This insight brief focuses on the negative social impacts of activities linked to the low-carbon transition.
The low-carbon transition could have negative social impacts if it is not managed fairly. While companies can make progress towards their climate goals using a range of decarbonisation levers, it is important that they do so in a manner that aligns with global climate targets and ensures no one is left behind. These levers, technologies or activities that aim to directly or indirectly reduce emissions, are associated with a variety of social impacts and have consequences in different parts of a company’s value chain.
This insight brief focuses on the negative social impacts of activities linked to the low-carbon transition. The authors set out an exploratory, evidence-based framework that can help investors and companies anticipate such risks. Combining insights from the academic literature with empirical data on corporate disclosure, the framework is valuable in identifying sector-specific priorities for shareholder engagement with companies.
Implications for companies and investors
The authors adopt three broad categories of social impacts on local communities: land-use conflicts, the unequal distribution of costs and benefits, and regional economic decline. Mapping how each is linked to specific decarbonisation levers, they find that:
- Decarbonisation strategies vary widely across companies and sectors, as do the social risks they can generate.
- Managing these risks effectively requires companies and investors to develop a shared, sector-specific understanding of the social impacts that are most material for specific levers.
- For companies, this means integrating lever-specific social impact assessments into transition planning from the outset rather than treating the just transition as a separate workstream layered on top of existing decarbonisation commitments.
- For investors, it means moving beyond broad portfolio-level assessment towards sector-specific engagement that is informed by the decarbonisation levers a company plans to use.
- Frameworks that adopt a sectoral lens, such as the Net Zero Strategies Framework for Diversified Mining, are beginning to generate data that will help investors and companies act on this basis.
