The World Economic Forum welcomed 2,500 state and government officials and private sector business leaders to its annual meeting last week. Securing the energy transition and supporting the growing green economy were top themes at the meeting.
Here’s a look at three takeaways from the climate-related discussions that took place during the meeting in Davos, Switzerland, from May 23 to 27.
‘First Movers’ Expands
During the meeting, U.S. Special Presidential Envoy on Climate John Kerry announced the expansion of the First Movers Coalition (FMC), an initiative launched during last year’s U.N. Climate Change Conference that comprises companies committed to making certain purchases from near-zero or zero-carbon suppliers.
FMC “leaps from the 35 initial companies … to 55 companies, with additions of major corporations,” including FedEx (NYSE:FDX), Ford Motor Co. (NYSE:F) and Microsoft (NYSE:MFST), Kerry said during a May 25 press conference.
In addition, the coalition is expanding the sectors it will address, adding carbon dioxide removal and aluminum to the original four sectors of shipping, aviation, steel and trucking. Microsoft, Alphabet (NASDAQ:GOOGL) and Salesforce (NYSE:CRM) plan to invest a combined $500 million in advanced CO2 removal technologies by 2030.
“We’re talking about durable and scalable removal processes that could have a span of storage for 1,000 years or more,” Kerry said.
Breakthrough Energy, one of the FMC’s implementing partners, will support the coalition members’ carbon removal purchases.
FMC’s core purpose is to engage the private sector on the demand side of the economy and reduce the often high “premium price” of clean technologies, Breakthrough founder Bill Gates said during the press conference. “The opportunity now to bootstrap green steel … green cement … or green aviation is stronger than ever,” he said.
Breakthrough’s new technology accelerator program, Breakthrough Energy Catalyst, will make its first few grants this year, according to Gates. Even though new climate technologies are often government-driven, Gates said, he believes that the private sector should “have a seat at the table” so that projects see viable cost reductions.
Ford and Volvo Cars were part of a group of companies founding the new aluminum segment, promising to have near-zero carbon emissions from 10% of their primary aluminum purchases by 2030.
FMC also welcomed Sweden, India, Japan, Norway, Italy, the U.K., Singapore and Denmark as new government partners.
Governments can support FMC’s goals by “implementing policies that augment each of the [hard-to-abate] sectors,” Kerry said. “Tax policy, public policy incentives, various budgets or concessionary funding will excite the private sector to be able to embrace these goals.”
Faster to Net Zero
FMC members’ efforts to accelerate clean technology are critical to meeting the concurrent challenges now stemming from climate change and the pressure on global energy markets from Russia’s invasion of Ukraine, Kerry said during a May 24 panel on “speeding up on the road to net zero.”
“No one should believe that the crisis of Ukraine is an excuse to suddenly build out the old kind of infrastructure that we had,” Kerry said, adding that governments need to be “smarter” and “more creative” in finding a solution to energy security.
Europe’s recent move to reduce its dependence on imported Russian fossil fuels represents a “permanent change” that addresses fossil fuel sources and promotes smart climate solutions for the energy transition, according to Frans Timmermans, executive vice president for the European Green Deal at the European Commission.
The EU’s approach includes:
- reducing energy consumption;
- accelerating renewable energy deployment;
- creating renewable energy zones;
- doubling biomethane production; and
- securing LNG contracts with diverse global providers interested in building a hydrogen economy.
The entire transition plan is currently estimated at 300 billion euros, Timmermans said.
“That sounds like a lot of money, but it isn’t if you compare it to the 100 billion euros we’re spending every year on Russian oil and gas,” he said. “If you could spend that money on something that’s future-proof, that’s a lot better.”
French multinational utility ENGIE, which provides electricity to 27 European countries and operates in the renewables, natural gas and petroleum markets, is advancing its net-zero transition through diversification, according to CEO Catherine MacGregor.
Wind and solar resources are important, but gas will need to “play a strong role” in the energy transition to ensure affordability, MacGregor said. The company, she added, is also accelerating renewable energy deployment, with half of the company’s capital expenditures going to the segment.
The current climate and energy security challenges make partnerships a critical part of achieving the company’s goals.
“We cannot do anything in isolation,” MacGregor said, pointing to FMC’s ability to address the chicken-and-egg problem.
FMC is aggregating green technology demand “so that we can give strong signals to get the new economy kickstarted,” she said.
Financing Net Zero
A lack of climate-related disclosure standards for companies, coupled with the growing interest in green investing, are creating challenges in financial markets that the London Stock Exchange Group (LSEG) is working to resolve, according to CEO David Schwimmer.
The people and entities with capital to allocate are making “enormous demands” to support the energy transition, but they “don’t understand the impact of those demands on issuers” or the “confusion … and challenges” they create, Schwimmer said during a panel on “financing net zero.”
The Glasgow Financial Alliance for Net Zero (GFANZ), of which Schwimmer is a principal, is trying to bridge the disconnect between those entities with capital to invest and those looking for capital. To that end, a working group of GFANZ will release a report in September that focuses on transition pathways for the real economy, with a focus on the high emitting sectors of aviation, steel, oil and gas, he said.
LSEG is working on another problem that is directly affecting the ability of investors to identify clean investment opportunities. Major players in the global markets, Schwimmer said, do not have the necessary guidance on climate disclosures as they relate to finance.
“We’ve made progress in this area, but 40% plus of global large and mid-cap companies do not disclose their emissions,” he said. And because there’s no standardized framework for emissions disclosures, data from companies that do report their emissions are “often wildly inaccurate.”
LSEG has called on governments globally to require publicly traded companies to disclose their emissions and break down their revenues by clean and non-clean sources. Doing so, Schwimmer said, will help green investors allocate their capital effectively.