Cross-Sectoral Sustainability Forum

Seats at a general assembly


Impact Investing Institute – Announcement of Public Consultation

Just Transition Criteria – Draft for Public Consultation

March 20, 2023

Re: Impact Investing Institute Just Transition Criteria – Draft for Public Consultation

Dear Impact Investing Institute,

We are grateful for the work of your organization in the Just Transition Challenge, together with its participants and partners, on building practicable frameworks for steering investment capital to solutions that address climate change holistically; i.e., including through consideration of its socio-economic dimension. We are also grateful for the opportunity to respond to your draft Criteria.

Future Nexus is a research and engagement consultancy based in New York City, with specializations including just transition, sustainable and development finance, industrial policy and public investment, and climate finance. As examples of our work, we have authored guidance for the global private and public sectors on the topic of Financing a Just Transition, on behalf of the UN Global Compact and International Labour Organization, respectively. We have also worked with a broad range of other clients and partners on the topic of just transition, in relation to corporate, financial, and public actors, including the We Mean Business Coalition, the International Organisation of Employers, the U.S. Impact Investing Alliance, the Sierra Club, the Roosevelt Institute, E3G, and the Harvard University Initiative for Responsible Investment. As such, we consider ourselves a key stakeholder in the global development of the discourse and tools related to financing a just transition.

Generally speaking, we find that your draft criteria reflect well the general principles and components of a just transition, and provide a strong basis for the design, evaluation, and communication of investment strategies and products aiming to support a just transition. Below we offer some ideas for your consideration in response to your consultation questions, and conclude with a general comment.

Q1. In addition to the use cases proposed in this section, a robust just transition investment framework can also generate possibilities for improved learning and coordination across investors, within and across regions, and with other stakeholders, including governments. Just as many investors are seeking opportunities for greater coordination in the design and implementation of their climate strategies, for example through Climate Action 100+, it can be expected that investors will seek similar opportunities in their support for a just transition. Achieving the vision of a just transition will depend on lessons being shared, across stakeholder groups, across regions, among investors, and across investment types. Consciously addressing this potential in the design of your framework can improve not only its uptake but also its impact.

Q2a: Generally speaking, we are of the view that although investment-/project-level sustainability performance should be an important criterion for investment decisions, the greatest contributions to just transition will be achieved through coordinated strategies that target structural transformation. Not only do coordinated strategies deliver greater system-wide impact, but they also allow individual investments to achieve outsized impact by identifying and acting on synergies with the actions and strategies of other stakeholders, including other investors and governments.

In specific reference to the question on interlinking KPIs, we believe that key KPIs can be identified and interlinked through reference to broader strategies in which the investment is proposed to play a role. That could include, for example, regional and sectoral transition pathways, as constructed in coordination with governments. Reference to such strategies and related KPIs can improve interoperability, legitimacy, public support, and impact of related investments.

Q2b: As recognized in the three Elements of your framework, just transition comprises both a process (community voice) and outcome dimension, which includes both climate and socio-economic impacts. Generally speaking, we find the linkages between community voice and impacts could be strengthened in your framework. Item ‘g’ on page 14 of your consultation document indicates possibilities in this vein; for example, using Element 3 (community voice) to identify local needs, to be addressed in Element 2. We believe there is significant scope to develop these linkages, not only between Elements 3 and 2, but also Elements 3 and 1, as well as to introduce more rigorous requirements. For example, in addition to evidence of engagement mechanisms, the framework can also recommend or require the disclosure of key results from such engagements, including, potentially, community feedback on the key objectives/KPIs formulated in relation to Elements 1 and 2. In addition, engagement mechanisms can also be an important component of evaluation, and the framework could constructively reflect this, with more explicit requirements or guidance regarding how investors can be expected to respond to key community concerns.

