The latest insights from the We Mean Business coalition

Building momentum to phase out fossil fuels

Last month, G7 leaders reaffirmed their strong commitment to achieving the 1.5°C objective of the Paris Agreement and supported the accelerated phase-out of fossil fuels, coupled with a rapid scaling up of clean energy. As widely reported, there were mixed messages from leaders on deadlines for coal and gas. Yet the overall message for business remains clear: fossil fuels are on the way out.

As I wrote in a letter to the editor of the Financial Times last week, rather than waiting to act until gas and coal phase-out timelines are formally agreed – which they eventually will be – business should take this as a clarion call to go all in. Companies who act now to switch to clean energy across the value chain will put themselves in the best position to thrive when regulations are implemented to accelerate the transition away from fossil fuels.

A critical issue right now is how we safeguard the freedom of financial institutions to invest in the companies planning for the net zero future. New evidence published by InfluenceMap has shown the involvement of the fossil fuel industry in sparking the anti-ESG movement in the U.S., a backlash aimed at threatening the flow of finance towards the clean energy transition.

In recent weeks, several insurers have quit the Net Zero Insurance Alliance, part of the Glasgow Financial Alliance for Net Zero (GFANZ), after attorneys general from 23 U.S. states expressed concerns about the group’s legality. GFANZ has signalled that it won’t be intimidated into watering down its goals. With our partners, we will continue to defend the Freedom to Invest in the U.S. and beyond.

Despite these developments, there are many reasons to feel hopeful. Just last week, the head of the International Energy Agency (IEA) predicted that solar power investment is set to outstrip spending on oil production this year. The overall ratio of investment in clean energy has now widened to $1.7 for every $1 spent on fossil fuels. It’s clear that clean energy is the growth industry to invest in now to attract investors and talent, cut costs and build resilience in the global economy.

Leading companies are already on board and driving demand for renewables, energy efficiency and electrification. Volvo Cars aims to fully electrify its fleet by 2030 and says greater access to clean energy is ‘critical’ to reduce emissions across the value chain. Schneider Electric has called on G7 governments to accelerate the deployment of technologies to increase energy efficiency. Nestlé has committed to purchasing 100% renewable energy at its factories in Japan by the end of the year. Ørsted has called for an immediate focus on electrifying as many sectors as possible through renewables.

Fresh opportunities are coming up to deliver the enabling policies and investments in clean energy that businesses need to meet their goals.

Next month, the meetings of G20 Energy Ministers provide a chance for India, as G20 host, to build on the outcomes agreed by G7 Leaders. The G7’s Clean Energy Economy Action Plan signalled clear intent from the group of seven to bolster global collaboration on the clean energy transition and deepen cooperation between emerging and advanced economies, which will help companies and industries to decarbonize their supply chains.

As we look towards COP28, the UNFCCC Bonn Climate Change Conference now underway marks a major milestone on the road to Dubai. It’s a critical moment for the UAE as the incoming Presidency for COP28 to show that they are in step with the world’s major economies. We are keen to see them committed to brokering ambitious outcomes that will chart a clear course to accelerate a just and inclusive transition to clean energy away from all unabated fossil fuels, in line with the IPCC and 1.5°C pathways.

This can be a new era of innovation, creativity and economic opportunity if policymakers enable business to move our global economy away from the risk, disruption and unrest of the fossil fuel dependent economy.

Let’s look forwards with optimism and channel our collective efforts to deliver a lasting legacy of action.

This article originally appeared in We Mean Business Coalition’s monthly newsletter. Sign up below to be the first to read it each month.