A just transition

The concept of the just transition originated in the 1970s. Back then, it was in reference to the labour market in the United States. Now, it has re-emerged in regard to climate action.

The International Labour Organization defines the term in today’s context as “greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities and leaving no one behind”.

As Veronica Joffre, senior gender and social development specialist of Asian Development Bank (ADB), said at the ADB Southeast Asia Development Symposium in March 2023: “It is people who are at the core of the transformation. It will be people who make or break this process.”

In short, collaboration is essential. Governments, businesses, unions and employees need to work together to ensure no one gets left behind.

Governments are critical, especially when it comes to policy and regulatory frameworks. A report by The Bridgespan Group – a global non-profit organisation – stated that the green economy could generate up to 30 million jobs in Southeast Asia by 2030, but workforce development is imperative.

As we invest in renewable energy sources, the 32 million workers in the fossil fuel industry will eventually be displaced. Governments need to identify skills gaps and increase access to reskilling and upskilling opportunities to safeguard their citizens in a rapidly changing industry.

Other than sending their employees to such courses, businesses should also respect labour and human rights,focus on social transformation and provide safety nets for employees.

Fair capital distribution

To transition fairly, developed markets need to help emerging markets (EMs) find the capital they need, BNY Mellon Investment Management's chief economist Shamik Dhar noted. “This is where financial institutions and investors can make an impact by directing financing towards EMs and (helping) them get up to speed in transition development,” he added.

More and more banks are coming together to commit to climate action, with 134 banks, including Maybank, joining the Net-Zero Banking Alliance since its launch in 2021.

Banks will be the key to unlocking the US$3.8 trillion (S$5.17 trillion) in annual investment needed to power the push to net zero. But with great power comes great responsibility.

However, Boston Consulting Group found that even though most banking executives said it is important to consider social impacts, only a third of them reported that such considerations often or almost always impact their banks’ climate-related decisions.

Moving forward, banks should set criteria for their investment and lending portfolios, allowing them to influence how capital is being used – in an equitable manner by being both environmentally friendly and socially conscious.

As Dato’ Khairussaleh Ramli, Group President & Chief Executive Officerof Maybank, said: "Banks have a huge responsibility to realise a ‘just transition’, not only for ourselves but for the customers and communities we serve.”

The Maybank way

Maybank aims “to create a sustainable future for all” by striking a strategic balance between remaining attentive to the needs of the community and those of different stakeholders.

“We can talk about moving into renewables straight away, but equally important is how we support our clients on transition financing, transition advisory,” said Dato' Khairussaleh.

The first pillar of Maybank’s sustainability strategy is a “Responsible Transition”. Besides financially supporting sustainability-focused innovations and projects, the bank works with stakeholders and partners towards verifiable commitments and sustainable progress.

In August 2023, Maybank also hit the halfway mark of one of its four key sustainability commitments – to mobilise RM80 billion (S$23 billion) in Sustainable Finance by 2025. This will help companies move to a low-carbon economy while being cognisant of the complicated transition process.

Maybank, along with the wider banking industry, aims to facilitate the just transition in Southeast Asia and beyond, to drive change and protect our planet without leaving anyone behind.