How much of your income goes towards household energy? This question often goes unconsidered until the numbers become significant. If the cost is under 10% of your total income, you are considered fortunate — because this is the UK threshold for fuel poverty. The situation affects 6.1 million households in the UK, up from 4.5 million in 2021. Statistics aside, it can often mean the choice between eating or heating your home. This creates a significant risk to health.
International Labour Organisation research suggests global warming is projected to lead to global productivity losses equivalent to 80 million full-time jobs by 2030 due to heat stress alone. The shift to a low-carbon economy must protect workers and communities. This concept, known as a ‘Just Transition’, aims to ensure that those who have contributed least to climate change do not bear its heaviest burdens.
Chris Skidmore is a former Energy and Clean Growth minister, and now chairs the Climate Action Coalition. He says: “The UK Transition Finance Council’s work on Sector Transition Plans is accelerating the capital flows needed for a credible net-zero economy. Yet as our Electric Economy research made clear, there is a broad consensus across the political spectrum that the transition must also deliver tangible benefits for communities — lower bills, greater energy security, local jobs. Real estate fund managers are uniquely placed to connect those two agendas: the buildings they own and retrofit are where transition finance either translates into real-world benefit, or fails to.”
This is exactly why three trade associations combined into Real Estate:UK: to accomplish more, with more profound results, for the real estate industry, its many clients and for the UK more broadly. Those real-world benefits are something that real estate investment managers are grappling with. They must consider how to advance net-zero emissions and protect jobs, manage rising energy prices and mitigate a host of other factors. In fact, many see opportunity to bolster community resilience and social licence. It’s a chance to seek sustainable growth and innovation in green technology. It can even enhance education and skills development.
Such thinking is widespread. For example, the UK’s Transition Plan Taskforce has a collection of Just Transition–relevant metrics and indicators. And the Local Government Pension Scheme wants real estate asset managers to align portfolios with Just Transition principles, including workforce impacts and community outcomes. The list goes on.
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However, there is every need for caution. Missteps are possible. We’ve seen the recent pairing of renewable initiatives with incentives to switch from gas to electricity. But rises in the latter’s price left 25% of households unable to afford adequate cooling in the summer. Success requires balance.
Five Ways Fund Managers Can Win
Achieving such balance will bring rewards. For real estate fund managers, the benefits are five-fold.
Perhaps the most notable is the Just Transition’s ability to unlock better capital raising opportunities. A firm called Orchard Street recently launched one such strategy, seeking, “positive and measurable sustainability improvements to both its assets and surrounding communities.” In some cases, firms can even gain access to specialised funding instruments with preferential terms.
Secondly, projects that engage communities, ensure workforce inclusion and maintain affordability support social licence to operate. A positive relationship with local stakeholders prevents delays, reduces reputational risk, and facilitates long-term operational success.
It also seems reasonable to conclude that developments guided by Just Transition principles contribute to market stability. After all, socially inclusive, sustainable properties are less prone to vacancy, resistance, or regulatory penalties. Moreover, properties serving diverse income segments have lower volatility in difficult markets.
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And then there’s the opportunity to invest in workforce development and supplier inclusion — and support resilient supply chains. Some 55% of UK construction firms face skills shortages. Real estate fund managers can help solve this.
Finally, buildings that demonstrate environmental and social performance often achieve higher occupancy, tenant satisfaction, and long-term appreciation. There’s often a link between ethical practice and financial outcomes.
If your funds — or, if you’re a client, the funds you invest in — are yet to adopt the Just Transition you might need a playbook or standardised metrics. The market is still waiting for such guidance. The best place to start is with materiality. It is wise to frame Just Transition considerations around tangible outcomes. For instance, retrofit creates warmer homes and lower bills, local procurement builds economic resilience and embeds green skills, community infrastructure strengthens planning approvals, and so on.
Then, have a think about how it fits into your existing processes. Your due diligence could expand to include social impact assessments. Or your risk registers could include social and community risks. At the very least, incorporate stakeholder engagement protocols into your asset management plans. This leads you onto measuring. Start with baseline data on current social and decarbonisation impacts, then set intermediate targets for a few measurable indicators. Did workers secure better wages? Did retrofit reduce tenant bills without triggering rent increases?
Practical Steps for Real Estate
No-one’s going to achieve a Just Transition alone. Partnerships will help. Those from the public sector partners can provide co-financing and planning support. Social housing providers bring affordable housing expertise. Industry bodies like Real Estate:UK or the Institute for Human Rights and Business offer case studies, frameworks and networks.
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“Just transition criteria exist, but they can be hard to cost, measure and apply in practice,” says Nick Robins, advisor to the Just Transition Finance Lab. “That’s precisely why the real estate sector matters so much: practitioners working with workers, residents and communities on clean energy and climate resilience simultaneously is where theory becomes practice.”
And, as you progress, you must communicate transparently. Report successes and challenges. Link initiatives to tangible outcomes — warmer homes, lower bills, local jobs, increased asset value, yield growth. Transparency about constraints demonstrates mature practice, not weakness.
This isn’t an easy circle to square. Fund managers and investors are being asked to deliver net-zero buildings and address affordability. And yet retrofitting typically increases capital costs. A Just Transition requires you to recognise such trade-offs.
Overall, the evidence suggests fund managers who seriously engage with social equity alongside environmental performance can do well, for everyone — benefiting existing investors and attracting new ones from the UK and overseas.
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