The transition to a net-zero economy has been gaining momentum in recent years as the world grapples with the impacts of climate change. However, there is still a lack of consensus around what makes a net-zero transition just and how much it costs to achieve just transition objectives. This has led to concerns that the transition may exacerbate existing socioeconomic injustices or create new ones.
This paper, authored by Dr Ivana Popovic, Michael Wilkins and Alexandre C. Köberle, aims to contribute to the theory and practice of assessing and acting upon socioeconomic risks that may be triggered by a net-zero transition, particularly for financial institutions. To address these concerns, the paper proposes a framework for analysing the socioeconomic risks associated with a net-zero transition. The framework takes into account various factors such as energy security and employment, analysed through four dimensions: territories, participants, sectors, and the environment. By using this framework, financial institutions can gain a better understanding of the potential socioeconomic risks and the investments needed to prevent them. The paper also offers practical recommendations to financial institutions for analysing and managing those risks. Finally, it highlights the importance of considering both – the costs and benefits associated with a just transition. Despite the growing interest in a just transition, there is still no clear definition of what it entails, and it is unclear how much it will cost to ensure a just transition. By considering the social implications of a just transition and taking into account the costs and benefits of such a transition, financial institutions can play a critical role in supporting a low-carbon future while also mitigating the socioeconomic risks that may arise along the way.
