A fireside chat on the topic: “What exactly is a ‘Just Transition’ and the implications for the UK and Nordic Region?” kicked off a recent NatWest Nordic client event about “Competitive transition and responsible supply chains” in the British Ambassador’s Residence, organised in collaboration with the British Embassy Stockholm. 
 

Moderated by Caroline Haas, NatWest’s Head of Climate and ESG, Ekin Björstedt, Secretary General of the Global Child Forum, and James Close, Head of Climate Change at NatWest Group reflected on the term ‘Just Transition’, which is rooted in the 1980s labour movement and is considered in the pre-amble of the Paris Climate Agreement. Whilst its substantive meaning is indeterminate and contested, its purpose is for governments and organisations to address adverse social impacts caused by climate change and climate transitions. However, proposals to address these social risks for people, workers, businesses, communities, regions and countries vary drastically in scale, scope, depth, and ambition, potentially creating internal and external contradictions and tensions. 
 

While James Close referred to internal tools that NatWest is developing and using for the engagement with customers to measure and support their transition plans and future decarbonisation pathways, Ekin Björstedt outlined how the Global Child Forum is working with companies to highlight the importance of children’s wellbeing and future sustainability in the communities where the companies operate. Companies can make use of the Global Child Forum’s benchmark – that has analysed how companies globally respond to children’s rights – to increase their social impact by looking at and learning from peer performance. 
 

Following on from the fireside chat, two roundtables on “Measuring and achieving positive social outcomes in an evolving economy” and “How to decarbonise heavy industry while maintaining competitiveness” offered participants a further deep dive into major transition topics.   

Moderated by Rahel Haque from NatWest’s Climate & ESG Capital Markets team, the panellists for the first roundtable – Alfred Askeljung from SEB Asset Management, Martyna Wojciechowska from ESG rating agency EcoVadis, and Emelie Norling from investment firm Summa Equity, as well as Ekin Björstedt – explored how businesses can embed social responsibility and sustainability into their operations and delved into the importance of the legislation on sustainability reporting, the need for transparency through data-driven approaches and collaboration, and safeguarding human rights during this transition. 

The sustainability specialists agreed that the SFDR has been a catalyst in improving disclosures on ‘social sustainability fundamentals’ not only from investors but also by corporates which are equally expected to feed into fund disclosure requirements. The panellists highlighted that “imperfect data at this moment is fine” as investors “need to start somewhere” and that engagement with the reporting directive and with peers would enable investors to refine their disclosures over time.  

Looking at how to build out a fuller, composite picture of social outcomes, the roundtable speakers emphasised the role of ESG ratings and scores as underlying constituent data points alongside additional data sources. They also stressed that: “Social and environmental considerations are not separate, distinct considerations that are traded off against one another but are actually inextricably linked.” Decarbonisation needs to go hand-in-hand with optimising the social outcomes of such projects in the pursuit of a ‘Just Transition’.

The domino effect of investor demand alongside a myriad of global sustainable regulations (e.g. EU Critical Minerals Act; Norwegian Supply Chain Transparency Act; CSRD; CSDDD) driving enhanced due diligence and as a result enhanced transparency across corporate supply chains was another key topic. This increased transparency helps to understand the ESG implications on supply chains and, even more important, helps to identify areas which require improvements which can either be achieved via engagement with existing suppliers, or by changing suppliers and/or evolving the processes within the supply chain (e.g. near- or re-shoring). 

Finally, the specialists also looked into available financing and investment solutions that are aligned with social outcomes. Examples include social loans, sustainability-linked supply chain finance, microfinance funds, and quantitative strategies thematically focused on health and education.

During the second roundtable, Magnus Nygren from Vattenfall, Kristin Wallander from Swedbank Robur, Ulf Erlandsson from AFII, and Huw Williams from the UK Department for Energy Security and Net Zero discussed with moderator Dr Arthur Krebbers, NatWest’s Head of Corporate, Climate & ESG Capital Markets, how heavy industry can successfully decarbonise and maintain its competitiveness. 

Sharing their concerns about current developments, the panellists pointed to B2C firms slightly reneging on climate commitments mostly due to insufficient customer demand for more energy-efficient products, given the price premium for such products. At the same time, the global competitive environment is tough to navigate, in particular with highly-subsidised Chinese competition, raising the question for many corporates how to counter this while also being dependent on Chinese raw materials and products for the low carbon transition.

To boost transition journeys despite these headwinds, the UK government has sought to develop policies that bring in the private sector by creating the right incentives – the panellists pointed to the Contracts for Difference (CfD) as one example on how to incentivise investments, in this case in renewable energy projects in the UK. The specialists agreed that first-of-kind at-scale technology will inevitably require a mix of public and private financing, with governments in the driving seat, seeking to draw in private capital. In this regard, incumbent utilities will also have a role to play as first movers, supporting a push to better bankability of sustainable solutions. At the same time, the energy market needs to find options to allow different energy consumers to move off grid – which will require further advancements in battery technology.

In the context of clean energy sources, the speakers conceded that nuclear energy economics remain tricky: while nuclear is more expensive than other low carbon options, it remains in many cases a critical source, especially for heavy energy users such as data centres. 

Against this challenging backdrop, the roundtable speakers emphasised the need for a single European perspective on decarbonisation and renewables strategy with a focus on reviewing the existing economic set up in light of decarbonisation. Therefore collaboration is key: having a commercial imperative alone is insufficient, there needs to be a supportive policy environment and access to finance, with investors equally understanding the importance of a collective effort, and their critical role. 

If you want to learn more about any of these topics, please get in touch through your usual bank contacts.