Investors praise SSE’s Just Transition progress report

UK utility's efforts welcomed as investors hope other companies will follow suit.

Investors and other market observers have welcomed SSE’s recent report disclosing progress against its Just Transition strategy.

The report detailed the utility’s actions against 20 principles for a Just Transition, established in November 2020, “with the clear purpose of bringing about enhanced scrutiny and engagement”.

Its initial 2020 plan – brought about on the back of engagement by shareholders Friends Provident Foundation and Royal London Asset Management (RLAM) – was a world first at the time.

Carlota Garcia-Manas, head of climate transition and ESG engagement at RLAM, told RI that the latest report demonstrates that SSE is showing leadership. “Achieving a Just Transition by ensuring that social considerations are at the heart of the climate transition is crucial if we are to minimise the disruption of moving to a low-carbon economy,” she said. 

The UK investor has been engaging the energy utilities sector on the topic since 2019 and has since been targeting more sectors and companies. In March 2022, RI reported that UK banks would face greater scrutiny from RLAM and Friends Provident Foundation as the pair widened their engagement programme.

Rathbones, which is one of the leads on SSE for Climate Action 100+, also welcomed the SSE report.

Matt Crossman, stewardship director at Rathbones, told RI: “I think you have to admire the commitment to transparency. Just Transition is a simple concept at first glance, but the more you dig into it, the trickier it gets to define and pin down. Define ‘Just’ – to whom and in what time scale?”

“We think the way in which SSE has invested in the intellectual side of things – bringing together diverse thinkers from all stakeholder angles – has been important in setting a framework for progress,” he added.

For Nick Robins, professor in practice – sustainable finance at the Grantham Research Institute, SSE’s new report helps to move the Just Transition agenda to the critical issue of measuring performance.

He told RI that three themes in the report “struck home”. First, the importance of fair work in securing a skilled and motivated workforce for growing green sectors; second, the need to distinguish different types of stakeholder engagement from engagement through consultation and on to co-creation (for example, in the design of community investment funds linked to new wind farms); and third, the importance of strengthening human rights due diligence for transition minerals.

Daisy Streatfeild, sustainability director at Ninety One, also said the report is a leading example of the transparency and detail needed to ensure accountability for a Just Transition and “serves as a standard for other companies to follow suit”.

In particular, she noted that the report provides a useful mix of both qualitative and quantitative data points, evidence and measures of progress, which “has been a challenge for many companies”.

Future improvements

Streatfeild suggested that data points for consideration in the future could also explore the actual number of jobs created and lost, and the number of low-income customers served with affordable renewable electricity.

She also noted that although SSE aims to invest £25 billion ($31.3 billion; €28.7 billion) between 2021 and 2031 in low-carbon infrastructure, it is “not clear on their capex allocation to their Just Transition efforts, such as the amount for development, retraining and support for suppliers/communities”.

Newton Investment Management’s global head of sustainable investment, Therese Niklasson, also suggested that the objectives within the plan could be improved by disclosure of time-bound commitments.

SSE has previously been recognised for its efforts in contributing to a Just Transition.

In the World Benchmarking Alliance’s (WBA) 2021 Just Transition assessment of 180 of the world’s most influential companies in the electric utilities, oil and gas, and automotive sectors, SSE was identified as an example of good practise. This was in stark contrast with the vast majority of the firms, which were criticised for “failing to demonstrate efforts towards a Just Transition”.

Commenting on the SSE report, its decarbonisation and energy transformation lead Vicky Sins told RI: “At a first glance, SSE’s progress report on actions taken is an example of good practice, which is rare to see. We welcome the company’s initiative as it shows their appetite for dialogue, transparency, and communication, which are core components to a successful Just Transition.”

In the summer, the Alliance will do another full assessment of the firms, set to be published in September.

SSE is also part of wider cross-industry transition initiatives, for instance, in February it became a member of the UK’s Transition Plan Taskforce’s (TPT) delivery group.

The TPT was launched by the Treasury in April 2022 and tasked with developing a gold standard for transition plans from UK financial institutions and corporates.  

Joe Dharampal-Hornby, policy and public affairs manager at the Impact Investing Institute, which co-chairs the TPT’s Just Transition working group, told RI that SSE’s report provides robust examples of the Just Transition in action. 

In particular, he pointed to the firm being an accredited Living Hours employer, as well as including clauses in contracts to prevent worker exploitation in supply chains, and providing retraining programmes for employees who want to transition to low-carbon roles.