Summary

Listed equity markets represent one of the most significant pools of capital with direct exposure to sectors central to a low-carbon transition. This report analyses just transition practice across 25 investment managers (IMs) that focus on sustainable and socially responsible investing. While the issue is widely recognised, with 17 out of 25 IMs explicitly addressing just transition in their policies, evidence on how this translates into practice is mixed. Just transition issues are currently viewed through a broad lens, encompassing not only workers but also community impacts and marginalised populations, with a growing emphasis on delivering positive contributions rather than merely mitigating risks.

In practice, however, just transition remains a low priority for many, with activity concentrated in a few leading managers. Of the approximately 600 total explicit and implicit references recorded in the study, 47% originate from just five IMs. Activity is also heavily concentrated in the energy, utilities, and mining sectors, with 22 out of 34 identified engagements relating to these areas. Stewardship teams often face resourcing constraints, forcing them to prioritise governance or other sustainability issues deemed more material to company performance.

Introduction

A just transition is essential for achieving an orderly and equitable move to net zero emissions. While the concept originated in labour movements, it now encompasses inclusive climate action that addresses impacts on workers, supply chains, communities, and consumers. Integrating just transition principles into investment strategies helps manage systemic, operational, and regulatory risks while driving long-term value creation. Despite some regions retreating from climate ambition, just transition remains prominent on the international agenda, with references appearing in 79% of Nationally Determined Contributions (NDCs).

Methodology

The research identified a specialist sample of 25 IMs starting from the Net Zero Asset Managers (NZAM) initiative. The study reviewed publicly disclosed stewardship and responsible investment policies alongside impact reporting. This desktop analysis was complemented by seven semi-structured key informant interviews (KIIs) with managers of varying scale, including those with assets under management (AUM) exceeding US$1 trillion and those with less than US$100 billion. The research employed an evaluative framework to identify references to climate action, socioeconomic equity, and community voice.

Just transition frontiers in listed equity investment

Just transition has been addressed mainly through investor engagement, ranging from opportunistic dialogue to long-term coalitions. Engagement typically focuses on encouraging high-emitting companies to announce public commitments, integrate social factors into transition plans, or improve disclosures. Success has been varied in the oil and gas, utilities, and banking sectors, often mediated by company appetite to engage. A key finding is that flexibility in terminology is important; engaging on specific issues like ‘workforce management’ or ‘stakeholder consultation’ can be effective even where the ‘just transition’ label causes friction.

The report highlights that IMs can play an interlocutor role, connecting companies to relevant expertise and advocating for stronger policy frameworks. However, the ability to engage effectively is diminishing as geopolitical fragmentation generates headwinds for climate action. In the United States, the retreat from climate ambition and a backlash against ESG investing has led to some asset managers exiting large coalitions, increasing the burden on a smaller group of committed actors.

Conclusions and recommendations

The analysis identifies three key challenges: scarce resources for meaningful engagement, a depletion of regulatory incentives in key regions, and a lack of shared understanding regarding sector-specific materiality. To address these, the report recommends that investors target outsized impact through strategic and collaborative approaches, particularly when interventions coincide with salient moments like the development of a corporate transition plan. Long-term, sustained engagement is necessary to build company awareness and capacity for sufficient disclosure.

Policy recommendations include a call for national governments to operationalise just transition commitments within their NDCs to provide a clear baseline for corporate practice. Multilateral organisations and international NGOs should provide stable anchors and concrete examples of good practice. Finally, financial regulators should encourage the consideration of the intersection of social and environmental risks within existing disclosure frameworks, such as the UK’s Sustainable Disclosure Regulation or the EU’s Sustainable Finance Disclosure Regulation, to provide tractable and scalable approaches for the market.