Q3a: We find this approach robust, though, in line with our suggestion above to develop linkages between Elements 3 and 2/1, we also see some scope for providing more direct guidance to investors regarding the best practice or requirement to use engagement processes in Element 3 to inform strategy and indicators adopted in relation to the the ‘Do No Significant Harm’ criteria for the other Elements. It can be difficult for investors to know the primary concerns of local communities, without which knowledge a bona fide assessment of ‘do no significant harm’ is impossible. In the context of this framework, requirements for community engagement can be usefully leveraged to provide insight on and strengthen the strategies for achieving climate and social impact.

Q4a: The proposed approach is robust in principle, though the design of this criterion should also reflect that many just transition-related projects already face substantial constraints on financial and technical capacities, even relative to local climate investments, and therefore limits on financial access. Many of the investments most needed in the just transition may have no impact track record and/or underdeveloped impact frameworks. The investment criteria should reflect the bias that already exists, and potentially even incorporate a manner for investors to meet certain of the framework’s criteria through support for capacity development among investees, in addition to or instead of other impact (measurement) requirements.

In addition to this, we believe the framework could better reflect the seventh Operating Principle for Impact Management: ‘considered exits’. Framework criteria which trigger automatic divestments have the potential to do more harm than good. As above, we suggest that the framework incorporate more scope for engagement and capacity development among investees, as an additional, substantive manner of delivering impact—particularly to prevent unmanaged exits.

Q3b and Q4c: Regarding KPIs for Community Voice, we believe there are interesting lessons to be learned from the realm of public investment. In the United States, for example, obligations to workers and communities are increasingly formulated in concrete terms, as specific criteria/standards for investment, such as requirements for community benefit agreements and/or project labor agreements. These structures are critical for the achievement of key economic, social, and environmental objectives, because they not only provide evidence of early and meaningful engagement with workers and communities, but also ensure that their concerns and objectives are incorporated into investment plans, following negotiation among key stakeholders. These structures might serve as a fruitful template more broadly, for investors seeking concrete ways to design, substantiate, and deliver the socio-economic benefits that matter to local communities.

In conclusion, we would like to reiterate one central principle, which we have come to value increasingly as our work in just transition has deepened, and greater incorporation of which we believe will benefit the uptake and impact of your framework. That is, in essence, that achieving a just transition means achieving a durable and systemic transformation, which depends on broader coordination, and oftentimes on public leadership. Individual investments can play an important part in the vision of a just transition, but their meaning and impact is multiplied to the extent they act as components of broader strategies: strategies which, as relevant, bridge the Global North and South, cut across economic sectors and industries while being coordinated within them, are aligned with regional and national plans, and, perhaps most critically, benefit from the policy levers and tools, the data and perspective, and the social trust of local and national governments.

From our seat, we have seen in many contexts that sustainable and impact investors increasingly agree that structural transformation depends on public leadership. Investors look to policymakers not least for the financial incentives (credit enhancements, tax breaks, etc.) which propel investment in target industries and sectors (and with the right conditions), but also for the coordination of a broad range of policy tools to achieve those goals, including financial and industrial regulation, trade, procurement, and labor policies, and more. Equally importantly, governments play a leading role in devising the development strategies which signal to the private sector and other stakeholders the intended direction of strategic development, through, for example, NDCs and credible regional and sectoral pathways.

Notably, this new sense regarding the expected role of governments is not confined to developed economies, where governments have far greater fiscal capacity to embark on green industrial policy. Rather, it is also increasingly visible in how the climate transition is approached globally, including in the context of Just Energy Transition Partnerships and new expectations for multilateral development finance institutions. In sum, investment is increasingly undertaken implicitly or explicitly in coordination with official plans.

As you seek to build a framework with staying power through what might prove to be a meaningful paradigm shift regarding the desired and even necessary level of coordination between the private and public sectors, especially with regard to economy-wide transition strategies, we believe that the just transition investment framework can and should anticipate and reflect the principle of greater cooperation and alignment between private investment and the strategies, policies, and investments of public authorities. Currently, your proposed framework for strategy-level due diligence mentions investment/issuer engagement with local governments as one aspect to be investigated, and the importance of public/private alignment is highlighted in your real estate-specific guidance. In our view, this represents a good start, but fails to account for the broad and deep importance of this issue across all investments and investment strategies. We believe this issue should receive greater emphasis in the framework, and be built out accordingly with related criteria and KPIs.  

