Corporate cooperation for a just transition

What role will financial institutions and corporate entities play in ensuring Australia’s move to clean energy is ethically handled?

The transition to a low-carbon economy in Australia will have wide-reaching impacts and a clear plan for its management across all affected industries is crucial to its success.

How our financial institutions and corporate entities can prepare for and contribute to the process is the subject of a new report developed by ISF for National Australia Bank (NAB) and the UN’s Global Compact Network Australia (GCNA).

Just Transition: Implications for the Corporate Sector and Financial Institutions in Australia highlights where businesses and financial institutions will need to manage their interests and those of their customers and shareholders throughout the energy transition.

What is a just transition?

One of the objectives of the Paris Agreement, a just transition will minimise impacts on vulnerable workers and create decent work and quality jobs.

It also aims to increase access to opportunities and benefits resulting from the transition, and to protect vulnerable communities from bearing a disproportionate portion of the transition’s costs.

In a coal-producing country like Australia, the risk of disruption is high, with closures threatening to create a corps of ‘stranded workers’ and ‘stranded regions’ as well as ‘stranded assets’.

There is growing momentum for a just transition approach by financial institutions and businesses because there is a shared interest,’ ISF Research Principal Chris Briggs says. ‘Almost all Australian banks and insurers now have a commitment to exit thermal coal between 2030 and 2035.

Collaboration is key

According to the report, inclusive planning and collaboration between corporates, governments and communities will be key to a well-structured and coordinated transition.

‘There is growing momentum for a just transition approach by financial institutions and businesses because there is a shared interest,’ ISF Research Principal Chris Briggs says. ‘Almost all Australian banks and insurers now have a commitment to exit thermal coal between 2030 and 2035. But what happens, for example, if there is an uncoordinated transition with planning and investment to provide alternative industries? There could be a fire-sale of assets which is bad for the banks as well as regional communities.’

‘The success of a just transition will require private and public sector partnerships as well as co-ordination and collaboration across all levels of government,’ says NAB Group Executive – Corporate and Institutional Banking, David Gall. ‘This report is aimed at driving discussion and it’s important that we start acting now.’

Learning from others

While our energy transition is picking up momentum, Australia can look to overseas for guidance. Just Transition… examines transition case studies from Spain, Germany and Canada to come up with four main lessons:

1. Build a social compact: community engagement and framework agreements are a pre-condition for a just transition.
2. Plan early for closures: early notice, workforce planning and negotiation is essential to reduce the impacts of closures.
3. Diversify regional economies over time: build new industries and jobs for coal regions.
4. Establish specialist national or regional just transition authorities and fund(s) to invest and plan for a just transition.

The next steps

In its conclusion, the report outlines actions that financial institutions and corporations should take towards a just transition. Chief among them is figuring a just transition into all organisational decision-making and strategic planning, going forward.

Also important is engaging in dialogue about the transition with stakeholders at all levels, from industry colleagues to customers, to come to a shared understanding of how the transition will affect them and what they each need to ensure it plays out smoothly.

 

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