Raising the bar: Integrating just transition in climate risk assessments for emerging market development banks

Development banks working across Africa, Latin America, and Asia stand at a crucial intersection: their efforts to support national climate goals must also address social risks, or the “just transition”, to avoid leaving vulnerable populations behind as economies decarbonise. This post explores where national climate risk assessments stand on just transition, showcases best practices from South Africa, Latin America, and Asia, and highlights practical ways development banks can close the technical gap through capacity building.

Emerging recognition: Just transition’s place in climate risk assessments

National climate risk assessments in emerging markets increasingly acknowledge the need to integrate social risks alongside physical and transition risks. However, less than one third of these assessments in Africa, Latin America, and Asia include explicit just transition components, and most fall short on practical analysis of community, labour, or equity impacts. Development banks such as the International Finance Corporation (IFC) and The World Bank that around half of public development banks in Latin America and the Caribbean see themselves as “followers” rather than leaders in climate transition, with just over 50% having dedicated climate risk teams or technicians.

Across Asia, many climate frameworks focus on net-zero pathways but lack granular planning for supporting workers and communities in carbon-exposed sectors. This gap is most acute where local government agencies and financial institutions have limited expertise and resources for assessing non-technical risks—such as the effects of coal phase-out on rural livelihoods or the access of informal workers to reskilling programmes. In Africa, only a handful of countries have frameworks to address transition impacts on social protection, resulting in fragmented policies ill-equipped for the pace of change demanded by Paris Agreement targets.

Best practice case studies: South Africa, Latin America, Asia

South Africa’s integrated just transition framework

South Africa’s Presidential Climate Commission delivers a benchmark for just transition integration in policy and risk assessment. Through robust stakeholder engagement—including government, unions, business, civil society, and impacted communities—the country crafted a Just Transition Framework that identifies risks, sets reskilling and social protection priorities, and aligns them to the national energy transition plan. Critically, the Development Bank of Southern Africa directly supports regions and workers impacted by coal phase-out with technical and financial support, ensuring local buy-in.

Latin America: Development banks driving capacity and climate resilience

Public development banks in Latin America and the Caribbean, such as Banco Nacional de Desarrollo (Argentina) and Banco de Desenvolvimento de Minas Gerais (Brazil), are expanding beyond traditional green lending to actively build technical capacity for climate-social risk assessment. Recent surveys find that 79% of these banks now offer green products, but only 54% have dedicated climate risk teams and 52% employ climate engineers. The banks’ role as “shock absorbers” is pivotal: lending to at-risk sectors like agriculture is paired with programmes to analyse and mitigate social impacts, including technical assistance for clients on how to design projects with community adaptation and job transition in mind. Despite funding progress, over half identify low client awareness and technical skill as the main barrier to scaling just transition efforts—far more than lack of access to capital.

Asia: Policy principles and targeted support for workers and communities

The Asian Development Bank (ADB) offers a regional model by embedding five just transition principles in their climate finance and policy advisory work: enabling socioeconomic outcomes, supporting the shift from greenhouse gas-intensive industries, mobilising finance through partnerships, directly aiding affected workers and communities, and engaging stakeholders throughout planning and monitoring. ADB, working with governments from Indonesia to Bangladesh, invests in reskilling initiatives and local stakeholder platforms to ensure those most vulnerable are included in planning and benefit from new opportunities. This technical support bridges the gap between national climate commitments and on-the-ground knowledge, accelerating not just net-zero outcomes but an equitable transition for all.

Scale of the gap: What emerging market development banks need to know

For development banks in emerging markets, the just transition integration gap is defined less by lack of capital and more by insufficient technical capacity, fragmented social policy frameworks, and low client awareness. Only 26% of climate policies surveyed across these regions address both community and labour impacts, and fewer still coordinate these efforts at the local or subnational level. Access to finance is improving—public development banks report long-term capital as among the lesser barriers—but technical expertise for measuring, reporting, and mitigating social risks lags behind. The result: climate investments risk exacerbating inequality or missing key contributors to resilience, especially in informal economies, rural areas, or marginalised groups.

Development banks also face the challenge of aligning commercial lending goals with the realities of climate-social risk. Siloed approaches to climate and social analysis in risk teams mean banks lack actionable data and frameworks, leaving Green portfolios exposed to reputational, strategic, and market risk where just transition is poorly considered. If unaddressed, this skills gap can undermine trust, stall investment, and reduce effectiveness in achieving both climate and development goals.

Role in addressing the gap: Practical technical actions for development banks

• Technical capacity building for government teams: Development banks should design and deliver targeted training in climate-social risk assessment, enabling ministries and local authorities to analyse labour market impacts, model community resilience, and plan coordinated interventions. By building in-house skills for scenario analysis and stakeholder engagement, banks unlock deeper integration of just transition into climate plans and projects. 
• Integration with financial sector risk frameworks: Partnering with commercial banks and microfinance institutions, development banks can co-develop tools and standards for assessing social risks in lending portfolios. This includes updating environmental and social governance (ESG) requirements to track job creation, reskilling, and community benefits—in tandem with climate risk disclosures—across key sectors such as energy, agriculture, and manufacturing. 
• Client and sectoral technical support: Expand advisory services for clients, focusing on project-level design for social impact, community adaptation, and workforce transition. Programmes should include technical toolkits, practical checklists, and ongoing helplines for integrating just transition metrics into project development and monitoring. Technical workshops and collaborative platforms strengthen sector-wide learning and knowledge sharing. 
• Multistakeholder policy engagement: Banks should convene roundtables and working groups including government, labour, private sector, and civil society to co-create just transition roadmaps. Joint action ensures policies and investments reflect diverse needs and risks, improving project feasibility and social buy-in while creating more robust models for replication in other regions.

How WeESG can support development banks with capacity building

• Customised just transition risk training: WeESG offers tailored certification and training modules for bank staff and government partners, mapping global best practices to local contexts and equipping teams with scenario modelling, stakeholder consultation, and policy coordination skills. Regular refreshers and advanced clinics deepen technical expertise over time.

• Development of sector-specific assessment frameworks: WeESG provides templates and digital assessment platforms that guide banks through project-level social risk analysis, blending climate indicators with local labour market and socioeconomic data. These frameworks enable comprehensive risk identification, ongoing monitoring, and actionable reporting aligned with international standards.

• Knowledge exchange and peer learning networks: Facilitating regional peer forums, WeESG connects development banks, policy leaders, and technical experts to share lessons, dissect case studies, and co-create solutions. Virtual discussion groups and in-person workshops foster continuous professional development and build sector-wide capacity for emerging market stakeholders.
• Technical advisory on project design and monitoring: Through bespoke consultancy services, WeESG embeds expertise directly into project pipelines, supporting banks from concept development to post-implementation review. Advisory teams assist in building participatory mechanisms, designing job transition programmes, and piloting innovative approaches for community resilience—ensuring climate investments deliver both environmental and social outcomes.

Development banks in emerging markets stand to gain not only climate impact but reputational strength, systemic resilience, and long-term developmental returns by investing in robust, technical, and context-sensitive just transition capacity. With targeted support from partners like WeESG, the sector can bridge the integration gap and fulfil its mission to drive sustainable, inclusive growth for all.

Written by WeESG co-founder and Chief Knowledge Officer Clarisse A. Simonek