Again, we would like to express our gratitude for your diligent, thoughtful, and constructive work on building a framework for just transition investment. It is a necessary effort, and we are pleased it is in good hands! If you have any questions or would like to discuss any of these points further, I would welcome the opportunity.

Best regards,

Aaron Cantrell
Executive Director


22 December 2022

Last year at COP26, the UN Global Compact, the International Labour Organization, and the International Trade Union Confederation launched the Think Lab on Just Transition. This year I had the privilege of working with the Think Lab, its partner organizations, and participating companies as author of the Introduction to Just Transition: A Business Brief.

This post is a chance to share that brief with the Future Nexus audience, alongside some personal reflections sparked in the process.

Aaron Cantrell
Executive Director, Future Nexus

Why I'm writing this

Future Nexus was named after the nexus linking the public and private sectors, based on a vision of public-private learning ranging from big sustainability ideas to data standards. But the penchant for systems thinking which inspired that vision has led to several more ‘connective’ specializations. In particular, the connection between environmental and social issues is a central theme in our work with clients.

The interdependencies between people and the planet are increasingly recognized in theory and practice, iconized perhaps by the United Nations Human Rights Council’s 2021 affirmation of the human right to a healthy environment. That climate change and other environmental catastrophes take shape as human crises is no longer a theory or a projection. At the same time, an effective response to climate change is necessarily collective and therefore embedded in social systems. The importance of social systems such as finance and policy has been well-recognized in the climate discourse, and the extent to which these are themselves embedded within slower-moving cultural and economic dynamics is being incrementally revealed.1,2

At the broadest level, a ‘just transition’ is the concept which recognizes the systemic dependencies between environmental and social sustainability, and has some ideas for addressing them in a constructive way. It is relevant for how we address a wide range of environmental issues, including biodiversity, pollution, and climate change. The Paris Agreement itself recognizes the ‘imperative’ of a just transition. The details of what this means and core principles for achieving it are developed in the International Labour Organization’s (ILO) Just Transition Guidelines.3 The ILO Guidelines address specific areas of national policy as well as the equally critical question of building coherence between distinct policy areas and public institutions. Constructing an effective policy environment depends on participation from business and labor, and the ILO Guidelines also address how these stakeholders can most effectively contribute to national policy-making.

An enabling policy environment for a just transition promotes fairness, inclusion, and efficiency in both process and outcome. As the concept of just transition moves ever closer to the center of international climate negotiations, the value of this foundational idea—and of the more specific content in the ILO Guidelines—is also increasingly acknowledged outside the context of public policy. Just transition is emerging as a framework which can help businesses address some of the issues that are underappreciated in more conventional sustainability paradigms—for example, paradigms which separate environmental issues from social ones or which prioritize top-down action over strategies to empower those affected by change.

This year I had the privilege of working with the UN Global Compact Think Lab on Just Transition,4 alongside its partner organizations and participating companies, as the author of two of its Business Briefs. The Think Lab was established in 2021 at COP26 by the UN Global Compact, the International Labour Organization, and the International Trade Union Confederation to drive thought leadership on the role of business in a just transition.

The Think Lab created an opportunity for global leaders on just transition—including from business, finance, civil society, academic, and intergovernmental organizations—to discuss the difficulties that businesses face in the just transition, identify solutions that work, and generalize some of the insights for a broader audience. We borrowed heavily from the wisdom embedded in the instruments and frameworks that exist to guide a just transition, corporate sustainability and responsibility, and sustainable finance, as well as from the wide range of initiatives that support specific dimensions of implementation. The insight of individuals with experience and perspective on the topic was also invaluable.

The Introduction to Just Transition: A Business Brief5 has all the ‘good stuff’: the what’s and why’s and how’s of just transition for business. This post is really just a hook for that Brief. At the same time, a few personal reflections have been stirring in the weeks since we launched the brief, which I thought worth sharing in a less official channel. I call them ‘lessons from the field’. Learned through the diverse interactions with global leaders in the field, these lessons are too unpolished for an official report, but as they continue to mature they will nonetheless shape how I and the organization I lead approach our work to advance a just transition for all.

