Good things are happening in British business
Find out how some of our customers have evolved their businesses in innovative ways.
Read time: 5 mins | Added date: 09/10/2023
Lloyds Bank recently brought together experts from business and finance for a landmark conference to explore the principles, processes and practices of delivering a Just Transition to a net zero economy in the UK. Explore the discussion below.
Now that the direction and level of ambition of net zero has broadly been accepted – the “what” – attention is turning to the potential social and other impacts of climate change – the “how”. As such, Just Transition is an overarching concept of ensuring fairness and equity in the process of transitioning to a net zero economy, ensuring that no one is left behind and that the most vulnerable communities and workers are supported during the transition.
Without due attention, both the extreme weather associated with climate change and the financial burden will disproportionately be felt by the poorest in society. “We have to ensure the next transition is Just, so that all communities and stakeholders not only survive, but also thrive - not just because it’s the right thing to do but because it’s the transition approach which creates the “least friction” and so is the pathway most likely to achieve success” says Chinyelu Oranefo, Director, Sustainability & ESG Finance at Lloyds Bank.
Oranefo points out that, whilst previous energy transitions in the UK – such as the transition from coal to gas in the 1980s - resulted in the UK reducing its emissions by 50%, it also resulted in the disruption of communities, particularly in the north of England. She is certain that a better result can be achieved in the transition to a net zero economy across all regions where communities, workers and supply chains are not left behind. Corporates, she says, have a key role to play in facilitating a Just Transition.
In many cases, this simply starts with an assessment of the impact of a corporate’s net zero plans which leads to engagement with those stakeholders affected to ensure they can also take advantage of the opportunities that the net zero transition presents.
First flagged in the landmark Paris Agreement of 2015, June 2023 saw world leaders bring focus on the need for a Just Transition through a call for “ecological transitions that leave no one behind”, highlighting the potential “for alleviating poverty and supporting inclusive and sustainable development”. An open letter signed by Prime Minister Sunak, President Biden, President Macron, Chancellor Scholz, President of the European Commission von der Leyen and many others, stated that poverty reduction and protection of the planet are converging objectives and called for Just and inclusive transitions to be prioritised1
“Just Transition has gone from a single line in the Paris Agreement to a core focus,” says Nick Robins, Professor in Practice for Sustainable Finance at the London School of Economics’ Grantham Research Institute. “There’s a recognition that we need to deliver climate and social goals simultaneously.”
However, while the language around Just Transition may be new, the objectives are familiar. “The UN Sustainable Development Goals (SDGs) already commit the world to eliminating poverty and reducing inequality as well as achieving gender equality.” says Robins. “What the Just Transition does is provide the bridge between climate action and these social objectives. In essence, it is about overcoming the siloes in our mind that separate climate and social justice.”
According to Robins, a Just Transition to net zero in the UK requires seven elements working together:
The risks of climate change and potential social disruption are real enough but the key to spurring action is to view a Just Transition in terms of potential opportunities, says Robins. “It is a good news story and could mean more – potentially better – jobs, enable us to reduce inequality, improve health, curb conflicts, and avoid catastrophic climate damage.”
Sir Robin Budenberg, Chair of Lloyds Banking Group, says that such a focus is likely to strike a chord with companies. “Put simply, the transition to a green economy will create significant opportunities for business. A Just Transition is about distributing those socio-economic benefits more fairly than has been the case in the past. Large companies now almost universally operate with a purpose and can apply that to a Just Transition.”
Social dividends that could be created by the transition to a low-carbon economy include jobs such as renewable energy installation, energy efficiency retrofitting, sustainable agriculture, and other environmentally-friendly sectors. However, whilst some of the technologies associated with climate transition, such as electric vehicles, offshore wind, carbon capture and storage and hydrogen dominate the headlines, more prosaic projects will also be critical – and can deliver significant social benefits.
Closer to home is the need to retrofit the UK’s housing stock which is some of the worst in the EU - “…housing will be a key part of the Just Transition, for instance” says Budenberg. Housing Associations in the UK need over £100 billion to bring their buildings up to net zero standards; that will not only deliver the UK’s green transition but also reduce fuel poverty.2
A source of information and guidance on how Lloyds Banking Group can improve the energy efficiency of the UK’s housing stock and help to meet the Government’s urgent target of net zero by 2050.
As well as targeting groups such as social housing tenants, Budenberg says a Just Transition must target geographical regions facing the greatest challenges. “Some areas, such as the North East, may face greater disruption and have further to go to capitalise on green growth,” says Budenberg. “But they also have great opportunities due to their proximity to new net zero industries like offshore wind.”
To this end, Lloyds Bank is working with the government and industry leaders such as Octopus Energy, Shell and National Grid on the Local Low Carbon Accelerator, which will provide a blueprint for local authorities and the private sector to work together and deliver green infrastructure faster.
Inclusive and participatory discussions and negotiations involving stakeholders such as workers, communities, governments, businesses, and civil society organisations. Social dialogue aims to reach consensus on the path and policies of a Just Transition, ensuring that diverse perspectives and interests are considered.
Measures and policies that safeguard the well-being and livelihoods of workers and communities affected by the transition. This can include income support, retraining programs, healthcare, and other forms of support to mitigate potential hardships.
The idea that communities and individuals should have greater control over the generation, distribution, and use of energy. It promotes decentralised and participatory decision-making processes in the energy sector, ensuring that the benefits of the transition are shared widely.
The capacity of communities and systems to withstand and recover from shocks, such as economic disruptions caused by the transition. Resilience strategies aim to build adaptive capacities and ensure the long-term viability of communities during and after the transition.
This article, and quotes within, are based on discussions at the Lloyds Bank Just Transition Conference held on 15 June. The views expressed are those of the speakers and do not necessarily reflect the views of Lloyds Bank.
Experts from industry leaders such as ScottishPower and Impact Investing Institute cover why cooperation rather than competition will be critical to the Just Transition and how it pays to search more widely for talent.
More from our Just Transition series
Industry leaders explore how public and private finance can complement each other, and the potential for new sustainable financial products that help citizens and organisations make the switch to green technologies.
We look at why the Just Transition requires a vigorous debate among the widest possible range of stakeholders, and how businesses are going to have to update their mindset and develop new attitudes throughout their organisation.
Lloyds Bank is a trading name of Lloyds Bank plc, Bank of Scotland plc, Lloyds Bank Corporate Markets plc and Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH.
Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC327000. Lloyds Bank Corporate Markets plc. Registered office 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 10399850. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278, 169628 and 763256 respectively.
Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is a wholly-owned subsidiary of Lloyds Bank Corporate Markets plc. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH has its registered office at Thurn-und-Taxis Platz 6, 60313 Frankfurt, Germany. The company is registered with the Amtsgericht Frankfurt am Main, HRB 111650. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is supervised by the Bundesanstalt für Finanzdienstleistungsaufsicht.
Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Please note that due to FSCS and FOS eligibility criteria not all business customers will be covered.
While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Lloyds Bank for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.