A unique coalition of businesses and investors representing over €21 trillion in assets have joined forces with local authorities and civil society groups to urge EU leaders to accelerate the transition to a zero-carbon economy in order to keep global warming below 2°C.

Europe needs to raise its level of ambition in order to keep global warming “well below 2°C”, the headline objective of Paris Agreement on climate change.

This is the main message of a letter to EU leaders sent on Tuesday (12 June) by the “Coalition for Higher Ambition” whose members include the Corporate Leaders Group representing key European businesses, the Climate Group bringing together businesses and governments at the global level, and the Institutional Investors Group on Climate Change (IIGCC), representing over €21 trillion in assets.

Highlighting the exceptional nature of the coalition, environmental NGOs, which are often sceptical of corporate action on climate change, have joined the group of signatories. Local and regional authorities are also represented through the Climate Alliance, which brings together 1,700 municipalities and mayors from across the world who committed to reduce greenhouse gas emissions by 10% every 5 years.

“Together we believe that the full implementation of the Paris Agreement means much deeper emission cuts than currently planned,” said Wendel Trio, Director of Climate Action Network Europe, an environmental group.

“Europe must embark on a pathway that delivers on the 1.5°C objective of the Paris Agreement,” Trio said. According to him, “this means adopting the Parliament’s position on the future energy legislation, but also much more than that: considerably increasing the target for reducing carbon emissions by 2030 and cutting emissions to net zero by 2050 at the latest.”

How do we make a net-zero carbon economy the new normal? As the EU Talanoa Dialogue and the Petersburg Dialogue kicks off a busy month for EU climate action, Eliot Whittington explains why now is the time for the EU to show its colours on legislation currently under consideration and make a net-zero carbon economy the new normal.

Clean energy package

At European level, policymakers are currently discussing a package of laws that will define the EU’s climate and energy policy for 2030 – including targets on greenhouse gas emissions, energy efficiency and renewables. A public consultation on a 2050 low-carbon roadmap is also due to launch in July, with a view to adopting a European “mid-century” strategy before the European elections next year.

But while countries like France, Sweden and the Netherlands have shown willingness to raise the EU’s climate objectives for 2030, others like the “Visegrad Four” countries of Central Europe – Czech Republic, Slovakia, Hungary and Poland – have slammed the brakes, highlighting the cost of the transition.

And Germany, which until now had kept its cards close to its chest, appeared to side with the Visegrad Four camp yesterday (11 June), when it warned of “unachievable targets” on renewable energies for 2030, which some EU countries would like to raise to 32 or 35% – well above the 27% objective agreed by EU leaders in 2014.

Germany pours cold water on EU’s clean energy ambitions Voters across Europe have lost faith in politics partly because of “unachievable targets” on renewable energy, said German Energy Minister Peter Altmaier, who rejected calls from a group of other EU countries to boost the share of renewables to 33-35% of the bloc’s energy mix by 2030.

However, for the business and NGO alliance, this would be short-sighted.

“More and more businesses are showing how innovative business thinking can reimagine the way we do things and make zero carbon not only possible, but good for people and good for business,” said Eliot Whittington, Director of The Prince of Wales’s Corporate Leaders Group. “But they need policy makers to set the direction and make policy frameworks fit for purpose,” he added.

In terms of economic benefits and job creation, the rewards could be handsome and come in the billions of euros, said Peter Damgaard Jensen, the CEO of Danish pension fund PKA.

“In the EU, clear, long-term and ambitious policies which are designed to accelerate private sector investment into the low carbon transition can support large-scale deployment of capital, promoting sustainable economic growth and boosting job creation while also cementing the EU’s position as a global leader on climate action,” said Jensen.

PKA is currently chairing the Institutional Investors Group on Climate Change (IIGCC), a collaborative forum with over €21 trillion in assets under management, including nine of the top ten largest European pension funds.

Why investors want greater ambition for the Clean Energy Package The goals of EU energy policy going forward must be ambitious if European countries want investors to provide the capital required to realise a smooth transition to a low-carbon economy and the growth this could generate, writes Stephanie Pfeifer.

Climate risk disclosure

For pension funds like PKA, the issue not only about making sound investments for the long term, it’s also about mitigating the risks that extreme weather events pose to their investments.

A rise in temperatures of six degrees this century would see $43 trillion wiped off the value of financial markets, according to research commissioned by Aviva, the UK insurance company.

On 11 June, S&P Global Ratings released a co-authored report determining the prevalence and materiality of climate risk for companies in the S&P 500 index. The report found that “climate risk is a surprisingly prevalent topic of discussion for the CEOs of publicly traded companies, and management teams are becoming increasingly accountable for understanding and mitigating the impact of climate risk”.

However, there is still some way to go before all companies disclose and report climate risks in a coherent and systematic way. While 73 companies on the S&P 500 publicly disclosed an effect on earnings from weather events, only 18 companies (4%) quantified those effects, the report found.

Business leaders back G20 task force recommendations on climate-risk disclosure Over 100 business leaders worldwide have backed the final recommendations of a global task force set up by the G20 to disclose how companies manage climate-related risk, in a move that could divert trillions of investments away from polluting fossil fuels.

This makes the adoption of climate legislation all the more relevant. In their letter, the business and NGO coalition urge EU leaders to:

Finalise adoption of the EU’s clean energy package of legislation for 2030, in line with the ambition levels adopted by the European Parliament;

Adopt a long-term EU climate strategy that sets Europe on a pathway to delivers on the 1.5°C objective of the Paris Agreement, which must include a net-zero emissions target by 2050 at the latest;

Revise the EU’s 2030 greenhouse gas emissions reduction target in order to allow the EU to resubmit its Paris pledge to the UN by 2020, as agreed in Paris.

The statement comes ahead of the High-Level EU Talanoa Dialogue on 13 June, where decision makers and stakeholders will be discussing ways to step up climate action, and the final round of negotiations on the 2030 renewable energy and energy efficiency legislation.