A new finance initiative is calling for a transformation of the $500tr global financial system to achieve climate goals through a just transition.

The Just Transition Finance Lab at the London School of Economics and Political Science (LSE) has also released a new report.

The Lab’s goal is to become a centre for experimentation and excellence in the financial solutions needed for a just transition. It will focus on designing financial instruments and strategies that bring the just transition to life and will also develop metrics to show ‘what good looks like’.

The new Lab is being launched at a time of rising concern in many countries about the fairness of climate action. The just transition is designed as the strategy to make the shift to a net-zero and resilient economy inclusive for workers, communities and other key stakeholders.

The Just Transition: Transforming the Financial System to Deliver Action report sets out why it is time to move from conceptual acceptance of a just transition to system transformation. It argues that the “financial world needs to price in just transition requirements and allocate capital to achieve this across the nearly US$500tr in assets in the global financial system.”

Professor Nick Robins, an author of the report, said: “The vast majority of financing decisions for climate action do not explicitly consider the social opportunities, social risks or social dialogue needed to ensure success. If this is not remedied, the world could miss out on the huge potential for social advancement in terms of more and better jobs, gender equality, community renewal and universal access to key goods and services (such as energy). A failure to achieve the just transition could also result in negative consequences for some workers, communities, enterprises and consumers, undermining trust and setting back progress.”

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