What’s good for the climate is good for business

At the UN Climate Summit in September 2014, Secretary-General Ban Ki-moon called for the private sector to drive more action and mobilize political will for a meaningful agreement in 2015.  Last month, business and government leaders from all around the world came together in Paris at the Business & Climate Summit and at Carbon Expo in Barcelona to make a united call for ambitious actions that will allow the scaling up of workable solutions to climate change. Given the pressing challenge, the private sector is grappling with the reality that sustainable business means de-coupling economic growth from rising carbon emissions.

The headline coming out of the Summit was the steady call from the business community for a price on carbon. CEO after CEO from a diverse range of companies came on stage to tell governments that the only way for a smooth transition to a low-carbon economy is through clear, predictable price signals that will allow them to invest in an efficient and sustainable manner.  A week later, six European oil and gas companies made news by calling for a globally coordinated price on carbon emissions. This represents a major change in mindset from the business community. Just a few years ago, no one would have expected calls for a carbon price from the private sector, especially not from the oil and gas sector.

So, why are some of the leading private sector companies calling for action on climate change?

Many companies are realizing that without transformation of key sectors, climate impacts will make it increasingly difficult to have the stable and robust international markets necessary for growth. It is becoming evident that some of the best run and profitable companies are also the most energy and resource efficient ones. Customers, employees and investors are also realizing that climate change poses real risks for those unprepared and are pressing their leadership to respond accordingly. CEOs are looking for a “clear roadmap” for their future investments and see carbon pricing as an essential tool for decision making. On the governmental side, the global community is realizing that the public sector cannot effectively address climate change alone and that the private sector is a necessary partner. More countries are trying to put a stable framework in place for businesses to operate under and today nearly 40 countries and more than 20 cities, states and provinces, together responsible for about 22 percent of global CO2 emissions, have either implemented carbon pricing policiesor plan to do so.

A growing number of leading international institutions, such as International Renewable Energy Agency (IRENA) and the International Energy Agency (IEA), have created emission reduction roadmaps by business sector, to outline the investments and actions needed to avoid more than a 2°C increase in temperature. This includes investments in areas such as renewable energy and carbon capture and storage to begin decarbonizing the energy sector; increasing energy efficiency to reduce demand; lowering direct industry emissions and creating less carbon-intensive primary materials; moving transportation systems to low-carbon power sources; reforestation and management of forests; and improved agriculture practices and livestock management.

Business organizations such as the World Business Council for Sustainable Development (WBCSD) are also taking the first steps toward this new reality. In the run-up to the Paris climate negotiations in December of this year, a WBCSD-led working group is identifying steps the private sector can take to deploy renewable energy technologies at a pace consistent withthe IEA’s 2-degree roadmap. While change will require government action such as regulatory reform, infrastructure realignment and clear price signals on carbon, the implementation capacity, creativity, and technological know-how of the private sector, will do the heavy lifting. Gradually, companies are shifting their paradigm from takers of governmental “rules of the road” to proactive visionaries in creating a new low carbon economy that supports growth and prosperity.

Recognizing the enormous potential of the business community in building a low-carbon future, IFC, the private sector arm of the World Bank Group, is investing alongside many of these companies in areas where an additional boost is needed most. Our portfolio of climate-smart investments has now reached US$15 billion supporting US$115 billion of projects, and we are investing over US$2 billion a year in new projects. We are building capacity where we see the biggest opportunities for private sector investments and are working with our colleagues across the World Bank Group to address obstacles to investment.

Opportunities are vast and the time to seize them is now: the private sector can be a key enabler for climate change mitigation in areas including renewables, energy efficiency in buildings, climate-smart infrastructure and others.  What’s obvious is that attitudes are changing, businesses are taking action, and governments are beginning to make the necessary reforms to incentivize clean investments. This can be good for business and good for the climate.

This article was first published by The World Bank’s Development in a Changing Climate blog. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Marcene D. Broadwater is the Global Head of Strategy and Business Development for the IFC/World Bank Group Climate Business Department.

Image: A worker inspects solar panels at a solar Dunhuang, 950km (590 miles) northwest of Lanzhou, Gansu Province September 16, 2013. REUTERS/Carlos Barria.