Lesson #1

Alignment around core principles is critical.

In the context of systems challenges and systems solutions, things get complex quickly. There’s no universal formula for the ‘material interdependencies’ between environmental and social issues.6 There’s also no blueprint for climate transition strategies which are fair and inclusive. The climate transition represents a complex patchwork of the plans and strategies of individual organizations, of economic sectors, of regions and nations (principally led by governments), of the financial system, of workers and labor unions, of civil society, and more. A shared set of principles and standards for the design and implementation of these plans is critical for their interoperability and uptake. In particular, the challenge of defining appropriate metrics for just transition—a crucial aspect of operationalization—depends on a shared framework of principles and objectives.

The guiding principles of a just transition, largely represented in the ILO Guidelines, offers that common baseline. In particular, the recognition that workers and communities should be integral to the process and that the climate transition represents an opportunity to build more equitable and sustainable economies more broadly can facilitate constructive interactions across stakeholder groups, across regions, and internationally. Without this alignment—i.e., some consensus around the terms of a fair process and outcome—what cannot be achieved collectively can hinder what can be achieved collectively. We must prevent this.

Lesson #2

A just transition can promote alignment in at least four dimensions.

Narrative dimension

Where are we—as a people, community, workforce, nation, or family…where are we going? Just transition provides a vision of a future where no one is left behind and where our efforts to combat climate change are not simply passed on as costs to unlucky segments of society. The narrative dimension of just transition is critical.7 People must see that they have a decent place in the future we are working for before they will support it in any way. Extending the ‘climate franchise’—that is, giving people a real stake in the climate transition, while listening to their voices—is a prerequisite for the robust design and smooth implementation of climate strategies.

Normative dimension

Just transition depends on—and builds on—a collective ethical stance: respect for human rights, including Fundamental Principles and Rights at Work. Respect for rights helps us define desired outcomes for workers and communities in a just transition, but is also a tool for achieving them. For example, freedom of association and the right to collectively bargain underpin effective social dialogue (between business and labor, sometimes including governments), which is itself a key process for setting the goal posts and practical trajectories of economic transition.

Practical dimension

The bulk of the ILO Guidelines is of a fundamentally practical nature, which indicates perhaps where the ‘heart’ of just transition as a concept lies. There are large and numerous opportunities for improving the efficiency of public and private resources through better coordination, coherence, and integration, including that achieved through social dialogue and stakeholder engagement. Many of these opportunities are left ‘unturned’ simply because governments and other complex organizations are not equipped to identify and harness them. The ILO Guidelines, alongside related research and thought leadership, not only describe what some of these opportunities may look like, but also give concrete ideas for institutional arrangements which can help organizations to identify, develop, and realize them on an ongoing basis.8

Political dimension

While a substantial part of a just transition follows from positive-sum efficiency gains, not all of it does. In fact, an important component of just transition is getting more folks to ‘the table’: the table where climate plans and strategies are negotiated, designed, and overseen. On one hand, this is likely to increase the challenges related to competing interests. On the other hand, alignment achieved in the narrative, normative, and practical dimensions puts these difficult negotiations on a more constructive footing. Bringing more enfranchised voices to the table while simultaneously establishing a forum that supports robust and legitimate negotiation outcomes—reducing risk in and increasing the speed of climate transition—is the crowning achievement of the just transition framework.

Lesson #3

A lot of roads lead back to social dialogue and public policy.

As the stakes (and temperatures) continue to rise, the materiality of both climate change and the holistic response it demands is felt across the private sector. Financial institutions and real-economy businesses of every type and size are formulating a vision of their place in a more sustainable world and developing strategies, policies, and practices that take them there. This is unquestionably an occasion for ‘pulling out all the stops’, and that includes all the areas of operations where corporate and financial actors can contribute to a just climate transition.

