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Lindsey Hall: Hi. I'm Lindsey Hall, Head of Thought Leadership at S&P Global Sustainable1.

Esther Whieldon: And I'm Esther Whieldon, a Senior Writer on the Sustainable1 Thought Leadership Team.

Lindsey Hall: Welcome to ESG Insider, a podcast hosted by S&P Global, where we explore environmental, social and governance issues that are shaping investor activity and company strategy. 

Esther, somehow it's already September. And in my house, that means back to school and back to this early morning chaotic rush out the door. In the sustainability world, September means we're heading into a busy fall season of climate events that culminates with COP27 in November.

As a reminder, COP is the big United Nations Climate Change Conference that this year is being held in Sharm el-Sheikh, Egypt. But first up is Climate Week, and that's what we're going to be focusing on today.

Esther, for our listeners who might not be familiar, can you give us a rundown? What is Climate Week? And what should people expect? What themes are going to be in the spotlight?

Esther Whieldon: Sure, Lindsey. So Climate Week takes place in New York City from September 19th through the 25th. The event has run annually since 2009, and it convenes leaders from the business, government and climate communities. The goal is to drive climate action. And this year, the tagline is "Getting it Done."

Climate Week includes hundreds of events across the city, and you and I are going to be busy trying to capture as many of them as we can. There are 10 themes this year: Built Environment, Energy, Environmental Justice, Transport, Finance, Sustainable Living, Nature, Policy, Industry and Food.

So needless to say, there's a lot of stuff they're covering at the event. Lindsey and I, as I hinted, will be on the ground interviewing some big names from across the sustainability space for this podcast as well.

Lindsey Hall: Thanks, Esther. And in today's episode in this run-up to Climate Week NYC, I wanted to understand how climate science is evolving. And at the same time, how is public perception of climate change shifting? So I turn to a climate scientist, Dr. Terry Thompson. In 2017, Terry co-founded the firm, The Climate Service, or TCS, a climate risk analytics data provider.

S&P Global acquired TCS at the beginning of 2022, and Terry is now Chief Climate Scientist at S&P Global Sustainable1. Now Terry tells me that climate science is at the "bleeding edge of scientific, economic and sociological knowledge." He explains in plain English the data points that climate science relies on, the gaps that the sustainability world is working to plug and how we can keep social equity in mind when discussing the physical risk with climate change and the energy transition.

Also Esther on a completely non-climate-related front, I also learned that Terry is a ballet dancer. And for me, this is a total opportunity to geek out because I was a ballet dancer growing up, and it turns out that Terry and I actually took classes from the same Russian ballet teacher in Northern Virginia.

Esther Whieldon: Oh, wow.

Lindsey Hall: So you'll hear us talk about that a little later in the interview as well.

Esther Whieldon: Yes. I think this will be another first for us on the podcast right now. We have a climate scientist who is also a ballet dancer.

Lindsey Hall: Yes, that's exactly what I said. Okay. So now turning to my interview with Terry. I start off by asking, what has changed about attitudes towards climate risk?

Terry Thompson: Yes. There's really been a sea change since we started The Climate Service back in 2017. In the first year or two of that effort, we would often find ourselves being asked the basic question, what is climate risk? What are you trying to do here? Why is that important? Not only what is it, but why is it important?

And as you can see, I'm sure everybody is aware of the increased sensitivity to climate change broadly speaking, both as a social issue and as a physical risk issue. So by the fourth year of the company, we were being asked not just what is it, but can you do certain very specific things? Can you calculate the risk associated with sea level rise?

Can you tell me how often certain flooding events will -- how their frequency might change in the future? Can you do this for 3 or 4 different visions of the future, scenarios for the future? Can you do that? Can you assign some probabilities to these risk numbers?

So by way of just giving that particular example of how the questions have become much more sophisticated and detailed over the past 4 years, I use that as an indicator of the sea change, one indicator of the sea change as we saw it from the perspective of our company. One need to only look at news magazines, essentially any media outlet to realize that the frequency of stories about the climate, meaning investigative journalism regarding the climate, that frequency has skyrocketed in the past 5 years as public awareness has increased of the nature of the problem as, unfortunately, a number of actual events related to flooding and heat waves and the like and wildfires, for example, have indicated that climate change is upon us.

