Supporting a transition that can be both fast and fair
As climate commitments across the global financial system accelerate, one question is increasingly coming to the forefront: how do we ensure decarbonisation does not leave people behind?
For pension investors, the answer matters. A transition perceived as unfair risks social resistance, regulatory pushback and disruption to economic activity - all of which ultimately can affect long‑term returns.
Recognising this, Royal London Asset Management, Border to Coast Pensions Partnership, and Friends Provident Foundation embarked on a four-year collaborative engagement programme with four of the UK's largest banks: Barclays, HSBC, Lloyds Banking Group and NatWest Group. Our aim was clear - encourage the sector to integrate just transition into its climate strategies and ensure financing decisions support customers, workers and communities through the shift to net zero.
The findings published this month in our Just Transition in Banking: Engagement Outcomes Report, offers valuable insights for pension schemes seeking resilient portfolios and credible climate stewardship.
Why banks should matter to pension investors
Banks sit at the centre of the real economy. Their lending decisions influence the pace of decarbonisation across housing, SMEs (small and medium-sized enterprises), corporates and regional infrastructure. But they also influence how transition costs and benefits are distributed - and therefore whether the transition is politically and socially durable.
A just transition approach can help banks:
- Manage customer and community exposure to transition risks
- Reduce long‑term credit, reputational and regulatory risks
- Strengthen the credibility of their net‑zero plans
- Unlock demand for new products and financing solutions aligned to sustainable, inclusive growth.
All of these are material for long‑term pension investors relying on stable growth and risk‑adjusted returns.
Four years of collaboration — and real progress
Clear investor expectations to help sector
Together with Border to Coast Pensions Partnership and Friends Provident Foundation, Royal London Asset Management developed 15 investor expectations for integrating just transition into banking covering products, sector strategies and regional approaches. These expectations draw from the Transition Pathway Taskforce (TPT) and Glasgow Financial Alliance for Net Zero (GFANZ) frameworks and were used to assess the banks' progress.
The collaborative approach mattered. The partnership brought together different investor types - a major Local Government Pension Scheme (LGPS) pool, an independent charity, and a large asset manager - strengthening the credibility and impact of the engagement.
Banks acknowledged that social outcomes are inseparable from climate plans
When engagement began in 2022, few banks made any explicit link between climate and social impacts. By 2025, all four acknowledged that a fair transition is vital to achieving their net‑zero ambitions.
The strongest observed progress: product innovation and sustainable finance
Across the banks, the areas showing clear advances were:
- Sustainable and transition finance: All four banks at the end of the engagement programme offered extensive green, social and sustainability‑linked financing, with Barclays explicitly embedding just transition language into its frameworks.
- Inclusive product design: Examples include Lloyds' Green Living Reward and housing initiatives aimed at supporting consumers and social housing providers through energy efficiency upgrades.
Case study – Lloyds
In 2025, Lloyds became the first major UK bank to lend to Community Development Finance Institutions (CDFIs), directing £43m to underserved SMEs in disadvantaged regions – aligning decarbonisation with social equity.
Case study – NatWest
NatWest's 2025 Human Rights Report recognises climate change as a salient human rights risk and integrates insights across operations, lending and supply chains.
Sector strategies: early progress but room to grow
Banks are increasingly supporting high‑emitting sectors through transition finance, sector frameworks and advisory support. Strong examples include:
- Barclays' integration of just transition factors into its Client Transition Framework
- Lloyds' systems‑based decarbonisation approach to housing, agriculture and transport, explicitly addressing workforce skills gaps and community risks
However, we noted two major gaps remain:
- Limited integration of social risks into sector transition roadmaps
- No bank yet meets expectations around encouraging community benefits from corporate transition plans
For pension schemes, these gaps matter – because unmanaged social risks can slow or derail transition programmes your portfolios depend on.
Place-based transition: the biggest challenge
Of all areas assessed, regional decarbonisation strategies scored the lowest.
Despite isolated examples we found that no bank has developed a comprehensive, structured approach to mapping regional transition risk or supporting communities facing economic disruption.
This could be a key future priority. Energy, housing and industrial transitions will not occur evenly across the UK and banks have unique visibility into local vulnerabilities and opportunities.
As Royal London Asset Management, Border to Coast Pensions Partnership, and Friends Provident Foundation emphasise: regional fairness is essential to sustainable long‑term value creation.
Why this matters for pension schemes
1. A fair transition reduces systemic risks
Unmanaged social impacts create resistance to climate policies – delaying change and increasing long‑term costs.
2. Banks with credible just transition plans are better positioned
They can help maintain customer trust, avoid stranded customer/worker/community risks, and capture new financing opportunities.
3. Collaborative engagement is working
The progress achieved through this programme demonstrates how clear expectations, sustained dialogue and aligned investor voices can shift industry practice.
Our call to action for pension investors
As long‑term stewards of capital, pension schemes have a critical role to play in shaping a transition that is not only environmentally credible but socially inclusive.
We encourage investors to:
- Integrate just transition expectations into stewardship and manager oversight
- Engage directly with banks and other financial institutions on place‑based risks
- Support collaborative initiatives, including the Just Transition Finance Lab
- Demand transparency on how banks assess and address social impacts in lending
- Champion innovation that enables vulnerable customers, workers and regions to benefit from transition opportunities
We believe a fast transition is essential – but a fair transition will be enduring.
Reference to any security is for information purposes only and should not be considered a recommendation to buy or sell. This does not constitute an investment recommendation.
Voting, engagement, research, and advocacy help shape outcomes and support better corporate practices. However, voting and engagements may not always apply to a specific Royal London Asset Management fund or strategy, as each will have different investment objectives. Please check the specific product objectives for details.
Past performance is not a guide to the future. Capital at risk.
