This article first appeared on The Climate Group website on 28 June, 2016, linked here.
LONDON: Today at the second annual Business & Climate Summit, brought to you by The Climate Group, a powerful group of industry, finance and government leaders shared their confidence in early ratification of the Paris Agreement and the merits of embedding forward-looking climate action at the heart of their businesses plans.
With the Summit taking place just days after the UK’s EU referendum, Sir Roger Gifford, Chairman, City of London Green Finance Initiative, stated: “Ruptures are shaping the global economy as we speak, not only in relation to last week’s referendum but in response to one of the defining issues of the 21stcentury, our environment.”
Setting the scene for the discussion, the Chairman said that while the Paris Agreement reached last December was “truly historic”, delivering on its commitments represents a challenge to policymakers, financiers, inventors and insurers alike. “In fact for all of us involved in finance or business there is a challenge which we are to meet: we have been charged with doing the heavy lifting that is necessary to meet or beat global carbon targets.”
Explaining that there has been a “remarkable rise” in low carbon finance in recent years, Sir Roger Gifford welcomed the swelling investment in clean technologies specifically, which he said “represents the cutting edge of 21st century capital markets.” He added: “We will promote the strength of this growth by working together to deliver real climate action. The success or failures of these efforts lie with investors to create carbon-conscious portfolios. […] Post Paris, these are some of the most pressing challenges facing the world.”
Peter Bakker, CEO, WBCSD encouragingly called for more businesses and investors to be bolder and faster in tackling these challenges and delivering on the Paris Agreement: “Those already involved, keep going, do more. Those involved for the first time, it’s not too late – you can still lead transformation in your industry.”
Ségolène Royal, Minister of Environment, Energy & the Sea, in charge of International Climate Relations, Government of France, and, President of COP21, is confident the Paris Agreement can be ratified before COP22, welcoming the 20 governments that have already ratified – as well as the EU which has “set itself in motion”. She affirmed the economic incentive for early ratification: “I know it is difficult, but we can. […] Inaction is more costly than doing nothing.”
But key to attaining such progress at speed, the Minister advises, is a carbon price – however, because it is “difficult to have a universal carbon price”, she cheered the idea of a “price window” between bottom and higher prices. “We know it is not easy for companies to integrate long-term climate costs which is why we need a carbon price. To give companies the ability to manage a long-term cost to give them incentive.”
Reiterating how climate change is not just a risk but an “opportunity to be among the first to drive innovation and transformation toward a low carbon economy”, the Minister applauded France’s carbon price, which she said will reach 56 euro by 2020 and 100 by 2030, offset by lower taxes from products and revenues that contribute to the low carbon transition.
Ban Ki-moon, Secretary-General, United Nations, also gave a stirring speech via video message to illuminate the pivotal role of the business community in driving forward early ratification of the Paris Agreement – momentum for which he says is exemplified by the Business & Climate Summit.
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Before presenting her compelling vision of a world in 2025 – where Sustainable Development Goal 7 had been successfully delivered and everyone has access to clean energy – Rachel Kyte, CEO and Special Representative of the UN Secretary-General, Sustainable Energy for All, explained: “As leaders we need to keep a close eye on not just the short term but on the distant point on the horizon to which we agreed we would arrive, as we lead people, business and partnerships; we have to be able to express this as a future to have hope in, not a future to be afraid of.”
Including the EU referendum in her vision of a 2025 economy “that has put energy productivity at its very heart”, she said: “Brexit hurt many people across the UK and across Europe. But somehow we muddled our way through and London is still a center of innovation, finance, strength and forward looking, outward looking creativity.”
Pointing out how energy efficiency could account for 40% of total abatement of greenhouse gas emissions by 2050 according to IEA research and urging companies to join The Climate Group’s EP100 project, Rachel Kyte then made a final call for businesses to use the next decade to recharge their climate plans. “It is the time to dig deeper and double down, because the direction of travel is clear”, she said. It’s time to go “further and faster to the future we all want”.
Echoing the fundamental message of her organization, sustainable energy for all, and nodding once more to the UK’s EU referendum she asserted: “We cannot leave anyone behind. In this city, this county, to leave people behind will be to create an unstable economy going forward.”
Opening the second panel session of the morning, Aron Cramer, CEO, BSR, reiterated that “climate change is not tomorrow’s issue anymore, it is today’s reality” that the business community must face. To help break down exactly what aspects of business forward-looking CEOs should address first, he suggested the just-launched report The Business End of Climate Change from We Mean Business, of which The Climate Group is also a founding partner.
The report says businesses could even help meet over 60% of the emissions cuts pledged by nations in Paris if they focus on five key climate action initiatives: ‘Science Based Targets’, RE100 which is a project of CDP and The Climate Group, zero deforestation, EP100 which is run by The Climate Group and the Low Carbon Technology Partnership Initiative.
In her final speaking role as UNFCCC Executive Secretary, Christiana Figueres further outlined how business can spur Paris Agreement delivery onward, but concentrated firstly on how the Brexit could impact such progress. “Should the UK trigger Article 50 it would have to look at its INDC target and maybe make some adjustments. It might mean that the EU would have to look at some recalibration of the effort sharing. But let’s not assume that would be the case. [..] There will be uncertainty and volatility for two years.
