June 3, 2015

Ikea, the Swedish home furnishing group, has vowed to spend €1bn on renewable energy and other measures to tackle climate change in a move that dwarfs what some countries are doing to address fossil fuel pollution.

The family-controlled company says it will spend €500m on wind power and about €100m on solar energy over the next five years.

Its charitable arm, the Ikea Foundation, will devote another €400m over the same period to helping people in regions most affected by global warming.

The group has urged other businesses to emulate its move, arguing such action could transform the way electricity is generated much faster than expected.

“If every business and organisation did what we did, we would flip electricity generation into being renewable-based by 2020 or shortly thereafter,” said Steve Howard, Ikea’s chief sustainability officer.

The group’s announcement comes as officials from nearly 200 countries gather in Bonn, Germany, to shape the negotiating text for a global climate change pact due to be finalised at a UN meeting in Paris in December.

One of the stumbling blocks to sealing the Paris agreement is a reluctance by some wealthy countries to meet poorer countries’ demands for money to help them deal with climate change.

Ikea’s move is a sign of what private sector groups can offer, though the flat-pack furniture giant does not face the same constraints as a publicly listed company.

However, the prospect of a meaningful global warming deal finally being sealed, after more than 20 years of UN negotiations, has prompted other companies and investors to demonstrate their climate concerns in recent weeks.

The French insurer Axa said last month it would ditch €500m worth of coal investments this year and triple its green investments to €3bn by 2020.

Six of Europe’s largest oil and gas groups wrote to the UN’s top climate official, Christiana Figueres, on Friday asking her to let them help devise a global carbon pricing system.

Separately, Norway’s parliament has just asked the country’s massive sovereign wealth fund to curb its holdings in companies that produce or burn coal.

Ikea’s €1bn commitment is notable for a company of its size: it reported revenues of €28.7bn last year, one-third of Axa’s 2014 sales.

The Swedish group is already a sizeable renewable energy player, investing €1.5bn in wind and solar power since 2009.

It has installed 700,000 solar panels on its own buildings, as part of a plan to produce as much renewable power as it consumes at its own properties by 2020.

It has also committed to owning and operating 314 wind turbines, mostly away from its own stores, in places such as Canada and the US. Last year it bought two large wind farms in Illinois and Texas.

Mr Howard said investing in renewable power made a lot of business sense and at least 20 large companies, including Apple, were also spending more money on clean energy.

“Carbon is a significant risk so if you can eliminate that risk, or a good share of it, that’s a good thing for investors,” he said.