Yet in our quest to identify private sector policies, strategies, and practices that promote a just transition, we were repeatedly led back to the need for collective action. Collective action includes formal partnerships and social dialogue, but it also includes the standards and frameworks which shape business practices. This baseline helps to ensure that sustainable business practices don’t come at the cost of competitiveness. Thus, ‘pulling out all the stops’ does mean reforming business practices, but equally important is business’ constructive influence over the frameworks which guide collective behavior. Public policy plays the central role in shifting business practices, while independent standard-setters also serve an important function. Social dialogue emerges (again) as a crucial factor for improving alignment between business and labor, as well as with the policymakers who devise standards and plans that coordinate and balance the needs of different economic sectors and stakeholder groups.

Lesson #4

Decent work is more than decent work.

Decent work—in its four pillars of full and productive employment, social dialogue, rights at work, and social protection—is the centerpiece of the just transition framework. Like respect for human rights, decent work is both an objective intrinsic to a just transition, but also an instrument for achieving it. That is because decent work is the ‘gateway’ to many other aspects of sustainable development, including reduced poverty, reduced inequalities, and economic growth. That means that respect for rights at work, strategies to create jobs and promote social dialogue, and the paying of fair wages and benefits is not a cost, but an investment.9

Decent work maps into all four dimensions of just transition: the narrative, the normative, the practical, and the political. Decent work is typically understood in terms of the last three, yet I believe the narrative dimension deserves more attention. Employment is a platform for earning wages and benefits—crucial for satisfying basic material needs—but it is also a platform for contributing to society, for identity formation, for self-improvement, and for many other desirable things not found in an employment contract. Workers care not only about what their job allows them to consume, but also about what it allows them to produce.

Decent work reduces social frictions through its distributive forces, but also through its narrative and normative forces. And that’s true not just for ‘the worker’: decent work is also about the society we all want to live in, where individuals and communities are respected and there exists a baseline for security and wellbeing. Recognizing the full powers of Decent Work as an idea and goal and embedding this understanding within just transition strategies generates a more robust foundation for our efforts.

Lesson #5

Carbon tunnel vision poses a risk to equity, sustainability, and to climate action itself.

Climate change mitigation is underpinned by systemic qualities including economic innovation and resilience, social participation and uptake, political stability and support, financial stability and access, and international cooperation.10 Small wins for emissions reductions which erode this broader foundation for mitigation activities work against climate objectives. Moreover, this approach represents a significant loss of opportunity. Climate change mitigation should be adopted as a propellant for collective action, recognizing that it also has the capacity to drive progress on other environmental, social, and economic goals.

Moreover, mitigation is only half of the challenge. Adaptation to climate change is equally underpinned by sustainable systems, and is itself a necessary condition for effective mitigation. Indeed, as the face of climate change matures in real time, these two dimensions of climate action become less distinct. Emblematic of the link, natural disasters are often themselves drivers of GHG emissions. In the realm of natural infrastructure and regenerative agriculture, we also see the fundamental union of adaptation and mitigation potential. And at the broadest level, investments in low-emissions technologies, infrastructure, and products depend on economic resilience and development. Acknowledging these dependencies rightly pushes us off a course of carbon reductionism—even for the purposes of mitigation alone.

Climate action–including both mitigation and adaptation–needs a solid footing. That means a holistic approach to climate change, to planetary health, and to the human-climate nexus. This depends on agreement around foundational principles and clear-headed negotiation of the trade-offs. Just transition ensures affected stakeholders have a place in the process and provides a basis for alignment around how the economic, environmental, and social pieces come together—and what can be achieved.

Lesson #6

We are all learning.

Just transition is an evolving space. New ideas, new experiments and experiences, new risks and concerns, new pockets of consensus, new tools and techniques, and new players continually appear. As they do, the ecosystem of just transition practice grows and adjusts through iterative planning and experimentation, evaluation and learning, sharing and partnering. Some consolidation of best practices is useful, though it’s also important to protect the space required for adaptation and experimentation in local contexts.

