Just Transition needs full involvement of organised labour and businesses

As SA decarbonised its economy in response to the growing global climate crisis, the need for a Just Transition — which balances environmental goals with socioeconomic realities — became increasingly apparent.

When it comes to encouraging enterprises and financing projects that will contribute to a sustainable economy, Old Mutual is leading the charge.

Old Mutual’s investment vehicles are funding the transition to greener energy through its engagements with businesses and the projects it invests in.

How is Old Mutual working with businesses to drive positive change and create a sustainable future?

Understanding the Just Transition

In an October 2021 address to the nation, SA President Cyril Ramaphosa warned the world was facing “a climate crisis of unprecedented proportions”.¹

Outlining the economic risks associated with climate change, Ramaphosa said: “As our trading partners pursue the goal of net-zero carbon emissions, they are likely to increase restrictions on the import of goods produced using carbon-intensive energy. Because so much of our industry depends on coal-generated electricity, we are likely to find the products we export to various countries face trade barriers and consumers in those countries may be less willing to buy our products.”

The other economic risk is that investors will shy away from investing in fossil fuel-powered industries. “Banks and financial institutions are already facing pressures from their shareholders not to finance enterprises that depend on fossil fuels to produce their products or services,” Ramaphosa said.

Emerging markets such as SA face distinct challenges in allocating capital to achieve net-zero carbon emissions. According to OMIG, these challenges are not shared and are frequently misunderstood by developed-market peers.

“This is relevant in an economy like SA, which is highly dependent on fossil fuels for electricity generation and has a listed financial market with a ‘weighted average carbon intensity’ that is significantly higher than the MSCI World 1.5 degree-aligned benchmark,” an OMIG statement says.²

“We need to deal with the structural problems we are faced with, such as how to move away from coal,” says OMIG MD Tebogo Naledi. “If we stopped producing coal from tomorrow, we would have to shut down the whole SA economy and swathes of the entire African economy, too.”

Hence Ramaphosa’s call for a Just Transition to a decarbonised economy. He said such a transition must address the needs of workers in affected industries and affected communities.

“The process of transition needs to be based on the full involvement of organised labour and business in targeted programmes of reskilling and upskilling, creating employment and providing other forms of support to ensure workers are the major beneficiaries of our shift to a greener future,” he said.

Read more on investing towards a Just Transition:

• The drive to net zero
• Investing in a Just Energy Transition
• How asset managers are driving energy’s greener future

Sources: 

1. www.gov.za/blog/desk-president
2. www.oldmutualinvest.com
   

This article was paid for by Old Mutual.