It was a really interesting debate and Q&A. The Chair was Professor Nick Robbins (LSE) and other speakers, Alan Brown MP (Shadow SNP Spokesperson Energy & Climate Change) and Rachel McEwen (Just Transition Commission Scotland & Chief Sustainability Office SSE). It was a shame that Richard Lochhead MSP (Minister of Just Transition, Employment and Fair Work) was unable to join due to technical problems.
This is my introductory contribution :-"Thank you, Nick.
I am a Councillor in East London and vice-chair of the Local Authority Pension Fund Forum (LAPFF), which is a membership organisation representing over 80 public sector pension funds and investment pools.
Together our members have over £300 billion of assets under management and have holdings in many of the largest companies within the UK but also globally.
The work of LAPFF is focused on engaging these companies on responsible investment issues, including around climate and social issues
We do so not only because it is the right thing and I say this also as an active trade unionist who pension is in the LGPS, but also because as long term investors the environmental impact of companies and how they treat their workers matters for long term value of those companies and ultimately protecting the pensions of beneficiaries.
The theme of today’s fringe combines both these areas; how best to manage climatic and social risks and I am going to focus my time on the role that investors can play in supporting a just transition to net zero.
As we head towards COP26, the climatic risks we face as a society are well known. And reaching net zero is increasingly viewed as a priority for governments across the globe.
The urgency of the need for immediate climate action for all societal actors has been reinforced by the Intergovernmental Panel on Climate Change’s latest report which has been called a ‘Code Red’ for humanity by the UN Secretary General.
This report shows that many changes are becoming irreversible and that there is no room for delay or excuses to avert climate catastrophe.
Climate change also has significant implications for long term investors such as pension funds. This includes stranded assets such as oil that cannot be extracted because of regulation or taxes and companies more generally failing to move to low or zero carbon business models
Moving to a zero carbon business model is far from straightforward and has social implications – many of these are very positive such as creating new green jobs and improving the air quality in our towns and cities.
But there are also risks of moving away from carbon intensive industries.
We have seen in the past the impact of deindustrialisation and pit closures on unemployment and local communities. I myself was brought up in NE Wales in the 1980s & experienced first-hand the closure of steel works & mills which resulted in massive social deprivation & up 33% male unemployment rates.
If we repeat the mistakes of the past and ignore the social implications of the transition, we risk creating opposition to the urgent and effective climate action that needs to be taken. We should never forget the “yellow jacket” protests in France which forced the government to reverse moderate rises in fuel duty & that it was Kentucky coal miners who helped elected Donald Trump
So as investors we have a role in supporting not only the transition to net zero but also one that is just.
As investors we can do so by first recognising the challenge and including the issue in policy statements to help guide investment decisions.
Investors can seek to understand the risks, including by engaging employee and community groups to get their views on the threats and opportunities.
Investors can also set expectations of companies and engage with company directors on these. LAPFF, for example, has been engaging a range of companies to ensure they have just transition plans. And the scale of the challenge means it is not just about oil and gas companies, but also utilities, carmakers, mining and manufacturing to name a few sectors.
However, investors can’t do it alone and we require support from governments
That is why LAPFF are supporting an inquiry into a just transition run by the All Party Parliamentary Group for local authority pension funds, which will be publishing its findings next month.
I think it is fair to say that much of what the APPG has heard suggests Scotland is leading the way, not least with the Scottish Just Transition Commission, something that the Forum thinks should be replicated at a UK level.
Over the past nine months the APPG has heard from different investors about the need for clear commitment from the UK government regarding a just transition and policy certainty. As long-term investors, without certainty it is hard to make investments in the transition or understand the social implications.
There are also areas where regulation could help, including ensuring companies disclose information on their workforce and that company TCFD (Task force for Climate-related Financial Disclosures) climate reporting includes the social implications of the transition.
And when it comes to financing projects to deliver the just transition, government funding in Scotland and across the UK will be needed to crowd in private finance.
This final example shows the importance of partnership working. While the roles of investors and government in ensuring a just transition are distinct, they are complementary.
Partnership working or social partnership, lies at the heart of what a just transition means, with all stakeholders involved in the process of making plans.
And to finish, the scale of the climate crisis and potential social implications of action required to address it, demands that investors, governments, companies, trade unions and society work together to ensure that the worst effects of climate breakdown are avoided.