By Pim Valdre, Head of Climate Ambition Initiatives, World Economic Forum
This year, 3000 leaders from over 130 countries gathered at the Alpine resort, including more than 50 heads of state and government for Collaboration in an Intelligent Age, the World Economic Forum’s Annual Meeting in Davos. The Annual Meeting comes two months after the United Nation’s Conference of the Parties, where countries negotiate on global climate agreements, with the strong focus of COP29 progressing a new climate finance goal to support developing countries.
Key takeaways for boards directors
- Against the backdrop of a fractured global context with rising policy uncertainty, including the US shifting its position on climate, 2025 will be a challenging year for keeping up momentum on climate and nature action.
- Despite political headwinds, representatives from business, science, international and regional organizations reconfirmed their commitment that climate smart is business smart, and joint climate action is the viable path ahead for a liveable planet.
- The clean energy transition continues to gather pace and global clean energy investments are set to exceed US$ 2 trillion for the first time. With significant momentum behind it, costs of fossil fuels higher than renewable energies in many places, and increasing energy security goals, the financial business case is strong for companies to transition away from traditional polluting energy sources to cleaner forms of power.
- The cost of inaction is high. Extreme weather and other physical climate hazards could wipe out as much as 7% of corporate earnings annually by 2035 without action. Businesses risk significant losses, including increasing costs from climate and nature impacts, increasing transition costs related to shifting regulation, carbon pricing schemes and potential stranded assets.
- The economic case for adaptation is strong. Every dollar invested in adaptation and resilience measures can generate up to 19 US$ in avoided losses.
- Despite risks, the evolving climate landscape presents substantial growth opportunities. Green markets are set to grow from US$5 trillion in 2024 to US$ 14 trillion by 2030.
- The opportunity for public and private sector collaboration is growing and will be key to driving the investment needed to transition to a carbon neutral, nature positive economy.
This year’s conference began on the same day as the Trump administration’s inaugural day in office, during which it announced that the US would be withdrawing from the Paris Agreement for the second time, and seeking to limit the US’s climate finance contributions for developing countries mitigating and adapting to climate change. This set a sombre tone for the progress of climate action going into Davos, as well as concerns that climate fatigue could slow progress this year. However, business leaders dispelled these concerns with many agreeing that private sector demand and investment for more sustainable projects and solutions remain strong and will likely continue. Whilst the politics may have changed, the science has not. The cost of inaction for business leaders is high, as highlighted in the report from the Alliance of CEO Climate Leaders, which notes that global GDP is forecast to decline by 19% by 2050 from increasing environmental issues.
The Global Risks Report 2025, published by the World Economic Forum a week before Davos, showed environmental concerns in the top four risks in the next 10 years. Extreme weather events was the second highest risk in the short-term time horizon, with the LA wildfires wreaking devastation, at an estimated cost over $250 billion, only a week before the report was published. This was evidently front of mind for many delegates as momentum on the climate adaptation agenda has grown with more countries experiencing extreme weather events over the past year.
The energy transition was a key talking point this year at Davos. Specifically the potential halting of this transition following the new direction of travel from the new US administration. In contrasting response to this, it was felt that sufficient momentum has been gathered in recent years that the energy transition cannot be stopped. In many places renewable energy is now cheaper than traditional fossil fuels, giving businesses a clear financial case to choose the more sustainable option. However, more still needs to be done across the world. It was recognised that Africa holds 60 % of the world’s best solar resources but it only received 2 % of global renewable energy investments in the last 20 years. Again it was made clear that no one should be left behind, and significant investment is still needed in this sector to less developed countries who can support globally in the transition.
Collaboration was a key theme throughout this year’s meeting. In particular for businesses, it was highlighted that public-private partnerships will play a significant role in enabling climate and nature action. With the LA wild fires raging in the background, the threat of retreating insurance coverage and uninsurable levels of risks was highlighted. It was noted that insurance premiums for climate resilience and natural catastrophe protection are set to rise by 50% by 2030. To tackle this more public-private insurance models, combined with earlier resilience and adaptation measures in key sectors, will be required.. An initiative in Africa, the Kivu-Kinshasa Green Corridor was launched by the Democratic of Congo government and partners to offer opportunities for public-private partnerships to drive green prosperity.
How can business leaders respond?
A new initiative, the Planetary Health Check, launched by the World Economic Forum, the Potsdam Institute of Climate Impact Research and the CDP, identified 4 key levers for businesses to act simultaneously to address the climate emergency and future-proof their business:
- A 1.5°C - aligned climate transition plan and the ability to track this.
- Placing a price on carbon internally.
- Linking executive pay to climate plans and goals.
- Engagement throughout the value chain (it is not just about your own business but who you are buy from along your value chain).
In the lead up to COP30 in Belém, Brazil this year, momentum must be maintained in the private sector to continue investments into climate and nature positive infrastructure, decarbonise across the value chain and to continue dialogues across public and private sectors to support new technologies and build the business case that sustainable solutions make financial sense.
We need to keep the climate agenda, in the living room, in the boardroom and in the cabinet rooms, and keep it there, up front and centre.
Simon Stiell, Executive Secretary, UN Climate Change