Transcript by Kensho.

Lindsey Hall: 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 Whieldon: Over the past few episodes of the podcast, we've brought you a series of interviews from the sidelines of Climate Week NYC. 

Lindsey Hall: Yes. And earlier this week, for example, we heard the investment perspective and an interview with Nikita Singhal. Nikita is Managing Director and Co-Head of Sustainable Investment and ESG at Lazard Asset Management, and she was one of the speakers featured during the Climate Week event hosted by S&P Global Sustainable1.

One thing Nikita talked to me about was the importance of breaking out of silos to connect the dots between different types of stakeholders like economists, the finance community and the scientific community. Well, today, we're connecting those dots by sitting down with a member of the scientific community. So let's dive into my interview.

Sarah Kapnick: My name is Sarah Kapnick, and I am the Chief Scientist of the National Oceanic and Atmospheric Administration, or NOAA for short. We're an agency under the Department of Commerce, and we are focused on the science, the stewardship of the environment and the ocean.

Lindsey Hall: Sarah was a speaker on a panel hosted by S&P Global Sustainable1 during Climate Week about navigating climate-related financial risks. Here she is talking about her takeaways from that event.

Sarah Kapnick: On that panel, I was explaining how NOAA is producing all the scientific information that is recording and understanding the climate and the environment notions in the past. So we have all the observations in the past, understanding what's happening, how the world is changing.

On a monthly basis, we put out a report on the state of the climate. We recently had the hottest July on record, the hottest August on record, and our record lasts 174 years. So we have the hottest months on record. Ocean temperatures are at their hottest and record multi-months in a row. We are at this point where we are continuing to break these records in terms of global temperature on land and the ocean.

And we are also seeing damages due to increases in probability and magnitude of extreme events. NOAA also keeps track of the $1 billion disaster record, where we monitor all disasters that are over $1 billion in damages. We have that from 1980 to present.

And the number of those events, as well as the total dollar value of damages every year, that has been going up over time. And so we're seeing the climate is changing, the damages are changing. And then when we look into the future, we have expectations that this will continue to happen until emissions go to zero.

Lindsey Hall: So you've just described some pretty alarming findings. Can you tell us a little bit more about once you have those findings in hand, that data, what do you do with it? Who are you communicating it to? And what do you hope that they, in turn, do with that information?

Sarah Kapnick: So climate science and the recent records that NOAA has take place, the warmest July in record, warmest August, warmest summer, record high ocean temperatures, drastic coral bleaching that we're seeing, these all underpin the need for urgent action to reduce global greenhouse gas emissions.

NOAA gathers at forums like at the New York City Climate Week to share findings, but also forge partnerships and raise awareness of the urgency of climate change. Ultimately, if action isn't being taken out, these gathering are coming short. Our goals increasingly are to work with different groups to ensure that, that science that we are producing is going into decision makers' hands and that they can take action on that information.

Lindsey Hall: And to that point about sort of working across different groups, as I mentioned, your panel that I saw you speak on had different kinds of stakeholders on it. And I wonder if you can say any more about your own experience sitting on that panel with those different stakeholders. Did you hear anything that surprised you?

Sarah Kapnick: Yes. So our panel had macro economists from S&P, and it also had a Head of ESG at an asset manager. The information we're producing needs to go into macroeconomic models. We've been focused on this at NOAA about ensuring that scientific information is better used for macroeconomics and economic forecasting.

It's part of the reason we have the $1 billion programs, understanding the financial impact of disasters and monitoring that over time. But as you look into the future, science isn't necessarily in macroeconomic forecasts. And actually, NOAA is we have a seat on the National Academy of Sciences roundtable on the future of macroeconomic risk under climate change to be able to start including more climate information to understanding what can happen in the future in macroeconomics.

And then on the investment side, scientific information is really critical for understanding physical risk exposure in investment decisions in hard assets. For this, climate science is becoming increasingly important for risk management, for understanding what the future might hold for these types of assets. And so we have been joining with different groups like this to be able to work through how do we bring and how do we marry the climate science along with these other fields to be able to drive decisions with climate in mind.

Lindsey Hall: Great. Now we've been talking about this one specific panel during an event S&P Global hosted, but I'm sure your week was much bigger and much busier than just that. Can you tell me a little bit more about what Climate Week NYC looked like for you and perhaps what were some of the key takeaways from the event?

