How the World Bank Plans to Balance Green Growth with Equity in the Climate Era

In June 2025, the World Bank’s Finance, Competitiveness and Investment Global Department, together with its Europe and Central Asia division and support from the Climate Support Facility’s Whole-of-Economy Program, unveiled a critical document titled Just Transition Tool for Private Sector Activities. Crafted with input from global research bodies including the International Finance Corporation, the OECD, the International Trade Centre, the Grantham Research Institute, and the University of Cambridge Institute for Sustainability Leadership, this tool reframes the climate transition not just as a technological or policy imperative, but as a fundamentally human challenge. It argues that as governments around the world race to reduce emissions, they must also create a path for vulnerable workers and regions to participate in and benefit from this shift. Without deliberate planning, climate action risks triggering economic displacement, job loss, and widening social inequality.

The tool puts employment front and center, asserting that jobs are the foundation of livelihoods and must be treated as such in climate mitigation strategies. In developing countries, where up to 90 percent of jobs are in the private sector, including SMEs and informal enterprises, this sector holds both immense responsibility and untapped potential. Yet, few businesses are prepared. According to a survey by the World Benchmarking Alliance, only 6 percent of high-emitting firms are even partially preparing for a just transition, and none are fully implementing it. This lag signals a market failure, one that public policy must correct with urgency and clarity.

Five Ways the Private Sector Can Drive a Fairer Future

The World Bank’s tool lays out five specific roles for private firms to help realize a just transition. First, they must channel investment toward sustainable sectors such as renewable energy, digital infrastructure, and circular manufacturing to create resilient jobs. Second, green innovation should become a priority; this means investing in clean technologies, waste-reducing processes, and new business models that promote both growth and sustainability. Third, companies need to support the workforce through proactive skills mapping, retraining programs, early retirement options, and worker placement services. Fourth, businesses are called to invest in communities, especially those affected by industrial decline, by contributing to local infrastructure, hiring locally, and developing inclusive supply chains. Lastly, companies must engage with policymakers to help shape employment-friendly regulations and remove barriers to green investment.

These roles are not mere ideals; they are necessary interventions. The shift away from coal, oil, gas, and carbon-heavy manufacturing is already underway in many parts of the world. If companies fail to plan for worker displacement and regional impact, they risk future protests, litigation, reputational damage, and financial exclusion. The tool also notes that integrating just transition principles can enhance a company’s social license to operate and improve access to sustainability-linked finance.

Governments Must Light the Path

Recognizing that many businesses cannot act alone, the tool provides a comprehensive suite of policy options for governments. These include direct support like grants, subsidies, and credit guarantees; regulatory reforms to promote open markets and competition; and structural investments in innovation ecosystems, skills programs, and digital or green infrastructure. Green industrial clusters and eco-industrial parks are highlighted as promising models to spur innovation, promote job creation, and embed climate priorities at a regional scale.

The report underscores the pivotal role of small and medium-sized enterprises. SMEs are responsible for nearly half of business-sector greenhouse gas emissions worldwide, yet they are often the least equipped to navigate the transition. They face financial constraints, a lack of technical knowledge, and limited capacity for strategic planning. Governments, therefore, must prioritize SMEs with tailored incubators, simplified regulations, and inclusive financing tools, especially those targeting women, displaced workers, and minority entrepreneurs.

Implementation Needs Strategy, Sequencing, and Metrics

A just transition cannot succeed without a strong implementation framework. The World Bank recommends setting up inclusive governance structures with representatives from central and local governments, labor unions, NGOs, academia, media, and affected communities. These bodies must have clear mandates, technical capacity, and transparent processes. Monitoring frameworks are equally important. Progress should be tracked using a diverse set of metrics, including job creation, demographic equity, private investment levels, and community well-being, with mechanisms in place to adjust strategies when needed.

The tool also calls for a phased approach. Policymakers should begin with diagnostic studies, stakeholder mapping, and small pilot projects. Once early lessons are captured, successful initiatives can be scaled. Financing will need to be mixed and flexible, blending public and private capital, leveraging instruments like transition credits and social impact bonds, and using sustainability-linked loans that reward measurable impact. Importantly, corporate transition plans, strategic roadmaps for how firms will adapt to decarbonization, should become standard practice, aligning with national or regional priorities and building investor confidence.

A Vision for Equitable Growth and Climate Justice

The document’s conclusion is clear: climate goals and employment goals must be achieved together, or neither will be met. The low-carbon transition is a once-in-a-generation opportunity to build more resilient, equitable economies, but only if the needs of workers and communities are addressed head-on. Strategic planning, place-based investment, inclusive dialogue, and job-centered reforms can help regions once reliant on carbon-intensive industries to thrive in new sectors.

The World Bank, through mechanisms like its Multiphase Programmatic Approach (MPA), stands ready to support governments with technical assistance and tailored financing. With the right mix of leadership, funding, and collaboration, the just transition can deliver not only net-zero emissions, but also net-positive prosperity, anchored in dignity, opportunity, and fairness for all.