In UNEP FI’s first blog post in our series on Gender, Climate and Finance, we noted the interconnections between gender inequality, poverty, and climate change, and discussed ways that improving women’s access to financial inclusion, education and family planning can also lead to a reduction in carbon emissions. If you haven’t read it yet, you can check out the blog post here.

In this post, we shift attention to the importance of ensuring a just transition away from reliance on fossil fuels, and the role of women in leading that transition in a way that minimises harm to vulnerable communities and maximises the economic, social, and environmental benefits to everyone.

Stay tuned for our third and final post in the series, which will focus on the ways that financial institutions are using innovative approaches to support gender equality, and how that relates to climate finance and contributes to the goals of the Paris Climate Agreement.

Today is Gender Day at COP27, with events throughout the day focusing on women’s role in adapting to climate change and leading the transition to net zero. The transition has immense potential for economic growth, with the number of clean energy jobs estimated to nearly triple by 2050 to 29 million globally. The renewable energy sector, along with forestry, manufacturing, aquaculture, agriculture and many others, are expected to experience significant structural changes as a result of the climate transition. However, traditionally underrepresented groups, including women, Indigenous peoples, and informal workers, risk being denied access to the economic opportunities presented by these structural changes. That is why at UNEP FI we are committed to a just transition that leaves no one behind.

The concept of just transition, officially recognized in the Paris Agreement at COP21, has become increasingly important over the past several years as governments and institutions grapple with the best way to decarbonize our economies. A just transition puts people and communities at the heart of our response to climate change and considers the needs and interests of communities who are most at risk of being negatively affected by climate-induced changes. This includes women, indigenous peoples, and informal workers, as well as workers formally employed in fossil fuel and related industries. The International Labour Organization (ILO) highlights that specific gender policies should be considered as part of the just transition.

A just transition must take into consideration the barriers that women face in accessing the formal labour market. In developing countries, 92% of women in the labour market work in the informal sector, primarily in the agricultural industry. These workers generally don’t have access to social protections because of their informal status which means they are more likely to miss out on reskilling and training opportunities, as well as unemployment insurance or other benefits that could help them as the economy transitions. Indigenous women and those who are heavily reliant on the land for survival are particularly at-risk during the climate transition. For example, renewable energy projects that require large tracts of land could risk displacing the traditional landowners if the projects are not managed properly.

There is also a significant gender gap in the formal economy, with women only comprising 32% of the global clean energy workforce. This is an improvement compared to the non-renewable energy sector, where women are only 22% of the workforce, but it still falls well below parity. That is why it is vital, now more than ever before, to commit to a gender-responsive just transition in which both women and men can equally share the economic benefits of the global transition to clean energy. Unless these issues are addressed, there is a real risk that the clean energy transition will lock women out from skilled, decent work opportunities in the formal economy.

Financial institutions have an increasingly vital role to play in incorporating just transition principles into their business operations. In 2021 the European Commission introduced the Just Transition Mechanism designed to promote investment in sustainable development in both the public and private sector to help alleviate some of the social costs of the transition to a carbon-neutral economy. In the same year, led by the Principles of Responsible Investment (PRI), 161 investors endorsed a Statement of Investor Commitment to Support a Just Transition. Banks are pivotal in ensuring that just transition principles are considered as part of a broader commitment to upholding and promoting human rights. They can also take an active role in making access to finance more inclusive and supporting new, women-led business opportunities in relevant sectors such as the renewable energy sector. Insurance companies also play an important role in helping businesses manage the climate transition and protecting the livelihoods of communities at risk of natural disasters.

Another way that financial institutions can support a gender-just transition is through better gender representation in decision making. A just transition requires thorough consultation and inclusion in decision making by social groups, including women, who have been historically underrepresented. There is evidence that including women in decision making leads to better environmental governance, whether through increased representation and voice of women within their communities, in society at large, at the political level, or through increased labour force participation. In other words, there is a correlation between women being empowered in decision making and lower carbon emissions. Involving women as active participants can also lead to greater adoption of clean energy technologies. For example, in Sub-Saharan Africa, investors tried to promote solar-powered cooking stoves, but failed to consult adequately with women in the community. In the end, the project was abandoned because the stoves took too long to cook food and didn’t meet the needs of the women in the community. This example shows how crucial it is for women to have a greater say in how we transition to a carbon-neutral society. By ensuring that more women are consulted on investment projects and represented in senior decision-making roles, financial institutions can facilitate a greater awareness of the importance of gender-responsive climate action in their business operations.

At UNEP FI, we are committed to helping our members to incorporate just transition principles as part of their overall commitments to carbon neutrality. We have some exciting work planned in this area for 2023 to strengthen the banking and insurance industry’s role in supporting a just transition. As part of this project, we aim to give practical guidance to financial institutions on how to incorporate just transition principles into every level of their business operations. Stay tuned to our website for more information about how you can get involved in this important area.