It's not something that will be around perhaps in a couple of decades. It's already upon us and increasing in certain ways. So that sea change in public perception, immediate perception of current events, has occurred. And additionally, both governmental and nongovernmental organizations have increased the tempo of their activities in this area.

Lindsey Hall: When we spoke before, I believe the term we used was emerging emergency. Can you tell our listeners what you mean by that?

Terry Thompson: This is not a future event when we talk about climate change. It is essentially a current emergency. So I think we're reaching the cusp of very much more strenuous and concentrated efforts to address climate change. The jargon is climate change mitigation versus climate change adaptation. And that simply means reducing the impact of humanity on the climate in some way, reducing greenhouse gas emissions, primarily. That's the mitigation part.

And the adaptation part is, given that the climate is changing to some degree no matter what we do, how do we adapt to increased heat wave frequency to more extreme precipitation-related events and the like? So much more activity on both those fronts, mitigation and adaptation.

Lindsey Hall: That's really interesting, the way you're framing it as -- when I was growing up, it was definitely climate change was some distant future thing, but you're absolutely right. This is -- there is an increasing sense of urgency. I'm on the website for Climate Week New York City right now, and it describes how this week creates an ambitious platform for the mission to drive climate action fast. And that word fast, I think it sort of speaks to that change in pace that you were referring to.

Terry Thompson: Yes. And I think we should talk just a little bit about why fast. And it's because we really do need to cut -- just concentrating on mitigation for the moment. We really do need to achieve some very substantial cuts in greenhouse gas emissions essentially this decade. We need to start very seriously this decade and continue that trajectory through mid-century. And the fundamental reason for that is that what we emit now ends up in the atmosphere. The atmosphere acts like a bathtub. You fill it up with things and it doesn't drain out rapidly. So what you put in now is going to be around for, let's call it, 100 years.

And it's important to realize that taking action now will reduce that fundamental, how much of the greenhouse gas have you put into the atmosphere because you can't get rid of it quickly. That's a little bit different from certain other kinds of pollutants, which wash out of the atmosphere really quickly. And so you could say that you wouldn't have this need to operate quite so quickly. But in the climate change arena, driven by greenhouse gases, primarily CO2, we really do have this problem, and we really need to start working on it in earnest.

Lindsey Hall: I mean I ask kind of a basic question here, but I think it's an important one for our listeners to understand. How does physical risk, in plain English, how does it fit into this broader landscape of climate change that we're talking about?

Terry Thompson: So you might think of this as a big loop. Greenhouse gases, speaking simplistically, greenhouse gases going into the atmosphere create changes in the behavior of the atmosphere. Changes in behavior of the atmosphere and the greenhouse gases in the atmosphere also change certain aspects of the behavior of the oceans. So we are altering the 2 fundamental components of the Earth system via these emissions. Those changes in the atmosphere and the oceans lead to changes in things that we would call hazards: heat waves, higher temperature, more extreme precipitation-related events, more extreme storms, for example, higher likelihood of wildfires, higher likelihood of drought. Those are several of the key components. So the way this fits together is that the changes in the atmosphere and the ocean create changes in these things that we sense on a day-to-day basis. That's the hazard part.

The next step in this physical risk analysis is related to what we call impact functions. And those are simply relationships, sometimes complex, but nonetheless, the basic idea is that this is a relationship between a hazard metric like the number of extremely hot days in a particular location and the impact on something. It could be on a factory, it could be on a warehouse, it could be on a data center. There are different effects on different types of assets.

And the reason -- one thing I want to get across is there's a difference between a hazard and a risk. So let's take a really simple example of very hot days strung together for a week with hot nights as well. For a data center, the only impact and, therefore, risk to consider in this mini scenario is probably the cooling costs are going to go up for that data center temporarily. They probably would not go up astronomically, but we can calculate roughly what those cooling cost changes would be associated with that 5-day period of very hot days and relatively hot nights.

