Sustainable Finance Working Group

Finance for a Just Transition and the Role of Transition Finance

This input paper prepared by the International Labour Organization (ILO) for the 3rd G20 Sustainable Finance Working Group meeting addresses the key role that financial systems and their actors play in achieving a just transition.

The level of integration of social and employment dimensions for the climate transition in financing activities is currently lagging. Although currently tailored largely to environmental goals, the sustainable finance market infrastructure offers several entry points to simultaneously target positive climate and social outcomes of the transition. A comprehensive approach that embeds social considerations within practices of the whole ecosystem of actors involved in climate financing can improve the interoperability of practices, bringing about operational synergies and increasing the overall availability of capital.

This paper presents several social and employment-related elements to be factored into financial decision making to align it with the objectives of a just transition; it highlights some building blocks of the financial market infrastructure that could be enhanced by including social aspects so as to deliver systematic positive contributions to sustainable development goals; and it connects these building blocks with elements of emerging transition finance frameworks, for further research and discussion by the G20 Sustainable Finance Working Group and other relevant platforms.