Banks sit at the heart of the transition to a low carbon economy

Banks sit at the heart of the UK’s transition to a low‑carbon economy. Their financing decisions, regional presence, and ability to support customers through change mean they are uniquely placed to drive a climate transition that is fair.

Achieving this ‘just transition’, is essential for long-term value creation, reducing systemic risks, and ensuring communities and workers are not left behind

What is a just transition? Rapid climate action is required to prevent the worst human and economic costs of climate change. A just transition aims to ensure that decarbonisation is both fast and fair.

Collaborative banking engagement programme

This report details multi-year engagement started in 2022 by Royal London Asset Management, Border to Coast Pensions Partnership and Friends Provident Foundation with four UK banks – Barclays Plc, HSBC Holdings Plc, Lloyds Banking Group Plc, and NatWest Group Plc – and their performance against our expectations.

Read the Just transition in banking: Engagement outcomes report

The aim was clear: encourage these institutions to integrate just transition principles into their climate strategies embedding social considerations into products, sectoral approaches, and regional decision‑making.

This report shares the progress of that engagement, underpinned by 15 investor expectations developed in 2024 in consultation with companies, experts, practitioners, and guidance from the Transition Pathway Taskforce (TPT) and Glasgow Financial Alliance for Net Zero (GFANZ) frameworks. These expectations assess the banks products, sectors and the geographic regional approach in which they operate.

The results show clear progress:

• All four banks now acknowledge the importance of just transition and have taken steps to reflect this in their strategies.
• While no single bank has emerged as a sector leader, we have seen meaningful improvements – from inclusive product design to early efforts at regional engagement.

This report highlights examples of good practice, identifies areas for further development, and offers insights for investors, banks and policymakers seeking greater resilience and reduced transition risk through the integration of just transition.

Our engagement has also informed broader work in the field.

• Since we commenced the programme, Royal London Asset Management and Border to Coast Pensions Partnership were invited to co-chair the IIGCC Working Group on Just Transition, which is developing supplementary guidance for just transition integration in the Net Zero Investment Framework (NZIF).
• Royal London Asset Management also contributed to the Transition Pathway Taskforce’s (TPT) guidance on just transition and were invited to join the External Advisory Board of the International Labour Organization (ILO) and United Nations Environment Programme Finance Initiative’s (UNEP FI) Just Transition Finance Project, and
• Border to Coast Pensions Partnership is advising the London School of Economics Just Transition Finance Lab.

Read the Just transition in banking engagement outcomes report

Royal London Asset Management engages with companies as part of its responsible investment and stewardship strategy, aiming to drive long-term value for clients while promoting sustainable business practices.

Our voting, engagement and advocacy activities are designed to be pragmatic, informed by research, evolving market insights and local best practices, and aligned with the long-term interests of our clients. These activities aim to enhance the value and integrity of our investment decisions.

Please note that voting and engagement practices may not apply uniformly across all Royal London Asset Management funds or strategies, as each have distinct investment objectives. Please refer to the investment documents for specific details. Reference to any security in this report is for information purposes only and should not be considered a recommendation to buy or sell.

For professional investors only. This material is not suitable for a retail audience. Capital at risk. This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. The views expressed are those of the Royal London Asset Management at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.