But if we were looking at a different asset, let's suppose we're dealing with a company that has outdoor warehouses where they store a lot of goods and it's not air-conditioned, then the impact on that asset would be very significant when we consider the workforce that has to operate in those conditions. So human beings will feel initially uncomfortable when we have a series of hot days and hot nights. But after several of those, we might actually find people are getting sick. It can lead to morbidity and mortality. But just to keep it really simple, you can think of the efficiency of the folks who work in that particular establishment going down as well.

So all I'm really trying to get across is the richness and the difference between a hazard change related to the physical climate, temperature in this case, and the impact which is the risk associated with the combination of how is the hazard changing but how am I sensitive, how is my asset or my concern sensitive to that temperature change.

Lindsey Hall: Terry, talk about the fact that climate change impacts everyone, from the public at large to the key decision-makers convening during Climate Week.

Terry Thompson: Let's start with the public at large. Persons experiencing, in their own neighborhoods, in their own lives, climate change-related events are much more likely to understand that this is a problem that's occurring now and is going to get worse. All of the climate modeling that we've done tells us that under any of the scenarios, it's going to get worse. Under the do-nothing scenario, it's going to get really, really terrible. And under certain other scenarios in which we cut greenhouse gas emissions pretty rapidly, it continues to get worse, but not by nearly as much.

So starting with the public, the public will then have a better perception that this is a real change. That will lead them to embrace and support changes in the economy related to emitting greenhouse gases. You might think of supporting carbon prices, meaning a price on the amount of carbon or CO2 that's emitted per unit of economic activity. Additionally, the public will be motivated to say, "Personally, what am I going to do about this?" I happen to live on a farm where we have horses. And I need to be thinking about how can I protect those animals from very hot, dry conditions that are going to occur with an increasing frequency. Do I build sheds? Do I engage in something even more ambitious? So you can see it becomes a practical consideration.

Moving away from horses, you might be a person that is considering renovating their home. Do I renovate and improve the air-conditioning? And not only improve its capacity, but improve its efficiency so that I can get a reasonable amount of air-conditioning for a very small or a smaller carbon footprint. So that's the adaptation part.

So moving beyond the public, the impacts then move to decision-makers and by analogy, the same sorts of things occur. The Climate Week Conference, I think, is aimed at increasing not only the awareness of the public at large, but key decision-makers on both sides of the equation. How do we mitigate? How do we reduce climate impacts over the next couple of decades? And how do we adapt to the inevitable change even when we do mitigate to some degree?

You may have heard recently an interview with the newly appointed public official in Athens, Greece. And her title is the Chief Heat Officer. And her job is to address just this sort of thing for Athens, Greece, primarily from the adaptation perspective, developing cooling centers, developing strategies for keeping heat islands, increased heat islands in an urban environment, keeping those at a minimum through the use of greenery, roof cover and other techniques. But that's the first that I personally have heard of a Chief Heat Officer, very specific in Athens, Greece.

Lindsey Hall: Side note here. Terry is talking about Eleni Myrivili, who became Europe's first Chief Heat Officer when she took on the role for Athens in 2021. Okay. Now back to my interview with Terry. 

So let me ask you a question, Terry. We like to get a little bit wonky on this podcast. We try to keep things plain English, but we like to dive deep. Can you pull back the curtain a little bit on some of this science? Like how are you actually calculating physical risk? What are the things that you are looking at? And how is that climate science evolving over time?

Terry Thompson: Yes. Okay. So I think everybody is familiar with daily weather reports, even hourly or every 10-minute weather reports and weather forecasts. So those weather forecasts are built upon computational models, which over the past 50 years, 40 years, have evolved from a very primitive techniques through some very -- now very, very sophisticated supercomputer model-based techniques. And those are the kinds of things that give you pretty good confidence that when the weather report says that it's going to be in the upper 80 degrees Fahrenheit for the next couple of days, you can pretty much count on that.

Climate models are built on a very similar technology. That's a set of differential equations that describe the movement of the atmosphere, little parcels of the atmosphere and its interaction with both land and ocean. Those differential equation-based models are also applied in the climate domain. And currently, in the current generation of climate models, there are 32 models used to model the atmosphere and the ocean around the world.

Now those models provide daily estimates of certain parameters like the daily maximum temperature, the daily minimum temperature, the daily precipitation. And they do that for small grids, small segments of the planet, all around the planet. And there are about 1 million of those grid cells, as we call them, at the surface and then upward vertically in the atmosphere. So roughly 1 million at each level.