Across these developments, however, a common theme is emerging. For businesses, for financial institutions, and for governments too, sustainability is no longer a side-show. ‘Side-show ESG’ is simply too costly to justify the marginal benefit. That doesn’t mean that every organization must set out to save the world. It does mean, though, that every organization needs a vision of its place in that future world. That vision is a precondition for not acting against it. It also serves as the basis for broader engagement with stakeholders, including businesses, governments, financial institutions, workers, customers, and beyond.

Here comes that hook again. Check out the fruits of our decent labor: Introduction to Just Transition: A Business Brief.


Pulling out all the stops

In writing this post, thinking about the systemic response required for a systemic challenge, the phrase ‘pulling out all the stops’ kept coming to mind. As the owner and player of this 1890 Packard reed organ, the metaphor means something special to me, even though for the sake of my neighbors I never do it. Just for kicks, I went over to the organ and pulled out all the stops. As I read the names of all the stop tabs again, I was surprised to remember that right in the middle of this (relatively modest) set of stops was Vox Humana: human voice. The metaphor tripled in meaning for me then, as I reflected on the centrality of (human) voice and representation in a just transition.

This organ was restored in the 1990s, but the Vox Humana stop is usually the first to break, and this one already had (again) when I bought the instrument. Vox Humana has a moving part (the tremulant, undulating the air flow) which makes it more delicate than the others. Strangely, more now than before, I can’t help but to miss that stop and think that the human voice would have made the music I play now a lot more beautiful.


  1. The Death of the Carbon Coalition
  2. Florida pulls $2 bln from BlackRock in largest anti-ESG divestment
  3. International Labour Organization Guidelines for a just transition towards environmentally sustainable economies and societies for all
  4. UN Global Compact Think Lab on Just Transition
  5. Introduction to Just Transition - A Business Brief
  6. The Transition Plan Taskforce Disclosure Framework
  7. People are not "leaping at positive change" owing to “a failure of our collective politics to paint an attractive, believable, comprehensible picture of what a just, green society looks like”. See Foreword, A European Just Transition for a Better World, edited by Dirk Holemans, 2022.
  8. A few straightforward examples: the ILO Guidelines recommend that Governments should 1) integrate provisions for a just transition into the agendas of line ministries, rather than assigning them to only one ministry; 2) promote the creation, development and formalization of dialogue mechanisms and structures at all levels to discuss the best means to implement national social, economic and environmental goals; and 3) coordinate skills development policies and technical and vocational education and training systems with environmental policies and the greening of the economy, and consider concluding bipartite or tripartite agreements on skills’ development.
  9. Finance for a Just Transition and the Role of Transition Finance
  10. In different words, "benefits for employment and development are vital for making many mitigation measures technically feasible, economically viable, socially acceptable, and politically sustainable." ILO, Employment and labour market implications of climate change

With sincere thanks to those who offered feedback and insight in response to the Discussion Draft, listed on page 3, we are pleased to share the final report.

There’s an ambitious idea making the rounds in the policy community. It has many names and many faces, a testament to its complexity. Distant corners of American thought leadership have converged on its core features, a testament to its potential.

Drawing from the experience of infrastructure banks, development banks, green banks, public banks, the USA’s mid-20th century Reconstruction Finance Corporation, as well as innovations in industrial policy and more, citizens, academics, politicians, civil and industry advocates, and investors are hard at work designing a new public investment institution for the US. It is an investment in America’s future.

This report compares fifteen distinct proposals for a new institution to drive and guide investment in America’s foundations. Although these proposals differ in many aspects, they have enough in common to merit a side-by-side analysis. Following an introduction of the broad context for this policy concept and a summary of each proposal, the comparative analysis covers their common policy objectives and methods, the core design choices which distinguish them, and the special policy objectives which might be worthy of broader uptake.

These proposals are part of a movement to increase and improve public investment in the nation’s future, but this movement also depends on and empowers other sectors, including institutional investors, civil society, and enterprise, as well as other levels of government, to play their part. The debate over key features of this policy idea will continue. Consider this report your guide to that debate.