“However, we must remember that Brexit was not about climate change, it was not about whether the UK should continue to modernize its manufacturing and industry, it was not about innovation – which is the opportunity we have by acting on climate change.” She ended her speech with the inspiring mantra to continue moving to a prosperous, low carbon and climate resilient future: “Stay calm and transform on.”
LOW CARBON FINANCE
While the private sector is indeed moving in the right direction and becoming “increasingly focused on green finance”, Michel Madelain, Vice Chairman, Moody’s Investors Service said slashing the risk involved in this transformation is critical. “We must reduce uncertainty around implementation which has an impact on the risk and returns of investment – and we must translate policy ambition into investment strategies that can be integrated into finance.” He said that while progress can be made, more work must also be done “around how to develop a finance solution that mitigates risks that are present with these [decarbonization] pathways.”
This level of specific focus on how industry can act on climate was also hailed by Jean-Dominique Senard, CEO, Michelin, who said to achieve implementation as soon as possible we must “show strong sectorial avenues and roadmaps.” He used the transport sector as a shining example of where such climate and energy commitments are being made “with tremendous coordination.” But the CEO warns these efforts must go beyond borders to have a global impact, because the Paris Agreement is based on national commitments “so we need international sectorial agreements and commitments from which nations can grab initiatives and transform them in countries.”
Offering another national perspective, Mahendra Singhi, Group CEO and Whole Time Director, Dalmia Cement (Bharat) Limited, said that despite “challenges ahead”, putting climate at the heart of business strategy will reap the benefits of high returns – turning the seemingly overwhelming challenge into a crystal clear opportunity. He explained that while Dalmia is one of largest cement companies in India it now has one of the world’s lowest carbon footprints.
In a subsequent session the rhetoric of acting swiftly to take advantage of climate change as a business opportunity mounted. Patrick Pouyanné, Chairman & CEO, Total, said: “We are in the energy business we know the world of energy: we have the tech capacities in our companies and financial capacities, so we must see this future as an opportunity to develop and transform our company. First it means integrating climate into our business strategy. We also need tools to measure our strategy, to reduce our own emissions, and to engage collectively to make an impact.”
A vital ingredient to this energy system shift is of course clean energy. Kerry Adler, CEO, SkyPower explained that the climate problem will not be solved by “subsidies and carbon taxes, or penalizing poor countries. Really this is about tackling the problem in a way that nobody has ever tackled it before. It is simple.” The answer, he says, lies largely with solar energy, where the math behind this business decision speaks for itself. “To build a watt of solar is cheaper to build than a watt of a gas plant; eight years ago it was 4x more. […] By 2025, it will be 3.5-4 cents for base load solar power. So what’s stopping us?”
Steve Howard, Executive Board Member, IKEA, reminding the audience of the furniture giant’s commitment go 100% renewable, said the company approaches the energy shift as an investment problem. “In the same way we invest in new stores, we invest in solar and wind.” Explaining that IKEA is energy independent in Nordic countries already and on track to be so elsewhere, he sketched out the business transformation as pure common sense: “This is about better, 21st century products and services. They will be fundamentally clean, more efficient, more affordable and more attractive.”
Closing the discussion between the global CEOs, Laurence Tubiana, Ambassador for Climate negotiations, Special Representative for COP21, Government of France, illustrated how heavily implementation of the Paris Agreement lies with the private sector – but that nations hold the ultimate means to a safer planet: “We have an agreement with clear principles, clear timetables and clear obligations. […] The next step is to translate them into clear policy frameworks which at the same time will be translated into clean investment plans and projects.
“Governments have to not only deliver a policy framework for 2030 but look longer term with mid-century strategies consistent with a below 2-degrees Celsius world.”
Nigel Topping, CEO, We Mean Business, introduced the final discussion of the morning, between Steve Williams, President & CEO, Suncor, one of Canada’s biggest oil companies, and climate campaigner and strategy advisor Tzeporah Berman, about their innovative collaboration which led to ground-breaking new climate policies on Canada’s oil sands.
Tzeporah Berman says that for years Alberta’s oil sands have been the subject of polarized conflict that has “paralyzed climate policy” in Canada, but post Paris there is “a new willingness from governments and business to have a real conversation” about deep decarbonization – which is exactly how she has been working with Suncor.
The oil giant’s CEO Steve Williams explained that while the company cannot fix the climate solution permanently, they are taking the right direction by setting an emissions cap to bolster certainty “on both sides”. But he warns it is this longer term planning which is often overlooked by politicians who are “in a 5-year world, but my shareholders are in 10, 20, 30 year cycles. It’s about science, not politics.”
While this partnership between environmental organizations and oil companies may have seemed implausible a few years ago, the pair demonstrate that it offers a fast track to deep emissions reductions. Steve Williams concludes that incentives themselves can also come from unlikely places. Despite the company’s original reputation as “bad guys”, the CEO believes “the best way to have a healthy economy is to have a healthy environment” and thought this reputation was unjustified; so the company challenged itself to “become the leader of the world. Then challenged the rest of the world to come with us.”
Parallel sessions also took place in the afternoon focused on transport, real estate, deforestation and energy.
The Business & Climate Summit 2016 was held between 28-29 June, 2016, at the Guildhall in London. #BusinessClimate.