That's the raw data that we start with in my lab. We start with those daily estimates. And the daily estimates run from -- generally from 1950 through 2100. So for every one of these million grid points on the planet, we have a daily estimate of temperature, precipitation and a number of other variables. We have it for the historical period, 1950 through present day. And then we have it projected into the future. Let's just keep it simple and say from 2022 onward, under different scenarios.

I mentioned earlier the scenario in which we do nothing to change our impact on the climate. That's got a particular name. That's one scenario. And there are 3 other main scenarios. So for each of those scenarios into the future, we take the historical data, that daily data. We take the projected future data for all of those days out to 2100 under each scenario. And then we compute hazard metrics. So a hazard metric, temperature is not a hazard metric. Temperature just is what it is.

A hazard metric would be, let's say, the -- as I mentioned earlier, the number of extremely hot days. You might say, "I'll define an extremely hot day as the hottest 3 days in August in the Northern Hemisphere. And I'll compute that for the historical period, and that will be my benchmark." And I'll say that's the historical number of very hot days, let's say, 3 in August. Then using that projected data out to 2100, I'll compute the same thing. So that's the kind of thing that we do for a much more complex hazard metrics as well. Precipitation is one of those.

We use, for example, for wildfire and drought, we use a multi-parameter input to the estimation of a drought or wildfire condition metric. For river and flooding, we actually use 3 of those input variables that are related to temperature and precipitation and actually the number of cold days, which is important for runoff. If there are very few cold days, you get more runoff than if precipitation stays frozen, so the number of cold days comes into it as well. And we couple that with some other hydrologic parameters and run that through a model.

But in the end, you said get nerdy. In the end, it boils down to take those daily estimates that come from the 32 climate models through that whole period under multiple scenarios, turn those into different kinds of hazard metrics. Then the hazard metric is linked to be an impact function to an actual risk. And that impact function, as I mentioned earlier, will differ depending upon the type of asset or operation that one is evaluating, the data center versus the open warehouse kind of thing. Is that nerdy enough? Or is it clear?

Lindsey Hall: That was fantastic. That was clear and nerdy. And I think you've heard that. Terry, we talk a lot on this podcast about the data challenges facing the ESG world. There are gaps in disclosure in some areas, the science is evolving in others. In your part of the sustainability world, where are those gaps? And what are the big challenges that are active -- people are actively trying to address?

Terry Thompson: One of the gaps I want to mention is related to the assets that I described earlier as being affected by one or another change in the climate. Knowing where those assets are and what their characteristics are is actually a very difficult problem. There is a worldwide effort to develop what I call asset-level databases that describe, for example, where are all the data centers in the world, where are all of the assets that are related to a particular corporation, where are all of the assets for that same corporation that are related to the supply chain for the materials that come into that corporation and the transportation networks that the corporation uses to ship its products, for example.

So this asset-level data is a huge challenge. One might think that any corporation knows exactly where all of its assets are. But I'm here to tell you that we worked for some very big corporations, and it's not that easy. It becomes a problem of certain parts of the corporation know where the data centers are. Other parts of the corporation might know where the farms supplying a certain type of equipment for the corporation are located, but actually bringing all of that information together in a coherent way even for that one corporation internally is not an easy thing to do. And then it becomes -- that problem becomes magnified if one looks from the outside and says, "Well, I'm not really a member of this corporation. I don't have their internal information, but how do I judge their climate risk? How can I estimate the distribution of their resources, along the lines of what I outlined on both production and supply chain?"

I think another data gap is simply related to understanding that we have quite good data on some of the climate parameters that are changing, but we don't have such good data for all the climate parameters that are changing. A simple example would be things that we can estimate with satellite-based remote sensing, temperature, for example. We can estimate the intensity of fires on the basis of infrared signals that are picked up by satellites. Those 2 things are examples where we have pretty good observational data.

But there are parts of the planet and levels, so to speak, of the planet where we don't have such tightly knit observational data. What's going on with salinity in the ocean, for example. We have sparse data based on floating or sometimes remotely operated vehicles, autonomous vehicles that are moving through the ocean, either under their own power or not. But that's a sparse data source, and we don't get very detailed information about salinity, particularly as one goes downward to greater depths.

