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COP28: Assessing the Global Stocktake

14 December 2023
Leon Kamhi reacts to final Global Stocktake text, which calls on all countries to transition away from fossil fuels in a just way

As COP28 concludes in the UAE, we are encouraged to see a historic deal agreeing to transition away from fossil fuels and help keep the world on a pathway to 1.5C. We are reassured by the agreement’s consideration of nature, and food systems in supporting global decarbonisation. At the same time, the agreement recognises the climate finance funding gap, particularly for adaptation efforts in developing countries, which risks an orderly transition. The statement crucially also refers to the need for a Just Transition.

The need for a just transition will not diminish with time, and we will want the consumer by our side on the long road ahead. This is very much a social issue, as much as it is a climate one.

Alongside governments and industry leaders, we as investors also have a responsibility to use our role as stewards of capital. We must engage with companies to protect the consumer and worker in the transition, ensuring they have access to affordable food and energy and their jobs safeguarded.

To ensure energy remains affordable, governments around the world need to consider whether subsidies to help consumers could be implemented longer term. ‘Inefficient’ fossil fuel subsidies are to be phased out and these could be replaced with a tax on energy companies for their emissions. Energy companies can also do more to educate their customers about efficient energy use.

Banks can play a part too. While lending for mortgages is commonplace, it is atypical for banks to finance heat pumps and solar panels. Expanding mortgage loans by a relatively small sum would make installing sustainable energy sources within homes feasible for a larger number of people, supporting customers in managing their energy bills and in their decarbonisation journey.

Another central element must be about creating better, more secure work. Given a significant volume of jobs will cease to exist due to the transition and rapid technological change, companies need to create retraining programmes rather than just hiring new people. By paying workers a living wage and providing them with sufficient hours, companies also have a greater chance of being rewarded with a happier, more productive work-force.

As climate change increasingly threatens the stability of the global food system, efforts to build resilience to physical climate threats will be a crucial pillar of a just transition. Parties at COP28 formally recognised the role of nature-based solutions and sustainable agriculture in building this resilience. These efforts also support the decarbonisation of agriculture and land use, one of the largest sources of emissions.

Through our stewardship work, we actively engage with companies across affected sectors, to bring about more sustainable practices that deliver longer-term financial performance for investors.

Our engagement approach on the just transition spans reskilling, local community impacts, and supporting customers through the energy transition. Effective just transition strategies can manage a company’s social licence to operate, while also levering opportunities to develop existing human capital and grow alongside transitioning customers.

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