For the success of the transition to a sustainable economy, it is essential to consider not only ecological goals, but also the social impact of change. A transition that exacerbates or amplifies societal differences lacks support. A more sustainable economy is necessary for a productive food system and a healthy living environment, and it also creates new prosperity and jobs through the emergence of new economic sectors.
Previous economic transitions driven by automation and digitalization led to the end of entire sectors and job loss. A “just transition” offers the opportunity to address both national and global social inequality and to avoid or reduce negative consequences. Communities most affected by climate change and pollution deserve support from the strongest shoulders. Collaboration between governments, businesses, and citizens must ensure equal distribution of benefits and burdens. This also means providing support at the national level to employees affected by the transition and encouraging businesses to invest in sustainable technologies.
Businesses must play their role in this process and collaborate with governments. One of the tools they have at their disposal is the issuance of social bonds to unite sustainable and financial goals.
Alice Loevenbruck, Global Markets Sustainable Structuring Manager at BNP Paribas, says: “Social bonds can be used for (re)financing activities that have a positive impact on, for example, the environment, education, or equality. Currently, there is no regulatory framework or classification system defining a just transition. A possible solution is to include social guarantees alongside ecological impact in investment strategies. One approach could be to exclude companies suspected of discrimination or poor working conditions, even if they contribute positively to the energy transition.
Today, various international initiatives, such as “Investing in a Just Transition,” explicitly weigh the social component. These initiatives try to define what a new approach to socially responsible investing could look like. It is expected that, in addition to their ecological footprint, companies’ social footprint will play a more important role. This encourages businesses to evaluate the social impact of their operations.”
Interested to read more on the “just transition”? BNP Paribas’ Perspectives magazine is fully dedicated to this topic.