Property owners flag social risks on the road to a ‘just transition’ | Property owners | Daily News Byte

The ‘just transition’ proposal was a highlight of discussions at the recent COP27 climate change conference held last month in Egypt. Many key themes have shifted from the environmental pledges of the previous CoP of developed countries to focus on the financial world’s failure to provide enough money to help developing economies effectively reduce their carbon emissions.

“A just transition largely means considering the social and economic dynamics inherent in the global transition to a net-zero economy and society, less reliant on fossil fuels and carbon.” It also confirms that certain hard-to-cut sectors will take longer to make this transition than others,” said Rodney Golo, head of risk at insurance company Bupa Asia Limited. AsianInvestor.

“To date, most of the conversation around climate change and sustainability has largely focused on the environmental component, and that’s where all the momentum and regulatory attention and focus has been,” he said.

Rodney Golo,

Bupa Asia Limited

While Golo thinks a focus on the environment is very important, he argues that there needs to be a more considered approach in developing and less developed countries.

“It takes time to diversify and change a country’s energy mix, so it is not so easy for people and businesses in developing economies to immediately move away from the use of fossil fuels, especially when most of the growth and industrialization in the developed world is based on the use of these fuels.” resources for decades,” Golo said.

“The transition to a net zero economy is far more difficult for emerging markets as they tend to be more exposed to social risks, weaker governance and lower financial buffers than developed economies.”

LABOR RIGHTS

Gollo highlighted a promising development launched on November 15, Indonesia’s Just Energy Transition Partnership, a $20 billion financial package — backed by the United States, Japan and other world powers — designed to support the country’s efforts to phase out coal and removes barriers to investing in clean energy.

As the world’s largest exporter of thermal coal, Indonesia is highly exposed to climate transition risks due to the domestic economy’s reliance on exports and the jobs the industry creates for a large part of the country’s population, Golo said.

“Part of the transition funding is about building capacity and helping to retrain this large population of people, who mostly work in these industries and live in areas where there are large employers,” he said. “It’s not as simple as turning to countries like Indonesia and asking them to shut down these coal plants – without addressing the social and economic factors at the same time – otherwise what would these people do then?”

Luba Nikulina, chief strategy officer at IFM Investors, agrees that a large element of a just transition essentially boils down to the “labour rights” of workers as economies transition to low-carbon states.

Luba Nikulina,
IFM Investors

“It is clear that many sectors will be affected by the transition to net zero and people will lose their jobs in those sectors.” The ability to secure their rights and create alternative job opportunities is very important,” Nikulina said AsianInvestor.

Creating social security for workers in transition economies should also rightly be a concern of investors and private finance, she said.

“There is a systemic risk for long-term investors, like climate risks, if social risks are not managed, it fundamentally affects the whole system.” If the transition from the carbon economy is not ‘fair’ — if it is not managed, it can lead to social unrest, political disturbances, which means that the system is destabilized, and this will affect financial returns,” Nikulina said. .

“A just transition will mean you don’t have any decisions to close carbon-intensive businesses.” You have to think about systemic impacts. You seek to create alternative opportunities for people; they invest in their training and invest in companies that will provide employment,” she added.

FINANCE OF ADAPTATION

Claudia Wong, Asia Investment Associate at insurance advisory firm VTV, cited risk management, opportunity identification and collective action as necessary tools to facilitate a just transition to net zero greenhouse gas emissions – one of the main takeaways reinforced by COP27.

Claudia Wong,

VTV

At the conference, rich governments and nations agreed for the first time to establish a fund to pay out to developing countries that suffer “losses and damages” from climate storms, floods, droughts and fires.

“Establishing a loss and damage fund is long overdue because we know that certain amounts of loss and damage have already occurred, given the current 1.1°C global warming,” Wong said.

Wong said the proposed adaptation financing would help mitigate some of the losses and damages associated with climate change. But historically, adaptation finance has been short-lived and investors need to step up their game when it comes to providing finance in areas such as building more resilient housing and infrastructure or financing sustainable agritech, Wong said.

“It is still not enough, as losses and damages, both past and future, are disproportionately concentrated in developing countries.” “While this reinforces the need for a rapid transition, it must also be recognized that climate transition is more nuanced for the most vulnerable countries and cannot come at the cost of significant economic damage,” she said.

Investors in developed countries should have a moral imperative to provide more transition financing to developing countries, according to Wong.

“Such financing must be innovative, for example using blended financing through public-private partnerships, and take into account the unique socioeconomic circumstances of individual countries,” she said.