Just Transition Observatory: as Europe’s transition moves forward, a tougher road awaits

?? In Europe as elsewhere, millions of individuals and businesses are making unprecedented efforts to reach carbon neutrality. Last year’s first edition of our Just Transition Observatory showed Europeans want not just a transition, but a just transition – one that ensures decent work for all, fosters social inclusion, and eradicates poverty. A special edition of Perspectives dives into the results of this year’s Observatory, based on a broad European survey conducted by 益普索 and the support and insight of our partners Terra Nova- think tank , CSR Europe and Università Bocconi . The bottom line? European households and companies are increasingly aware of the pressures the transition is putting on them.

• ?From the wars in Ukraine and Gaza to rising energy prices, perhaps it should come as no surprise that climate change has, for the first time, slipped down to third on the list of Europeans’ worries, after the international situation and purchasing power. But something else is afoot: while they have begun adopting new behaviors and changing their lifestyles, it seems EU citizens are now entering a “wait-and-see” phase when it comes to ecological gestures. In short, they’re holding off on making more efforts, waiting instead for more consistent and encouraging signals from public and private actors.

• In practice, this means Europeans are less inclined than last year to limit their travel by car or plane (-5 points), change their heating system (-4), or eat less meat (-3), despite these actions all being crucial for decarbonisation. They are also more wary of compulsory measures like a ban on diesel cars (-3), an increase in taxes on petrol and diesel (-4), or flight restrictions for destinations reachable by train in three hours (-3). In short, Europe’s citizens are ever so slightly less open to making personal sacrifices.?

• ?Should this be a concern? Perhaps not. Because what this reveals is not a lack of will but, rather, growing attention to the fairness of the energy transition. “People are increasingly concluding that efforts to fight global warming are driving up inequality”, notes Brice Teinturier , Deputy Managing Director at Ipsos. In fact, these efforts represent clear driver of social inequalities for a whopping 64% of Europeans, a 3 point rise from last year. Additionally, 72% think transition efforts will create disparities between affluent and low-income groups (up 4?points). For instance, 71% (+2 points) foresee inequalities between those who depend on their car and those who don’t.

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• These results are not necessarily bad news for the transition. Rather, they are a sign that change is underway. With the 2019 Green Deal, the EU made an unprecedented commitment to environmental action. Building on efforts made from the past 15 years, this acceleration is now starting to pay off: 2023 saw a significant drop in Europe’s CO2 emissions. As these changes become more visible, so, too, does their social cost and the significant lifestyle changes they induce. This explains why the green policies designed to speed up this process are increasingly met with protests over their potential impact on jobs and livelihoods.

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• Europeans are making it clear: the energy transition may be necessary, but not everyone shares equal responsibility. This is why a majority support wealth redistribution, believing the richest should shoulder more of the cost. Our survey of 400 SME senior executives in energy, agriculture, and construction (sectors responsible for at least 60% of Europe’s CO2 emissions) echo these concerns. Many feel they are being asked to do too much, risking their company’s economic health in the process. “Stakeholders are well aware of the challenges, but they now clearly realise that the road will be rockier than expected”, comments Laurence Pessez , Head of CSR 法国巴黎银行 .

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• To lessen the burden, SME executives call for subsidies, tax advantages, and accessible financing to support individuals and businesses in their energy transition. They also advocate for collaboration at the local, national, and international levels to protect vulnerable groups such as low-income households and workers in transitioning industries. Finally, they stress the urgent need to build infrastructure for the energy transition, from energy grids to wind farms and water management systems for farmers.

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• What do these trends and concerns reveal? First, as Thierry Pech , managing director of think tank Terra Nova, puts it: “Europe is finally approaching the ‘tough part’ of transition”. Second, to effectively address growing resistance from individuals, climate policies need to be more inclusive, ensuring support for disadvantaged households and a fair distribution of the burden. In three words: a Just Transition! To find out how we get there, dive into Perspectives’ special edition now!

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?? In Asia, one long-neglected factor is now at the forefront of stewardship decisions: nature.

• This is no coincidence: Asia is home to some of the most vibrant biodiversity hotspots on the globe, and 63% of its GDP depends on nature and ecosystem services, according to the World Economic Forum . Yet Southeast Asia also suffers from one of the highest deforestation rates, putting the region at risk of catastrophic landslides and flooding.
• Recent regional initiatives reflect an increasing awareness of the importance of nature preservation. Launched in 2022, the Asia Research & Engagement’s Asia Protein Transition Platform (which BNP Paribas Asset Management co-founded) aims to set investor expectations for the region (including zero deforestation, responsible use of natural capital and minimal chemical use) and engage with companies across value chains on the subject.
• BNP Paribas Asset Management ’s stewardship team has also been actively stepping up its engagement on hazardous chemicals and plastic pollution, a considerable issue in Southeast Asia due to rapid urbanisation and inadequate waste management infrastructure.
• To find out more about our stewardship efforts in Asia and the initiatives we are part of, head there ??

? In the United States, a bright future lies ahead for clean energy!

• Since the 2020 pandemic, renewables, electric vehicles, lithium, and battery tech have garnered increasing attention in the United States, resulting in a surge of clean energy IPOs and SPACs. In 2022, Joe Biden’s Inflation Reduction Act and the European energy crisis triggered by Russia’s war on Ukraine only confirmed this momentum.
• But things have begun to take a different turn: a hike in borrowing costs is challenging the residential solar sector, while trade issues are severely affecting large-scale solar. So, what lies ahead for renewables in the US? BNP Paribas Exane ’s research highlights a path forward for solar and green hydrogen. ??

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?? Italy has launched its first Green BTP issuance of the year!

• BTP Green are Italian government bonds designed to finance initiatives within the State Budget that have positive environmental impacts. Due in 2037 and supported by BNP Paribas as Joint Lead Manager, this €9 billion transaction attracted an impressive €84 billion in orders.?
• The funds will support a variety of environmental objectives, including the development of renewable and low-carbon energy sources, energy efficiency improvements, public transportation upgrades, and investments in pollution prevention and control.

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Few of us are familiar with the 50-year story of the climate battle.

• In 1972, global leaders convened in Stockholm for the UN Conference on the Human Environment, marking the birth of climate diplomacy. Half a century later, while the road ahead remains challenging, considerable strides have been made to mitigate climate change.
• This month, Julie Meynard , Director of International Business Office at Arval BNP Paribas Group , recommends adding “The Climate, a 50-year battle” to your watchlist. This powerful documentary by Elena Sender and Alexis Barbier-bouvet dives into the decisive moments and key figures that shaped the climate movement.
• A great source of inspiration to continue making progress towards a more sustainable and just world!

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