But salinity is really important in the way the coupled atmospheric ocean system operates. So there are data gaps in what is the planet actually doing. That's all I'm really trying to say. Some of it, we can see and have very reasonable and very accurate data; other components, we can't see well, and we don't have very good data. And that creates challenges as we move into more detailed types of climate change hazards.

Lindsey Hall: I'd like to take a little step back as we kind of wrap up our conversation. A lot of our discussion has been about the E in ESG, which makes sense because this is an episode about Climate Week. But we've also talked a lot on this podcast about the need to take a holistic approach to sustainability. So how do you address the energy transition without losing sight of social issues or the S in ESG? Or how do you ensure the energy transition takes place in a way that's just then equitable? And that's also going to be a theme during Climate Week, investing in equity and the economy. So I'd love to get your thoughts here, Terry. As focus on climate change ramps up, how do social issues fit into this discussion?

Terry Thompson: Well, I think first, not only is it the energy transition that may or may not be inequitable. Actually, the impacts of physical changes in climate can be quite inequitable. A simple example is the availability of cooling centers during hot periods in urban areas. Not unlike food deserts, I think it's well understood that -- grocery store deserts, is what I mean. It's also well understood that the resources needed to cope with a change in climate are not equitably distributed at present time.

And so we need to take -- be aware of that particular aspect and take some actions that would ensure that we make that as equitable as possible. Migration away from rising sea levels and increasing flood frequency is also something that is not equitably distributed. How do we cope with that? So I'm really only saying there's the physical side to the equality question, the equitability question. There's also an energy transition side to it.

Lindsey Hall: And I think that's going to be an important topic during this upcoming Climate Week. And before we close, I did want to circle back to your own personal story. You shared with us how you came to climate science. But I can't pass up an opportunity to talk with the guests about one of my great loves, which is ballet. One thing I know about you from our previous conversations is that you are, in addition to being a climate scientist, also an avid ballet dancer. Can I ask you to share a little bit about that part of your life with our listeners? When and how did you come to that?

Terry Thompson: Well, I came to it late, to begin with. I grew up in Northeastern Ohio in what was then steel country. And I'm not sure that I ever heard the term boy and dance in the same paragraph. So sort of totally beyond my cultural awareness. And in my 30s, I actually was exposed to it through a film that involved Mikhail Baryshnikov and Gregory Hines, who were doing in part in the film, a dual of the cultures of tap, Gregory Hines; and classical ballet, Mikhail Baryshnikov.

And I've never seen anything like it before, and I made a vow to find out what that was all about. Immediately started taking ballet classes. And lo and behold, years later, I'm still doing the same because ballet is the epitome of a mental and physical and emotional challenge in which one gets the opportunity to merge those 3 things. And I've never known of anything else that merges the physical with the emotional and the mental in such a beautiful way.

Lindsey Hall: Well, thank you so much for sharing. I can say you're definitely our first climate scientist/ballet dancer to come up on the podcast. It's been a pleasure talking to you today.

Terry Thompson: Yes. This is an enormous challenge for humankind. And no one has all the answers. So I think we have to work together to figure them out.

Lindsey Hall: So Esther, you heard Terry talking about the sea change the world is experiencing in awareness of climate change. And you said the questions companies are asking about climate change have become much more sophisticated. For listeners who'd like to learn more about physical risk, S&P Global Sustainable1 is hosting an upcoming webinar on scenario analysis. We'll include a link in our show notes.

Esther Whieldon: And as we head into Climate Week in September and then COP27 in November, this will be an opportunity for key decision-makers to come together and identify solutions. As I mentioned before, we'll be on the ground in New York City for Climate Week, and this will include an event hosted by S&P Global Sustainable1. So see the link in our show notes if you'd like to register for that.

Lindsey Hall: Thanks so much for listening to this episode of ESG Insider. And a special thanks to our producer, Kyle Cangialosi. Please be sure to subscribe to our podcast and sign up for our weekly newsletter, ESG Insider. See you next time.

Copyright © 2022 by S&P Global. 



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