This article is co-published with Business & Human Rights Resource Centre.
Investors are increasingly recognizing the potential negative impact of social risks associated with climate transition. To help identify and mitigate this risk they may soon have a valuable new tool: the Climate Action 100+ Just Transition Indicator. But for it to be effective the current draft indicator must be strengthened.
Climate Action (CA) 100+ is an investor coalition begun in 2017 to drive a global net-zero greenhouse gas transition aligned with the Paris Agreement. The coalition, comprising more than 500 pension funds, foundations, insurance companies and asset managers, responsible for over $52 trillion in assets under management, engages the world’s top corporate emitters on improving climate change governance, cutting emissions and strengthening climate-related financial disclosures. Since a company’s largest investors will often belong to CA 100+, the group has significant sway over corporate decision-making. This power should make the business and human rights community take notice.
CA 100+ is currently in the midst of grading its 167 focus company emitters according to its new Net-Zero Company Benchmark. The Benchmark mainly focuses on greenhouse gas reduction targets, capital expenditures, lobbying and executive compensation tied to decarbonization, but critically, also measures how the company is approaching a Just Transition. Companies will be scored on the ten indicators and this score will inform CA 100+ corporate engagement, support of shareholder resolutions, and even voting for or against corporate directors.
The Just Transition Indicator, however, is not yet finalized, and in its current draft form, lacks sufficient emphasis on human rights, equity, and justice in order to capture a truly “just” transition.
The Just Transition is often conceptualized as ‘leaving no one behind’. Workers of the ‘old system’, such as coal miners and roustabouts, must be retrained, their communities must be rejuvenated, suppliers must not suffer from canceled orders, nor customers from price gouging. The draft Just Transition Indicator comprehensively covers these imperatives, which is necessary to grant the net-zero transition its own ‘social license to operate’.
But another danger of the transition was not addressed – the risks to people and communities touched by the ‘new system’ of renewable energy and low-carbon projects.
Climate justice principles demand benefits and burdens be shared equitably. This notion applies across the value chain of low-carbon energy, from the siting of clean energy facilities to the sourcing of materials for renewable energy technology to the hiring of local workforces in a way that is inclusive and advances justice.
Too often the communities facing the highest risk from the impacts of climate change are the communities who stand to lose the most in a rapid transition to renewable energy. It is worth noting the clean energy workforce is disproportionately white and male in the United States. In Central and South America, Indigenous Peoples have been once again displaced from their land to make way for large-scale wind and solar projects. The renewable energy sector is consistently among the highest-risk sectors for activists, with more than 30 attacks on human rights defenders working in the sector recorded in 2020. This month marks the fifth anniversary of the assassination of Berta Caceres, a Honduran environmental leader and activist who was murdered for her opposition to hydroelectric dam projects.
Likewise the supply chains of renewable energy may inadvertently fuel abuse, from forced labor in the manufacturing of solar panels and wind turbines, to the expansion of an abusive mining industry critical for supplying the transition minerals needed to build renewable energy technology. Even reforestation programs, which will be a key strategy of companies in the CA 100+ focus group, have led to human rights violations when poorly constructed and managed. Companies are also now facing legal liability for the actions of their subsidiaries, which makes it vitally important they conduct adequate human rights due diligence to ensure both their subsidiaries and the companies in their supply chains respect human rights.
It is imperative these human rights risks be recognized and addressed if this sector is to continue to grow at the pace needed to tackle the climate crisis. That is why the CA 100+ benchmark must address them in its Just Transition indicator. We highlighted these concerns in comments submitted to CA 100+, together with the Sierra Club Foundation and the Interfaith Center on Corporate Responsibility, in order to emphasize that human rights due diligence toward communities and workers, in direct labor forces and supply chains, must be an integral component of any Just Transition Indicator.
Human rights due diligence will soon become mandatory for many CA 100+ signatories, especially with an EU-wide mandatory human rights due diligence law on the horizon. Failure to conduct human rights due diligence has rapidly become a material issue for companies and investors.
The deleterious effects of climate change will fall disproportionately on developing countries. In the interests of equity and justice, disclosure to investors of the societal implications of a low-carbon transition must include all of its material risks.
Photo by Alexander Abero on Unsplash