The urgency of climate change has led to growing recognition of the need for a transition to low-carbon economies. There is also growing recognition that there is a need for climate transitions to be just—creating equitable opportunities for all members of the society, protecting workers and communities, and promoting decent job opportunities, all while minimizing negative impacts, especially for the historically marginalized and vulnerable populations. Just transitions bring opportunities for people and economies through the creation of decent jobs, improved health outcomes, low-cost energy, and greater productivity. Fair and inclusive climate transitions can help ensure broader societal buy-in, thereby speeding the transition to a more resilient and competitive net zero economy.
Drawing on our work supporting just transitions in the Bangladesh textile and construction industries and in India and the US, we have identified four key considerations that funders could take into account as they develop and execute strategies to advance just transitions:
Keeping these considerations in mind during both design and implementation can significantly enhance the effectiveness of just transition initiative
For example, both Germany and South Africa have committed to phasing out coal, but their approaches reflect starkly different contexts. Germany’s diversified economy, strong labor unions, long-standing investment in renewables, and substantial financial capacity have enabled it to pursue a coal phase-out by 2038. The transition is guided by a multi-stakeholder Coal Commission and supported by compensation and social protection measures, helping secure broad public and political backing. In contrast, South Africa depends on coal for over 80% of its electricity and thousands of jobs—within a broader context of high unemployment and inequality. It has, therefore, opted for a more gradual transition that prioritizes social protection and energy security, supported by international funding through South Africa’s Just Energy Transition Partnership.
Effective transitions also require coordination across governments, businesses, workers, and civil society, as fragmented efforts can lead to inefficiencies and missed opportunities. Funders can play multiple roles in enabling this—convening stakeholders, commissioning public goods (e.g., climate research), influencing decision makers, or supporting implementation. To ensure their contributions are truly additive and impactful, funders could adopt an ecosystem approach. This involves understanding the context, mapping key actors and their relationships, analyzing existing initiatives and gaps, and identifying leverage points that can catalyze broader systems change.
In a context where multiple stakeholders are working in silos to support different groups, a funder could add value by facilitating, coordinating and aligning these efforts. For example, if one initiative is focused on expanding adoption of low-carbon technologies that may require reskilling of workers, and another initiative is focused on livelihoods, a funder could help align their efforts by understanding the new skills needed and designing interventions to reskill workers for these new technologies. In other contexts, for instance, when promising models exist but lack validation, the greatest impact may come from funding proof-of-concept innovations that industry players can scale.
A just transition must address both short-term challenges and mid-to-long-term resilience. Climate change is already affecting communities—especially vulnerable groups—through negative health impacts, economic disruptions, increased competition for scarce resources, and physical displacement. Without timely adoption of climate adaptation measures, these impacts are expected to worsen. At the same time, transition strategies must also reduce future climate risks by accelerating decarbonization and shifting to more sustainable systems.
Funders should balance short-term and mid-to-long-term needs by identifying sector-specific climate risks and supporting strategies that integrate both adaptation and mitigation. Investing in initiatives that embed resilience into broader development plans can help communities manage the short-term effects of changing climate.
For instance, while decarbonizing factories and supply chains is critical for the mid-to-long-term, investing in adaptation strategies in the short-term is equally important to protect workers, communities, and businesses from immediate climate-related risks such as heat stress, flooding, and extreme weather events. These strategies could include infrastructure interventions (e.g., improving ventilation in factories, flood-proofing factories and communities in which workers reside), financial measures (e.g., climate-linked insurance for workers and businesses), and operational adjustments (e.g., ensuring labor laws account for increasing heat stress, for instance, by requiring frequent water breaks). By implementing such measures, industries can help protect vulnerable groups while maintaining productivity.
Climate transitions are dynamic, with emerging risks and opportunities constantly reshaping their trajectory. Just transition strategies must set realistic, achievable goals while remaining flexible enough to adapt to these evolving scenarios.
Rigid or unrealistic goals can hinder or even stall transitions, while an approach that considers constraints and capabilities of current systems and actors allows for continued incremental progress with opportunity for course correction. For example, efforts to support displaced workers often focus on pathways into “green” jobs, which may not be available adequately in these locations or may require significant re-skilling. A more pragmatic approach is to place workers in sectors with lower emissions than their previous industry, even if those jobs are not fully “green”.
A flexible strategy ensures transitions remain relevant and effective as circumstances evolve even in the face of uncertainty. To achieve this, funders can use the scenario analysis approach to map out plausible future scenarios, galvanize stakeholders to work towards the best-case scenario, and design pathways and strategies to achieve this shift while safeguarding against poor outcomes. By continuously monitoring emerging trends in relation to these scenarios and pathways, funders can identify early signals and proactively adjust their strategies.
For instance, as part of a broader just transition effort in Bangladesh’s industrial sector, FSG identified six potential scenarios for the textile and apparel sector by 2030, based on three key uncertainties: global demand, sector competitiveness, and youth unemployment. These scenarios help stakeholders anticipate risks, explore trade-offs, and plan for plausible futures, including less favorable scenarios.
For a just transition to succeed, it must involve all affected stakeholders, especially those most marginalized. Marginalized populations—such as low-income workers, women, and indigenous communities—often face the greatest risks in transitions. To ensure their needs are addressed, it is critical to integrate their voices across all stages of a transition—from planning and decision-making to implementation and monitoring. Without meaningful participation from diverse groups, transition strategies may overlook critical social and economic realities, potentially exacerbating inequalities. This in turn can hinder community buy-in and undermine the effectiveness of the transition.
Funders can ensure their strategies are truly inclusive by conducting thorough research into the needs and risks of marginalized groups. Additionally, they can institutionalize structures and mechanisms to enable marginalized groups to participate meaningfully in decision-making during the design and implementation of just transition initiatives.
Costa Rica’s Citizens’ Climate Change Advisory Council (5C) is a notable example of inclusive engagement shaping climate policies. The council brings together representatives from seven sectors, including development organizations, biodiversity and ecosystem groups, indigenous women, and labor rights organizations, to ensure that government decisions reflect the needs of a wide range of stakeholders. Every two years, a sectoral assembly is organized to elect the 5C plenary, which provides inputs on the design, implementation and evaluation of the climate policies, programs, and metrics. This inclusive approach has enhanced the legitimacy and effectiveness of Costa Rica’s transition strategies, helping ensure that no one is left behind.
As key drivers of just transitions, funders need to navigate uncertain futures, complex systems, and diverse actors. Taking the above considerations into account can help ensure transitions are inclusive, create equitable opportunities, and drive lasting impact.
Director
Associate Director
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