Interview: What Makes a Climate Transition Effective

A Conversation with Shin Furuya, Director of Impact Strategy

Excerpted from our 2022 Impact Report

Shin Furuya

Domini’s Impact Investment Standards serve as a guide for all Domini Fund investments. How do they shape the firm’s decisions when it comes to corporate climate change policies and practices?

In our view, climate change poses fundamental questions of transforming existing business models for many, if not all, sectors. This transformation must consider not only reducing greenhouse gas emissions across a product’s entire lifecycle, but also ensuring resiliency to climate-related physical risks.

Our approach emphasizes business model realignment with our Impact Investment Standards. Business model alignment is crucial to how we assess a company’s current standing, and our sector-specific key performance indicators (KPIs) may include forward-looking data, which helps us to assess the direction of a company. We seek to identify which companies have robust climate transition strategies and to measure actual progress as their business models shift from “misaligned” to “aligned.”

Climate change is a major labor issue. How will the transition to a lower-carbon economy affect the workforce?

There are significant gaps in the labor market when it comes to the low-carbon transition. The International Energy Agency has estimated that there are at least 32 million workers in fossil fuel-related sectors alone. There is a high demand for skilled workers in low-carbon sectors, which are facing serious labor shortages due to rapid growth.

It’s also worth remembering that workers and their families constitute an important part of communities where companies operate. Other businesses, especially stores and restaurants, depend on local companies and their workers. Companies help generate significant tax revenue for local governments. Communities are very invested in seeing local companies make a sustainable transition and prosper.

“We believe companies that invest in training workers for the transition to renewable energy will be well positioned for the future.”

Can you give us some more insight into what makes a company’s climate transition effective and equitable? What’s a good example?

A crucial step for companies is to assess how each stakeholder, including workers, will be affected by climate change. Our standards explicitly support workers’ transition to a low-carbon economy, which should be accompanied by strong labor protections and fair wages.

A good example is SSE PLC, a United Kingdom-based electric utility company. It is tackling the enormous challenge of becoming low-carbon and has taken a leadership role in caring for its workers. SSE has conducted detailed surveys with unions, governments, and other stakeholders regarding the concrete steps needed to ensure a just transition. The company is seeking to hire workers from carbon-intensive sectors, who it believes bring valuable expertise to low-carbon operations.

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