Measuring decent work for better investment decisions: integral for a just transition to net zero

Dr Mohsen Gul, Senior Project Manager, Centre for Sustainable Finance reflects on why a just transition to net zero necessitates measuring decent work for better investment decisions.

The Just Transition Declaration, agreed upon at UN Climate Conference COP26, recognises the need to ensure that no one is left behind in the transition to net zero economies. This should include particularly those working in sectors, cities, and regions reliant on carbon-intensive industries and production. With less than 100 days left to COP27 taking place in Sharm el-Sheikh, the question is no longer ‘why’ but ‘how’ do global leaders create a supportive environment to green the global economy fairly and inclusively. Investors have a role to play in this, and with policy momentum and a growing number of net zero pledges, the just transition is firmly on the investor agenda and will help them meet the Paris Agreement.

The Principles of Responsible Investment (PRI) recognises calls for investors to take a human-centric approach to decent work and assess how invested capital contributes to quality jobs, alongside metrics that show portfolio emissions. Much of the data needed for investors to assess fund impact on quality jobs, alongside financed emissions through better, does not exist yet, or is not in the right format.

The Investment Leaders Group (ILG) at the University of Cambridge Institute of Sustainability Leadership (CISL) has led research on how to measure decent work in companies they might invest in. The newly launched report and action guide make a clear financial and moral case for investing in quality jobs, which maximises corporate profitability, reduces litigation risk and ensures long-term economic stability thereby contributing to positive financial returns for investors. The number of jobs supported by investee companies is commonly disclosed. Some data also exists to help investors assess the quality of those jobs. But at present, data coverage is too low, data is unverified, or it is not disaggregated enabling investors a clear view of the impact of invested capital, on decent jobs.

We look at data provided by companies in the MSCI All Country World Index (ACWI) about the number of jobs supported by portfolios, and the meaningful characteristics of those jobs - for example pay, job security and working conditions.  Targeted recommendations for policymakers, ESG data providers and corporate are provided to fill in the gaps and support investors to better measure their invested impact on quality jobs.

Investors call upon businesses to improve the disclosed data on quality jobs by:

• Disaggregating wage data to show the medium wage and the number of individuals paid a living and minimum wage
• Detail the proportion of different contract types supported by companies (permanent, fixed term, agency, contractor, zero-hours etc.) to indicate job security
• The number of workplace accidents, in addition to health and safety policies and training on those policies may not reflect incidents that occur
• Instances of discrimination and harassment, and corporate policies that support workers facing discrimination to safely self-report their experiences
• Information on the proportion of workers represented by independent trade union organisations or covered by collective bargaining agreements – largely self-reported by companies - needs to be independently verified

Investing in decent work (UN Sustainable Development Goal 8) is an integral component of supporting a just transition. Supporting integrated disclosure on decent work will need multisector stakeholders to work together. ILG calls upon companies from large-mid cap to Small Medium Enterprises need to focus on gathering and reporting the right data. ESG data providers need to request, capture, and present this data in transparent, accessible formats. Policymakers need to consult with investment actors to standardise approaches, and support better disclosure by encouraging, incentivising and mandating disclosure where sensible, for example in low carbon new transition plans.

Read the Investing in quality jobs for a just transition reports here.