Fourth-Quarter 2022 Edition:
Measuring, managing climate & nature risks

Welcome to the second edition of the S&P Global Sustainability Quarterly, featuring research authored by a cross-section of representatives from across S&P Global. We publish at a pivotal time for the sustainability world — hard on the heels of the U.N. Climate Change Conference in Sharm el-Sheikh, Egypt, known as COP27. The second part of the U.N.'s Convention on Biological Diversity, known as COP15, is underway in Montreal. As we head into 2023, it is increasingly clear that these two topics — nature and climate — are inextricably linked.

For example, mining exploration around the world is picking up as companies seek new deposits of elements like lithium and copper to support the energy transition. But research by S&P Global Sustainable1 finds that many existing mines and exploration sites overlap with some of the world’s most important areas for biodiversity. Enabling the energy transition while managing the potential negative impacts on biodiversity is a complex challenge. It is also increasingly urgent, given that trillions of dollars of economic activity rely on nature.

While the challenges of climate change and nature loss are ubiquitous, their impact differs across geographies. Developing countries disproportionately face increasing costs and disruption from the physical impacts of climate change. Read on for a special report from S&P Global’s Economics & Country Risk team exploring the impact of water issues and extreme weather events in Latin America. The research finds that water scarcity in Latin America is likely to intensify supply chain and operational disruptions, regulatory risks, and economics losses for businesses over the next decade.

The challenges also differ by sector. During COP27, we saw commitments from public and private sector alike, including ambitious carbon reduction initiatives from one sector that is a major contributor to global CO2 emissions: cement. The EU is leading the way on decarbonizing the cement industry, and in the pages that follow, S&P Global Ratings analyzes the steps some European players are taking to decarbonize their operations and update their strategies to meet changing customer demands. The research also looks at the potential financial and operational implications for companies in light of the EU's goal to hasten emissions reduction and the challenges the industry faces, given the current nascent stage of decarbonization technology.

In the banking sector, there has been an increasing number of regulatory initiatives across the globe to accelerate the assessment of exposure to and management of climate risks, notably through stress tests. Research from S&P Global Ratings explores the approaches of regulators and prudential authorities and aims to identify the key challenges that remain.

With the acceleration of global ambition to tackle climate change, market participants increasingly need to better understand the greenhouse gas competitiveness, or the relative greenhouse gas intensity, between different sources of crude oil globally. A newly developed proprietary model helps do just that by modeling greenhouse gas emissions down to individual assets and the sources of emissions. Research by S&P Global Commodity Insights applies this model to the North Sea — one of the most significant oil- and gas-producing regions globally.

There is no one-size-fits-all solution to climate and nature challenges. In the research that follows, we seek to understand the sustainability challenges different parts of the world and the economy face — and the solutions to help address these challenges.

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Around the globe, countries are facing growing exposure to the physical impacts of climate change. The inaugural S&P Global Sustainability Quarterly is a roadmap to understanding this evolving climate landscape.