Clear Government Plans to Bring Business Support for Climate Action

Record-breaking heat waves, devastating wildfires, and devastating floods are becoming the norm rather than the exception as the world warms. 2023 was one of the warmest years on record according to the World Meteorological Organization and 2024 is likely to be even hotter.

Continuous burning of fossil fuels and environmental degradation are the root causes of this dangerous warming. To accelerate the transition from coal, oil and gas to clean energy, and to protect and restore nature, countries must provide strong national climate plans called Nationally Determined Contributions (NDC) under ‘a Treaty of Paris.

The NDCs are the cornerstone of global climate efforts. They represent each country’s commitment to reducing greenhouse gas emissions and adapting to climate change. They should be renewed every five years, represent progress beyond the original plan, and reflect the highest ambition of each country. The new 2035 NDCs are due next year.

A new report from the We Mean Business Coalition highlights how proactive NDCs can drive rapid private sector investment in the transition to a clean and sustainable economy.

The report calls on countries and businesses to work together to propose their NDCs and plans, which should reduce emissions in line with science. Most importantly they should provide enough explanation for companies to invest with confidence. To achieve this, the plans must include targets to phase out fossil fuels and replace them with renewable and energy-efficient energy, and halt and reverse deforestation.

The paper also highlights the importance of translating NDCs into policy and concrete actions and increasing government-business collaboration.

It is important to adopt such an approach because today private investment is not enough to keep global warming below 1.5°C as promised under the Paris Agreement. The United Nations Environment Program indicates that current NDCs will result in an increase of 2.5C to 2.9C by the end of this century. Scientists warn that global warming will be dangerous and costly.

The current NDCs are not limited to ambition, but also details on how governments plan to drive investment in clean technologies and actively replace fossil fuel systems and infrastructure. Long-term certification is essential for business. Companies need coherent five- to ten-year government plans that show politicians are committed to accelerating the transition from fossil fuels to clean ones to give them confidence to increase investment in this direction .

And the reason business needs to consider, sustainable strategic planning is because pollution and global warming have the potential to seriously damage the operating environment for all businesses, whether large or small. . From trade disruptions, devastating weather events and threats to infrastructure and raw materials, to financial risks ranging from rising insurance costs, volatile energy prices, changing costs of land, manpower and equipment – there are many things that a good plan can prepare.

The transition to a clean economy is also a huge opportunity. Shifting to cleaner business models will give a competitive advantage to companies that are at the forefront of technologies that are proving to be cheaper over time. Renewables, especially solar and wind, are more expensive than fossil fuels. Reports from BloombergNEF show that solar and wind now represent 91% of new energy additions by 2023, showing a significant cost advantage. The IEA estimates that approximately USD 2.8 trillion was invested in energy by 2023, of which more than USD 1.7 trillion went to clean energy. There is also growing evidence that companies that prioritize renewable energy are often perceived as better by consumers and investors.

A recent survey shows that investors believe that investments in clean energy will outperform other sectors and earn investors money in the short and long term. They recognize that climate risks are major business risks that, if ignored, can damage companies’ financial performance and investment portfolios. They also believe that retail investors expect more clean energy than any other sector except AI in the next 10 years.

Many businesses are now focused on accelerating change. More than 260 companies, collectively generating more than $1.6 trillion in revenue, are working to eliminate fossil fuels under the cleanup campaign. And thousands of other companies are setting science-based goals, creating climate change initiatives and investing in net-zero solutions.

Credible NDCs need to include clear ambitions to accelerate clean energy and address deforestation, must provide relevant plans, policies and incentives, and be able to work in tandem with sectors and implementing agencies. With these in place, countries can attract private capital and expertise, and in doing so, create a wave of ambition that can keep 1.5C in sight.