Sarah Kapnick: Yes. For me, Climate Week was about engaging with all the different people that are using our data. So we talked -- I talk to investors. I talk to your insurance companies. I talk to the data managers, everyone trying to understand how to incorporate more climate science into their work.

They both want the historical information, but they also want to understand what does the future hold, how do we understand what the next couple of months look like? How do we understand what the next couple of years, decades look like, to be able to understand then how they should be making their decisions to incorporate that.

So for example, in the insurance space, we had a lot of discussion about new data that NOAA is producing in response to collaborations and discussions with the insurance industry around needing more information on hail and also needing more information on bringing climate information into catastrophe models.

So as people are identifying the gaps in places where they can bring climate information, we've been having discussions and trying to bring that information to them and form some partnerships around that. Another aspect of Climate Week for me beyond physical risk was also the future of marine carbon dioxide removal, where we are in terms of science, in terms of cross government investment in marine carbon oxide removal science, but also how it's going to become actual, and then discussions of what the future of that space looks like.

Lindsey Hall: And can you characterize for me in these discussions you're having with all these different stakeholders, are there any key challenges or obstacles that you've heard them talking about that start to emerge as a pattern or a trend?

Sarah Kapnick: Particularly for people that are using climate science information for the first time, we have these barriers to entry of language and information and acronyms that are used. For a long time, climate science hasn't been brought in because we haven't had those translators and those people working across to ensure that climate science is brought to use.

I also think the barriers to entry using it historically is in that people don't understand what the financial impacts of climate change and climate extremes are. And so as the body of academic research has grown a lot in the last few years, as the number of disasters have been growing, the cost of damages from them, people are realizing that it's something that they should try and quantify and they should focus on, that it's no longer something that is it just an academic exercise. It's actually becoming a business imperative to figure out how to do this.

Lindsey Hall: I hear that a lot, actually, the difficulty of connecting the dots between these different audiences, finding a common language. That's definitely a theme I hear emerge, is something we definitely try to address on this podcast by eliminating jargon and speaking in as plain English as we can. But in your world, how do you address that challenge?

Sarah Kapnick: So we've been addressing it by ensuring that we have the scientists engaging more with private sector. So under this administration, we have been focused on a key strategy that we're calling Climate Ready Nation.

So with that, we've been trying to create ways for communities, industries, decision makers have all the tools, data and resources that they need to build their unique climate resiliency measures. With that, there have been products we've put out like HEAT.gov, a website that brings together all the heat information, the exposure of present people that are exposed to heat, forecast expectations for seasonal prediction, but also climate change so you can gather all the information you need from the science basis, but then there's also case studies of how people dealt with heat, how they are building the resiliency to heat.

So that people can see, by example, how other communities or businesses have made plans with regards to heat so that you get the scientific information, but then you also get some action plans about how to actually implement it. And so we're doing this with a bunch of different science products and data. But we're also doing it with various industries and different types of partnerships to create those case studies, create those pathways for the ways the science can start being used.

Lindsey Hall: Would you characterize this Climate Week NYC as a success?

Sarah Kapnick: I will characterize it a success as long as we have action. I think that this Climate Week for 2023, it had the most energy of one that I have ever gone to. I don't know about you and your experience.

But I felt like everyone really wanted to take action and they were trying to figure out how they can get the information they need to take action going forward. And I really just hope that we follow through with that momentum, and we start to really see action on both climate mitigation, but also increasingly kind of adaptation to build resilience in business.

Lindsey Hall: And now in the interest of what we're talking about untangling any jargon and explaining things in plain English. When you talk about mitigation and when you talk about adaptation, can you tell our lay listeners like what do you mean by those 2 terms?

Sarah Kapnick: Climate mitigation is reducing continued climate change. So it is reducing, removing, avoiding greenhouse gas emissions into the atmosphere. Climate adaptation, however, is adapting to the climate change that we already have baked into the system or continuing to adapt to the climate change that we expect to see in the coming years until we reach that point of zero emissions.

Put another way, climate mitigation is everything related to greenhouse gases because greenhouse gas and the increasing greenhouse gases, mainly from fossil fuel burning, is what is leading to climate change. 

Climate adaptation is dealing climate change. It's making sure that society can continue to function, that we figure out what to do to be able to live in a world where we have changes in probabilities and magnitudes of extreme events, to be able to have society resilient to the changes that we have and expect to see in the coming years.

