Key takeaways for board directors

• Climate and nature dominated many of the discussions at Davos, following the publication of the World Economic Forum’s Global Risks Report 2024, with climate-related risks featuring high in both the short and long-term risk landscape.
• The urgency to take climate action and implement the outcomes from COP28 was regularly acknowledged, with an emphasis of the cost of inaction being too high.
• In the lead up to and at COP29, climate financing will be high on the agenda, and mobilising private and public sector investments to accelerate the transition to net zero.

Published in the lead up to the Annual Meeting, the Global Risks Report 2024 set the tone for the meeting. It highlighted the spread of misinformation as the biggest short-term risk, in part increased by the potential use of Artificial Intelligence to flood Global Information Systems with false narratives. The second highest risk in the 2-year horizon was from extreme weather events and climate, the effects of which are being felt more and more widely, with more industrialised economies now starting to be impacted. For example, in 2023, the US experienced 28 weather and climate disasters each costing over 1 billion. This put climate and nature high on the agenda at the Annual Meeting again this year.

Following increased engagement with business and the private sector at COP28, Davos saw similar levels of stakeholder engagement to that of pre-Covid times, with many viewing the Annual Meeting as an opportunity to operationalize the COP28 decisions. Discussions centred around the positive outcomes from COP28, including the transition away from fossil fuels, tripling of renewable energy capacities and greater investment in energy efficiency measures. It was felt that COP28 had the potential to be historic, if the ambition and pledges are implemented.

With elections in the US taking place this year, there was a strong presence and engagement with US representatives, in particular John Kerry, US Special Presidential Envoy for Climate, who participated in a number of panel discussions. 

Decarbonisation was still high on the agenda; the Forum’s First Movers Coalition are focused on supporting the harder-to-abate sectors’ transition to a net zero future. The initiative has grown to more than 96 members making a total of 121 commitments across 7 sectors. By 2030, these commitments will represent an annual demand of $16 billion for emerging climate technologies and 31 million tonnes (Mt) CO2e in annual emissions reductions. A greater emphasis was also placed by business on nature this year, following the publication of the Taskforce for Nature-related Financial Disclosures (TNFD) recommendations last September. The early adopters group of this set of standards was announced during Davos, with over 300 companies set to incorporate the standards.

Focusing on the year ahead and COP29, it was recognised that the major theme will be climate financing. It is now widely accepted that to achieve the commitments from previous COPs, we need 2 - 3% of global GDP for investments in emerging markets. A lot of this must come from domestic resource mobilisation, and private sector financing, which will also need to be anchored in the continued reform of the Multilateral Development Banks. The development of high integrity, voluntary carbon markets is an important piece of the financing puzzle, with plenty of work to be done in this area, and this is certain to be a high priority at COP29.

Attendees recognised that the cost of inaction on climate is high. Climate change is already having a massive impact globally on GDP per capita, affecting people’s livelihoods and irreversibly damaging the environment. Society has a moral duty to take climate action and reduce the severity of these impacts. The increasing acknowledgement of this responsibility alongside engagement with the climate agenda from CEOs and executives coming into Davos was encouraging. Business is increasingly taking action on scope 1 and 2 emission reductions and there is growing momentum on improving business strategies to reduce scope 3 emissions. The World Economic Forum’s Alliance of CEO Climate Leaders will have a strong focus on scope 3 emissions moving forward and has launched a Scope 3 Action Plan and a support hub to encourage and enable supplier decarbonisation.

 How can business leaders respond?

Collaboration is key. The breadth and complexity of the climate crisis is huge, and a coordinated global effort is essential to meet the goals of the Paris Agreement. Business has a central role to play in this, and in driving the transition to a Net Zero future. Business leaders must take the lead in addressing the risks and opportunities of climate change with a strategic, long-term approach. 

The Climate Governance Initiative, through its global network of board directors in over 70 countries, supports board directors to share best practice in implementing effective climate governance within and across borders. Its work builds on the World Economic Forum’s Principles for Effective Climate Governance, a set of guidelines for how to set up effective climate governance on corporate boards, which was published in 2019. 

To join your local Chapter of the Climate Governance Initiative, visit the Climate Governance Initiative website.