Border to Coast Pensions Partnership, Royal London Asset Management, and Friends Provident Foundation today called on the banking sector to play an active part in ensuring a just transition.
The investor collaboration launched the report ‘Investor expectations on just transition for the banking sector’ as part of their ongoing engagement with four banks – Lloyds, Barclays, NatWest, and HSBC.
The report, which lays out the trio’s expectations of the banking sector, asks that banks either introduce a standalone just transition plan or explicitly incorporate the just transition into existing climate plans.
“The integration of just transition enables investors and businesses to address systemic threats to long-term stability and value creation and supports the delivery of a rapid and resilient transition to net zero,” said Colin Baines, stewardship manager at Border to Coast, the largest LGPS pool in the UK, which is responsible for £47.9bn (€56.3bn) of investments.
Banks’ key role
This call to action comes amid growing recognition that rapid climate action is required to prevent the worst human and economic costs of climate change, with the just transition aiming to ensure that decarbonisation is both fast and fair.
Banks have a key role to play in the green transition, both via capital allocation and support for customers to transition, being well placed to consider place-based investment at a regional level.
“Given this, we believe a compelling reason exists for investors to help banks increase their awareness of and approach to a just transition, for the benefit of our holdings and society,” the investor trio stated.
“We believe banks that integrate just transition into their net zero strategies will be in a better position to manage the transition and benefit from lending, investment and reputational opportunities presented,” they added in the report.
Expectations
According to the three investors, it is now necessary for the banking sector to integrate a just transition across products, services, and operations.
“Banks are at the heart of the economy and have a critical opportunity to contribute to a just transition, both via capital allocation and support for customers to transition,” said Charlie Crossley, investment engagement manager at Friends Provident Foundation.
Given the expectation that many banks will follow the Transition Pathway Taskforce’s (TPT’s) guidance for their transition plans, the collaborating investors used the TPT Disclosure Framework to break down just transition integration in a way that is consistent with the TPT Bank Sector Guidance.
Carlota Garcia-Manas, head of climate transition and ESG engagement at Royal London AM, said: “Just transition as a requirement of the 2015 Paris Agreement has become a key objective of various governments and investor climate initiatives and is emerging as a benchmark for net zero transition plans. Our investor expectations are aligned with these initiatives and will assist leading banks to establish best practice.”
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