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Our views 26 May 2023

Cost of living and climate crisis interlinked

5 min read

For years Royal London Asset Management has maintained that the climate transition must be a just transition. A just transition ensures that climate action also supports an inclusive economy and avoids exacerbating existing injustices or creating new ones.

Thinking of workers, communities, and citizens impacted by moving to net zero means we are more likely to design a transition that has long-term public support and the people to deliver it. Never has this been more evident than in 2022, where labour rights and high energy prices have taken many headlines – as our senior economist, Melanie Baker argued in her article, you cannot forecast inflation without considering climate change.

There has been increased focus on the quality of green jobs given the resurgence of the labour movement in the UK and reshoring of industry jobs due to war and geopolitics. An independent review by government suggests that a faster move to net zero promises lowering energy costs and providing a wave of green jobs. Recent weather events, such as heatwaves, floods, and fires in the UK, have made nearly two-thirds (60%) of adults more concerned about climate change. However, 38% think that it is too expensive to live more sustainably, thus creating a barrier to climate action [1]. Mass adoption of lower carbon alternatives needs to be affordable.

Internationally, the just transition is gaining momentum. Despite poor progress in COP27 with regards to country targets, Just Transition Energy Partnerships – which use a combination of donor country guarantees and private sector finance – in Vietnam and Indonesia seemed to be one of few actionable outcomes from the international dialogue. Moving fairly is a prerequisite to achieving net zero.

Update on activity on just transition in 2022

Royal London Asset Management has engaged investee companies on just transition since 2019, in collaboration with Friends Provident Foundation (FPF). We have continued to ask companies to integrate just transition into their climate plans, specifically in three sectors – utilities, banks and social housing.  

Energy utilities

Building on our success asking European energy utilities to set climate transition plans over the last few years, following pressure from us and our collaborative partners in the US, we saw National Grid publish its principles on just transition in 2022. We expanded our geographic focus to North America where we partnered with US investors through the Interfaith Centre of Corporate Responsibility (ICCR) and Ceres (a non-profit organisation focused on using finance to solve sustainability challenges) and gained understanding of local realities such as environmental racism. We also asked CLP, a Hong Kong utility, to develop a just transition strategy whilst it considers coal phase-down.

We went back to SSE, E.ON, EDF, Centrica and Scottish Power and asked for evidence of meeting policy commitments with actions. Examples included EDF, which reported how it has ended power outages for vulnerable customers and opened a technical university for nuclear energy skills, whilst SSE published a report measuring progress of its Just Transition strategy, including for example new processes to co-create community investment funds with local communities where renewable installations occur.  


Provision of capital plays an essential role in helping customers to transition to sustainable low-carbon economies. Banks climate commitments have potential social risks, for example decarbonising mortgage lending books, if not done with adequate policy support and a thoughtful strategy, could lead to individuals or families paying high interest rates and being unable to re-mortgage.  

At the AGMs of Barclays, Lloyds Banking Group, NatWest, and HSBC, we and FPF asked if the banks would consider integrating just transition throughout their climate transition plans. We met all four banks in Q3 2022, rearticulating the business case and providing suggestions on how integrating just transition into these plans would look. HSBC announced its support to the Just Transition Energy Partnership for Indonesia and Vietnam, and shortly after, it become the first bank to include just transition as an objective of its Energy Policy. Barclays stated in its annual report it has begun qualitatively assessing just transition when reviewing the quality of its client’s climate transition plans.

As the main barrier to action from banks is articulating how these companies can act on just transition, we contributed to a tool launched by ILO and LSE Grantham Institute at COP27 to support banks and the finance sector integrating just transition into climate plans. In addition, we were asked to join the External Advisory Board of the International Labour Organisation (ILO) and United Nations Environment Programme (UNEP) Just Transition Finance project, developing further guidance for banks and insurance companies on how to implement Just Transition.

Social housing

Royal London Asset Management and FPF conducted an engagement campaign with eight housing associations and one social housing finance aggregator, seeking to better understand the challenges faced by the sector and determine how, despite observable and often competing claims on housing associations’ finite resources, the sector can best achieve a just transition to net zero.

We found that under the current circumstances, social housing’s route to net zero is poorly defined and unfair as it risks diverting resources from other essential priorities, such as new affordable homes. We do not believe that addressing decarbonisation to the detriment of housing associations’ other requirements is a solution. In our detailed report on this engagement, we provided summary recommendations for policy makers, fellow financers and finally housing associations. 

Why it matters

Having a just transition strategy is one of our 12 indicators to assess credible climate transition plans and a cornerstone of our broader engagement with the top emitters we own in our portfolios. We have been actively seeking to embed just transition throughout collaborative investor networks such as CA100+ and the Financing the Just Transition Alliance and in consultations on climate transition plans. We are members of the United Kingdom Government Transition Plan Taskforce Just Transition working group, ensuring this aspect features in government guidance on climate transition plans.

We are delighted that this concept, first mentioned in the Paris Agreement, is now becoming mainstream for companies and investors. We will continue prioritising just transition engagement throughout the upcoming years, asking government and companies to put people at the centre of their climate plans.


  1. Royal London surveyed 2,000 nationally representative UK adults aged over 18. Research was carried out by Opinium between 14 October and 18 October 2022.


Past performance is not a reliable indicator of future results. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.