The just transition: how two investors are tackling its social implications

As we enter the decade of delivery for the Sustainable Development Goals, accelerating a fair and just transition to a low-carbon economy is crucial. The financial industry has a role to play in moving this agenda forward – over 150 investors representing $10 trillion of AUM have already made this commitment. 

Aiming to turn that commitment into meaningful action, the PRI launched an international investor working group, co-chaired by Laetitia Tankwe, Adviser to the President of the Board of Trustees of Ircantec and Mario Tremblay, Vice-President of the Fonds de Solidarité FTQ, two of the most prominent voices advocating for an investor agenda for the just transition. It will explore what meaningful investor action looks like.

Below are examples of how the Solidarity Funds and Ircantec have begun to tackle the just transition agenda, building on their institutional expertise to address the social challenges implicated in a low-carbon transition.

Fonds de solidarité FTQ

In 2018, the Fonds de Solidarité FTQ (Solidarity Funds), a labour-affiliated development capital fund founded in 1983, announced a plan for integrating the just transition into its investment and community engagement strategies.

The Solidarity Funds built its just transition strategy based on its role as a developmental investor, and close connection to the Quebecois workforce and small business community. Founded by the FTQ, Quebec’s largest labour federation, in the wake of an early 1980s recession, the Fonds’ mission is to convert the tax-advantaged savings of Quebec’s workers into investments that support economic development and quality job creation in SMEs across the province. With C$15.6 billion in AUM, it is also one of the province’s most important sources of debt capital for SMEs.

The just transition strategy emerged from discussions dating to 2015, when the FTQ began systematically exploring the implications of climate change for Quebec’s workers and communities. The Fonds has translated that call into a specific plan for integrating the just transition into its investment strategy.

Addressing the just transition

The goal of the Just Energy Transition Plan was to bring decarbonisation and resilience strategies into existing labour and community investment practices. It includes four action areas:

• the measurement and reduction of the carbon footprint of its securities and publicly traded investments, as well as its development investment portfolio in Quebec’s SME sector;
• a pledge to support Quebecois companies in the transition to a zero-carbon economy, centring on decent jobs in the process;
• a portfolio reorientation to increase investment into clean energy, energy efficiency, and new technologies and industrial processes that reduce carbon emissions;
• the assumption of a leadership role in the province, promoting a just energy transition through engagement with key stakeholders.

To manage this strategy, the Solidarity Funds has created a Sustainable Development Committee and includes a Transition Support Group focused on the energy, human and technological components involved in SME business development. Practical steps include divestment from coal and hydrocarbon extraction, a decarbonisation process tied to ESG integration in its public equities index investments, and direct engagement with SME investees on decarbonisation and energy efficiency.

Finally, the Solidarity Funds has conducted extensive multi-stakeholder outreach in Quebec to assess the challenges facing workers and communities as they take on the transition. This has included, for instance, co-sponsoring a meeting of public sector, labour, business, and community groups in 2018 alongside the FTQ.

In 2019, the Solidarity Funds took advantage of its close ties to worker beneficiaries to convene meetings on the just transition in its 16 regional offices, gathering input on the issues that workers themselves raised to better refine its strategy going forward, and to ensure that beneficiaries are aware of and support significant strategic commitments.

Ircantec

Integrating the just transition into the fund’s policies

Ircantec began addressing the just transition by aligning its formal investment policies with a broad institutional commitment to the agenda. Since late 2017, the fund has set the social implications of the ecological and energy transition as one of its three top priority areas in line with the Paris Agreement. In June 2019, the Ircantec SRI charter was revised to integrate the just transition^[1].

Investments

The just transition is now part of the Request for Proposals process for asset managers and the mandates they undertake. It sends a strong signal externally but also internally, as the inclusion of the just transition into the charter means it is now an agenda item for the fund’s board of trustees.

To foster sustainable real estate, Ircantec’s investment policy prioritises buildings that reflect specific social priorities (e.g. intermediate housing, accommodation for elderly dependent people) while achieving environmental goals on carbon emissions and resource consumption and on environmental issues such as natural resource consumption.

Ircantec also works to integrate sustainable development into existing assets, linking environmental quality improvements with a better quality of life for tenants. The fund has also unlocked resources to help retired people resettle after natural disasters, a contribution to resilience in the face of climate shocks.

Shareholder and institutional engagement

The scheme initiated a dialogue with investee companies and presented its shareholder engagement policy on the just transition by leading a roundtable during PRI in Person in San Francisco in 2018. On the global front, Ircantec – as part of the Climate Action 100+ steering committee – has been pushing for the inclusion of just transition-related indicators into the companies’ benchmarks and has started to engage on questions relating to the just transition in its dialogues with investee companies in energy-intensive sectors.

Conscious that this global challenge will require attention to local context, Ircantec has been one of the partner institutions in a French working group on the just transition since May 2019. Through dialogue with a variety of stakeholders including companies and trade unions, this group has sought to define how the just transition translates in practice in France.

 

 

 

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