The just dimension of transition finance and related supporting tools

Background

In the next few years, climate action must reach record levels to limit warming to 1.5°C—a goal integral to averting catastrophic consequences. Such a transformation requires a profound shift across sectors and the global economy. The transition to low-carbon and sustainable economies not only offers a pathway to mitigate environmental degradation but also holds the promise of job creation, technological innovation, and the development of resilient societies.

The concept of a just transition, as outlined in the ILO Guidelines for a Just Transition, emphasises the necessity of aligning the shift to a low-carbon economy with equitable practices that leave no one behind. Globally endorsed, this framework provides principles and policy entry points to guide governments, employers, and workers’ organisations in navigating this transformative journey. The importance of a just transition is enshrined in the Paris Agreement and is gaining prominence in the agendas of governments, corporations, workers, and financial institutions worldwide.

Crucially, the financial sector plays a key role in supporting a just transition. By directing capital towards green technologies, adaptation solutions and innovative businesses, the sector can expedite the move towards a lowcarbon, resource-efficient and resilient economy. Simultaneously, responsible finance practices can incentivize businesses to transform their operations and adopt environmentally and socially responsible practices—promoting decent work and contributing to the well-being of communities affected by economic shifts. To support the financial sectors’ contribution to a just transition, the ILO is looking for a consultant to write a report reviewing the existing applications of the ‘just’ dimension of transition finance and related supporting tools.

Objective

The objective of this assignment is to write a report reviewing the existing applications of the ‘just’ dimension of transition finance and related supporting tools.

The paper is expected to have between 8-11 pages, informing financial sector players of relevant “just” transition considerations, related to transition finance, available frameworks and tools; sharing examples of emerging practices with a focus on specific sectors in short “sector snapshots”; and providing action-oriented recommendations relevant for financial service providers and other sector stakeholders such as regulators, Ministries of Finance and Central Banks.

The paper should cover the following aspects:

1. Approaching a just transition in the financial sector, particularly as it applies to transition finance

• Reviewing approaches to embedding social considerations in the context of the climate transition (such as impacts on the world of work, gender equality, non-discrimination, social inclusion, etc), including in the context of the ILO’s Just Transition Guidelines.
• Outlining major social considerations associated with a just transition relevant for the financial sector.

2. Enhancing assessment of social risks and opportunities in transition finance

• Review of frameworks and tools guiding financial institutions in making transition finance just
  • At the level of internal policies and transition plans of financial institutions
  • At the level of processes and procedures to assess risks and opportunities related to the social aspects of the low-carbon transition

3. Sector snapshots

• Snapshot 1: Agriculture
  • Transition dynamics affecting the sector and main social impacts
  • Approaches that financial institutions can use to embed social considerations and contribute to just transition in this sector (including examples)
• Snapshot 2: A high-emitting, hard-to-abate sector (to be defined)
  • Transition dynamics affecting the sector and main social impacts
  • Approaches that financial institutions can use to embed social considerations and contribute to just transition in this sector (including examples)

Methodology

The methodology to be used by the consultant will include:

• Desk research, based on inputs from the ILO on relevant tools, frameworks and initiatives already identified o Interview with key ILO experts on the theme. ILO experts will include staff working on the following departments, units and programme:
  • Social Finance Programme
  • Priority Action Programme on Just Transitions
  • Sector specialists
• Interviews with other actors working on the topic of just transition in the financial sector (regarding specific tools and case studies)

Deliverables and timeline

The consultant will deliver:

• Deliverable 1: A draft annotated outline by 12/03/2024, including list of potential interviewees
• Deliverable 2: A draft report, by 28/03/2024, which will undergo 2 rounds of comments by the ILO
• Deliverable 3: A final report, by 22/04/2024 Payment will be made in two tranches:
• 50% once deliverables 1 and 2 are received and judged satisfactory by the ILO.
• 50% once deliverable 3 is received and judged satisfactory by the ILO.