Investing in a socially responsible net zero represents a “multi-trillion, multi-decade investment opportunity”, according to group of multi-stakeholders.
As India begins to make progress in line with its commitment to being net zero by 2070, private investors must look to support social dimensions of the climate transition by helping to unlock new jobs in sustainable industries to avoid stranded workers and communities.
This is according to ‘Just Finance India: Mobilising investment for a just transition to net zero in India’, published by the London School of Economics Grantham Research Institute on Climate Change and the Environment (LSE GRI), India-based consultancy firm Environment Management Centre (EMC), and British International Investment (BII), the development finance arm of the UK’s Finance, Commonwealth and Development Office (FCDO).
India’s solar and wind energy sectors alone employed 164,000 workers in the 2022 fiscal year, the report noted, which represents a 47% increase on the previous year. It’s expected these sectors could be employing one million workers by 2030, it added, noting that the Indian government also established the Skills Council for Green Jobs, which has so far trained 500,000 workers across green business.
Following feedback from policy, finance, investment and non-governmental organisation stakeholders, the report outlined ten recommendations for action mobilising private investment for a just transition in India and upscaling green job opportunities. These include incorporating just transition principles into sustainable finance policy, encouraging just transition financial innovation and undertaking pilots for place-based investment in coal-dependent regions, and calling on multilateral development banks (MDBs) and development finance institutes (DFIs) to “crowd in private capital for the just transition”.
Steps to a just transition
Speaking at a webinar this week launching the report, Nick Robins, LSE GRI Professor in Practice on Sustainable Finance, added that it is “imperative” private investors prioritise five steps: incorporate just transition into their transition plans, engage with companies on just transition, allocate capital specifically to activities promoting a just transition, engage with policymakers on social dimensions, and report on their impact across social themes.
The just transition is “a very multifaceted issue”, said Amal Lee Amin, Managing Director of Climate, Diversity and Advisory at BII.
“There’s always going to be a role for governments, whether that’s central, state or municipal, but there are also going to be many private sector opportunities that can be unlocked through a specific focus on the just transition,” she said.
To reach net zero by 2070, India’s Council on Energy, Environment and Water (CEEW) has estimated that US$10 trillion in investment is needed between 2020-2070.
Amin noted that just transition forms one of the core pillars of BII’s approach to aligning its investments with the Paris Agreement, alongside a commitment to be net zero by 2050 and “to invest more for climate adaptation and resilience”.
“We see the just transition agenda as central to both those pillars,” she said.
The report added that, in order to make “substantive progress”, investors efforts to finance the just transition in India should be “sector-specific”, such as tailoring investments to address the social challenges of phasing down coal and phasing-up renewables.
“A place-based approach will be essential, adjusting financial responses to the needs of different districts and states across India,” the report said.
Upping the ante
India’s government, central bank and regulators are installing a host of sustainability-focused rules to encourage a nationwide transition to net zero.
At the beginning of this year, the Indian government earmarked US$4.3 billion to invest in low carbon solutions like hydrogen and renewables. The government also recently issued its first green sovereign bond, while the Reserve Bank of India announced its plans to issue new guidelines on stress testing, green deposits and climate disclosure.
Last month, the Securities and Exchange Board of India (SEBI) published a consultation outlining a proposed regulatory framework for ESG disclosures by listed entities, ESG ratings in the securities market, and ESG investing by mutual funds. This follows its previous decision to mandate the top 1,000 listed companies by market cap to report against the Business Responsibility and Sustainability Reporting framework.
India’s Group of 20 Presidency is also expected to advance structural reforms to global finance institutions.
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