respected in the assets they manage. More than this, workers are also savers, with their pensions representing deferred wages designed to provide financial security in their retirement. This gives workers a direct interest in the management of their assets in the financial system and was the reason for the foundation of the Committee on Workers Capital in 1999. These realities underpin the strong social case for responsible investment, with more than 2,200 investors with over US$80 trillion in assets now signed up to the UN-supported Principles for Responsible Investment. Signatories not only commit to integrating environmental, social and governance (ESG) factors into their decision-making: they also commit to assessing and disclosing their progress.

Read moreNew investor guide
Climate change and the just transition: a guide for investor action

A ‘just transition’ for workers and communities as the world’s economy responds to climate change was included within the Paris Agreement. This guide sets out how investors can address the social dimension of climate change and pursue the goal of a just transition as part of their core operating practices.

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An assessment of climate action by high-carbon global corporations

This journal paper (available as an open access article) provides a synthesis of the state of climate action by high-carbon global corporations based on analysis of data from the Transition Pathway Initiative.

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New policy publication
Capitalising on technological change and the low-carbon transition in the UK

 

Upon publication of a new special report for the LSE Growth Commission, the authors outline why it is sensible for environmental sustainability to be at the heart of the UK’s growth strategy and how this can be achieved.

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Grantham Research Institute at COP24

Representatives from the Institute will be involved in a number of events taking place during the final week of the UN Climate Change Conference in Katowice this week. Visit our COP24 page for further details.

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