Lindsey Hall: I've asked you a lot of questions, Sarah. But what are the questions that you wish you had been asked either in this interview or during Climate Week? What should people know that we haven't touched on?

Sarah Kapnick: As we look at the climate information, like what I said in the panel, these are going to be some of the coolest summers for the rest of our lives. But how much more carbon we released in the atmosphere is our choice. It will make a big difference for what the world likes going forward.

So weeks like these at Climate Week are really vital on bringing us together to talk about where we've been, what work is being done right now, but then also start to create those action plans for the months and years in between gatherings to be able to make plans and push forward on action in the coming years.

Lindsey Hall: Did you hear anything at Climate Week that surprised you that you found to be unexpected or like a new and innovative idea?

Sarah Kapnick: This Climate Week had a major focus on biodiversity and nature capital, which I think in some of my sessions I was at, some people were having problems disentangling climate and biodiversity and how the two were linked or not linked.

I think that biodiversity and nature capital are going to be increasing parts of the conversation because climate is a major force that can directly negatively impact biodiversity and nature capital. But also there are nature-based solutions that are really critical for also dealing with mitigation and adaptation to climate change.

And so I think there's going to be more and more discussion about how nature and biodiversity are interrelated to climate and what to do about that. I'm also amazed by how much discussion there was on how to start investing in nature and how to start investing in biodiversity, and what that means and what that looks like.

I think until now, there's been a lot of focus on the science development of climate side and what we know what we don't know. To start creating climate action, it's going to take everyone. It's not just the scientists. It's going to require partnerships, public-private partnerships. It's going to require leadership in business, leadership in government, leadership at the community level.

Only through complete across all of society working on this will we be able to take full action on climate change. And for me, this Climate Week really highlighted that from all the people I've met from all across society and all across the world, trying to bring together their climate action plans on both climate mitigation and adaptation. And I hope that we continue to see this going forward.

When I started in this field 20 years ago, climate change and climate information was mainly only seen as an insurance issue. It was seen as something that was only a long-dated risk or you might realize climate change from the time that you structure a products and the time that product ends. But now we're at a time where people are realizing that it is affecting every single sector in different ways, either by needing to mitigate climate change or start to adapt. And any one of physical assets is realizing because of growing damages that they need to be able to adapt, both in their business operations as well as in their longer-term investment strategy. 

So I think over the last 20 years, we see the transformation of people realizing they need to start thinking about climate no matter who they are, whatever sector they work in. And I think in the coming years, we're going to see that translation of climate information into action plans into how people deal with it. And we're starting to see it. 

S&P had a great report showing that utilities, for example, have the most climate action plans in their filings. They're recognizing that they have adaptation plans because of previous companies that have had losses due to extreme fire risk. I think we're going to see that across all sectors going forward as people realize what the impacts of climate change are on their business.

Lindsey Hall: Yeah, that's a really good point. It is certainly something that's moved out of the realm of just insurance to really across the board. And I think we saw that reflected in the breadth of sessions. I don't know about you, but I spent a couple of days at the Nest Climate Campus and attended sessions on everything from the consumer industry and the fashion industry and to financial institutions, to just every industry imaginable is being impacted and so is now taking part in these discussions at Climate Week, it seems.

Sarah Kapnick: Yes, absolutely. There's a saying I've heard people saying, any job can become a climate job going forward because everyone is affected by it. And we all need to be working together figuring out how to deal with it. And it's not just something that we have to do because it's a good thing to do.

It's becoming a business imperative to do that on both a risk standpoint, which I talk a lot about. But also in innovation and opportunity standpoint as people who figure out how to deal with this first are going to be the leaders in this space.

Lindsey Hall: Well, Sarah, I hope you'll come back on the podcast and continue this conversation with us in future episodes.

Sarah Kapnick: I hope to as well. Thank you very much for having me.

Lindsey Hall: So we heard Sarah point to the growing understanding of the cost of climate change. She said it's becoming a business imperative to understand how to quantify these costs. She also acknowledge the difficulty of translating climate science into plain English. To address that challenge, she said NOAA scientists are increasingly engaging with the private sector.

Esther Whieldon: And she talked about the high level of energy that characterized much of Climate Week NYC, but she said she'll only consider the week a success if it results in concrete action. And we'll continue tracking the action that resulted for Climate Week in the run up to COP 28, the UN's big climate conference taking place later this year. And please stay tuned for more of our key takeaways from Climate Week.

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.

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