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27 Jan 2023 - The net-zero journey: creating a just transition for workers

By: abrdn

The net-zero journey: creating a just transition for workers


December 2022

A 'just transition' refers to the way the world transitions to low-carbon energy sources. It is a crucial part of the climate agenda. A just transition aims to minimise adverse impacts from the energy transition and to see everyone share its benefits - including workers, suppliers, communities and consumers.

The journey to net zero will have uneven effects across industries and countries. One key aim of a just transition is to support vulnerable workers by creating green, high-quality jobs and helping equip workers with the skills necessary for achieving net zero.

Net job impacts

The prevailing view is that the transition to a net-zero economy would lead to more job gains than job losses. According to McKinsey's calculation based on a net-zero 2050 scenario, the transition could create around 200 million jobs and displace around 185 million jobs. This could result in a net impact of around 15 million more jobs by 2050.1 These job gains include around 162 million jobs in operations and maintenance across different sectors of the economy, and around 41 million jobs associated with spending on physical assets needed for the net-zero transition by 2050. The International Labour Organisation (ILO) paints an even more positive picture, estimating that a net increase of 18 million jobs by 2030 is possible.2

What sectors and countries will be most affected?

According to the ILO, most of the job creation that results from the energy transition will happen in construction, electrical machinery manufacturing, copper mining, renewable energy production, and biomass crop cultivation. Most of the job losses will occur in petroleum extraction and refinery, coal mining, and thermal coal. In addition, the shift to electric vehicles will require fewer workers for production, leading to net job losses - something that is already happening within the sector.

The impact on jobs also varies by country, depending on its economic exposure to the net-zero transition. The transition would unevenly affect lower-income and fossil-fuel-producing countries, such as Pakistan, India, Bangladesh, Kenya, Nigeria and Indonesia.

How companies manage the impacts of the transition on their workforce will pose considerable investment risks and opportunities for investors

These tend to be countries with a relatively higher proportion of jobs, gross domestic product and capital stock in sectors that are more exposed to the transition - that is, sectors with emission-intensive operations, products and supply chains. Significant fossil-fuel resource production also creates high exposure for some countries, such as Qatar, Russia and Saudi Arabia.

Investment implications

How companies manage the impacts of the transition on their workforce will pose considerable investment risks and opportunities for investors. There are two types of risks facing companies within the sectors that are most exposed to the energy transition: restructuring risks and human-capital risks.

Firstly, when it comes to restructuring risks, the most obvious of these is operational disruption caused by mass redundancies. This can lead to costly pay-outs and challenging labour relations. Research shows that the top performers with higher restructuring management practices tend to be concentrated in Europe. This is also the case for companies within the fossil-fuel and emission-intensive sectors, which indicates that European companies are relatively more prepared for a just transition.

Secondly, human-capital risks mainly manifest as skills mismatches and shortages, which can impede a company's progress on the green transition. According to the International Energy Agency (IEA), the energy sector already faces difficulty hiring qualified talent to keep pace with the growth in clean energy. If solar and wind installations reach four times today's annual level by 2030, as called for in the IEA's net-zero scenario, these labour constraints could impede the world's ability to accelerate the shift to a low-carbon future.3

According to the ILO's survey, while most countries have environmental policies, there are only a handful of countries with corresponding policies at either the national or the regional level for skills development. These are Denmark, Estonia, France, Germany, the UK, the US, China, India, South Korea, the Philippines and South Africa. Similarly, few countries have incorporated skills for the green transition into the formal vocational training curriculum.4

Companies also have an important role to play in identifying and anticipating skills, and in providing access to jobs and training for the green transition. In practice, this can be done in partnership with the government and educational organisations.

Investors need to understand how these risks are being managed. For example, through our own extensive engagement with auto makers, we have learned that the industry is managing these risks through early retirement schemes, upskilling of the existing workforce, and proactive engagement with trade unions. In general, to understand how companies are managing these risks, investors can focus on four key indicators:

  • evidence that the just transition is integrated into the company's climate transition plan;
  • adoption of responsible restructuring practices;
  • provision of relevant upskilling and vocational training; and
  • efforts to create high-quality, green jobs.


The energy transition will have a significant impact on employment. It will lead to the creation and displacement of millions of jobs. While the overall net impact is likely to be positive, the projected job gains will concentrate in sectors like renewable energy, electrical machinery and construction. From a geographical perspective, a higher level of disruption to the labour market is expected in developing countries that rely heavily on fossil-fuel and emission-intensive sectors. How companies and governments manage these impacts will present risks and opportunities for investors.

Our ongoing research and engagement aim to understand the social impacts and potential risks to our investments from the energy transition. Our research in this area is expected to expand and grow in the future, in conjunction with our ongoing climate change, human rights, and labour and employment work. For example, building on our focus on workers in the energy transition, we will also consider the perspectives of communities and consumers, in order to integrate further insights into our investment process.

Author: Ziggy You, Sustainability Analyst and Elizabeth Chiwashenga, Senior Sustainability Analyst

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1. The net-zero transition: Its cost and benefits | Sustainability | McKinsey & Company
2. Flagship Report: World Employment and Social Outlook: Trends 2018 (
3. The importance of focusing on jobs and fairness in clean energy transitions - Analysis - IEA
4. World Employment and Social Outlook 2018 - Greening with jobs (

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