Defining just transition in emerging markets vs developed markets in Asia

The Asia Investor Group on Climate Change (AIGCC) reviewed over 50 definitions of just transition. The most comprehensive recognise foresight, stakeholder engagement and equity in outcomes.

Emerging markets face unique challenges compared to developed markets. They are often resource-intensive, dependent on extractives and more vulnerable to disruption, with livelihoods at greater risk. Development priorities such as energy access and poverty alleviation often outweigh immediate decarbonisation. In contrast, developed markets benefit from diversified economies and stronger welfare systems, spending around 25% of GDP on welfare compared to 2% in developing markets.

Just transition is relevant for both phasing out fossil fuels (“transition-out”) and for scaling up green industries (“transition-in”), with local contexts shaping impacts and solutions. Place-based transitions focus on tailoring economic, social and environmental policies to specific geographies, recognising distinct vulnerabilities and opportunities.

Evaluating just transition policies: Market-level analysis

AIGCC developed a framework assessing policy integration, institutional readiness, social protections, workforce resilience, financing and adaptation. Four markets were analysed: India, Indonesia, Malaysia and Japan.

India targets net zero by 2070, with interim 2030 goals of a 45% reduction in emissions intensity and 50% non-fossil power capacity. Coal-dependent states like Jharkhand, Chhattisgarh and Odisha derive up to 30% of revenues from fossil fuels. Labour informality exceeds 80%, leaving workers with limited protection. Initiatives include state-level diversification, skilling schemes aiming for 30–35 million new jobs by 2047, and use of District Mineral Foundation funds for social protection, though effectiveness is uneven. Female labour force participation stands at 42%, with a target of 70% by 2047.

Indonesia aims for net zero by 2060, with a 32% emissions cut by 2030. The Just Energy Transition Partnership (USD20 billion) supports the shift. Coal regions such as East Kalimantan are heavily dependent on fossil fuel jobs. Wage disparities are significant, with coal jobs paying 67% more than in-demand roles and 52% more than green jobs. Social protection schemes cover only 28% of workers, largely excluding informal labour. Domestic financing and green sukuks complement international funds, but disbursement of pledged resources remains low.

Malaysia targets net zero by 2050, with 70% renewable energy by then. Oil and gas account for 31% of national income and 13% of exports. The National Energy Transition Facility of RM2 billion (≈ USD450 million) aims to create 310,000 green jobs by 2050, though current training levels are modest. Female labour force participation is 51%. Social protection is relatively comprehensive, but informal and Indigenous workers face gaps. Subnational initiatives, such as Sarawak’s Sustainability Blueprint 2030, demonstrate diversification efforts.

Japan targets net zero by 2050 with 46% emissions cuts by 2030. Its Green Transformation (GX) and Digital Transformation (DX) policies drive investment of JPY150 trillion (≈ USD1.02 trillion) over a decade. Labour protections are strong, covering 98% of the workforce, though 40% hold non-regular employment with weaker safeguards. Trade union membership exceeds 9.9 million, but formal just transition frameworks remain limited. Lessons from past coal transitions and strong disaster resilience systems underpin its approach.

Across markets, key challenges include high labour informality, fiscal dependence on fossil fuels and uneven institutional capacity. Investors are advised to ground strategies in local contexts, engage policymakers and align financing with social outcomes.

Future policy pathways

Strengthening just transition requires clear national strategies, integrated climate–development planning, inclusive stakeholder engagement and improved transition data with local detail. Funding should be targeted at reskilling, community revitalisation and green industries, with robust monitoring frameworks.

Governments are encouraged to co-create plans with underrepresented groups, such as informal workers, women and Indigenous peoples, and link skilling to wage outcomes. Local governments need resources and technical capacity to deliver place-based transitions.

Case studies: Place-based transitions

Four case studies highlight best practices:

• Schroders integrated climate adaptation and social equity into Asian apparel supply chains, addressing worker heat stress and resilience.

• Maharlika Investment Corporation in the Philippines secured Indigenous community consent for mining projects, embedding benefit-sharing and royalties.

• Eskom in South Africa decoupled repurposing and repowering from coal decommissioning, using blended finance and community engagement to diversify Mpumalanga’s economy.

• Ayana Renewable Power in India embedded community skills programmes into renewable projects, aligning local livelihoods with national clean energy goals.

Financing just transition: Key considerations

Funding requires combining public, private and concessional capital, with social outcomes as core criteria. Emerging models integrate non-commercial activities such as worker reskilling, Indigenous participation and community resilience. Investors are advised to incorporate climate and social risks into fiduciary duties, engage corporates on just transition planning and advocate for policy alignment.

Recommendations for investors and corporates

For investors: embed just transition in policy engagement, allocate capital to social outcomes and track indicators such as wage parity and social protections.

For corporates: develop just transition plans with measurable targets, engage stakeholders transparently, link transition investments to core operations and evaluate risks through both social and climate lenses.

Conclusion and way forward

A just transition in Asia depends on aligning climate goals with social equity, strengthening institutions and embedding accountability. Investors and corporates play a critical role in enabling inclusive, place-based strategies that reduce systemic risks while capturing opportunities in the low-carbon economy.