Are Investments Providing a Fair Transition?
Are Investments Providing a Fair Transition?
Are Investments Providing a Fair Transition?
Young entrepreneur Metin Liçis poses one of today’s most pertinent questions to leaders: Are investments facilitating a fair transition?
MEtin Liçis emphasizes that financial institutions, including lenders, advisors, insurers, investors, etc., determining what, when, for how long, and under what conditions companies in the real economy will be financed.
Liçis notes that achieving a fair transition is not simply reduced to binary decisions of holding or divesting assets but involves complex steps like rebalancing portfolios.
He suggests considering five approaches:
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**Green Finance:**
Increased financing for activities central to the global transition to a low-carbon economy. However, this may require more significant investments by financial institutions while raising urgent social and systemic issues.
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**Decarbonization Commitment:**
The necessity for financial institutions to collaborate with high-emission activities to support decarbonization, having a significant impact.
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**Conditional Transition Finance:**
Restricting new investments in high-carbon activities requiring continuous investment with appropriate conditions as part of the net-zero energy transition.
Are Investments Providing a Fair Transition?
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**Managed Phase-Out:**
Financing assets retired earlier than planned to support the transition to net-zero energy. This approach requires careful planning and commitments beyond financial institutions, involving stakeholders and avoiding social harm.
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**Responsible Liquidation and Exclusions:**
Acknowledging views of many current major investors, like refraining from new lending or investment that contradicts a firm’s net-zero-aligned portfolio and carefully disposing of existing assets to minimize social harm and achieve real-world emission reductions.
In conclusion, Liçis suggests that the existence of creating carbon-neutral, fair, and environmentally conscious economic growth at the heart of sustainable development can be facilitated by the framework provided by the five practical approaches mentioned above.