Transcription provided 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: Happy New Year, Lindsey. 

Lindsey Hall: Esther, Happy New Year. Any New Year's resolutions on your part? 

Esther Whieldon: Yes. One of my big goals this year is to build on my sort of urban sustainable  homesteading efforts that mostly involves like growing and preserving more food from my garden and  expanding my knowledge of foraging, that sort of thing. How about you? 

Lindsey Hall: Okay. That's a lot more ambitious than what I can achieve when it comes to gardening. I  guess maybe I would just say not to kill any more plants in my house would be my baseline goal. From a  professional standpoint, I'm hoping to be traveling more and on the ground at more events this year,  conducting interviews with experts for this podcast. 

I also hope to do more ESG Insider Live events like we did last year for the very first time. And of course,  we keep moving towards this 1 million download goal. And we're very nearly there. We have over a  dozen episodes in 2022 that were downloaded more than 11,000 times.  

And in this episode today of ESG Insider, we're looking ahead to themes that will drive 2023 by revisiting  our most popular episodes and some of our favorite interviews from the past year. We'll hear from one  of the world's largest banks, the Head of the Network for Greening the Financial System or NGFS, the co Chair of the Taskforce on Nature-related Financial Disclosures, or TNFD, some of the scientists behind  the reports by the UN's Intergovernmental Panel on Climate Change, or IPCC, and that's just to name a  few examples of what's ahead in today's episode. And by the way, it will include links to all the episodes  we mentioned in our show notes, and you can find our whole archive wherever you get your podcast. 

Esther Whieldon: Last year, we spoke to some of the world's largest financial institutions about how  they're approaching ESG and sustainability, including how they are balancing sometimes competing  demands from a variety of stakeholders. For example, one of our most popular episodes of the year  featured Victoria Gaytan, Vice President at BlackRock Investment Stewardship. She talked about the company's approach to engaging with companies, including those in carbon-intensive sectors.  BlackRock, by the way, is the world's largest asset manager with $10 trillion in assets under  management. The topic of divestment versus engagement is a recurring one in our interviews with  financial institutions. 

Lindsey Hall: So was the topic of decarbonization. How are companies reducing emissions to align with the goal of the Paris Agreement. And with that goal in mind, how are companies measuring and  managing emissions across their supply chains. That was a topic of focus for our interview with one of  the world's largest banks. In April 2022, Karen Fang, Global Head of Sustainable Finance at Bank of  America spoke to us about the difficulty of measuring and managing Scope 3 emissions that occur up and down a company's supply chain as well as when customers use the company's products. Here's  Karen in that interview.  

Karen Fang: So for us, as a bank, the biggest challenge is Scope 3 because that's our entire supply chain  and value chain and what does a bank do for a living, right? We obviously provide financing, we're  provide investments, and we do these advisory activities and capital markets activities, just to simplify,  right? Obviously, when you think about consumer banking, corporate banking, commercial banking, we  all do different things. But a large part of our Scope 3 emissions is our financing and investment  emissions. So when you think about any type of loan we make to a company, any type of mortgage we  provide, right, all of that supply chain financing included is essentially carried on in our Scope 3  emissions. And our Ccope 3 emissions dwarf our Scope 1 and 2 emissions, which is why it would take us  a while, and it really takes all of our clients that we lend money to and invest in to work with us on a  credible transition plan to transition to nonzero to our financing and investment emissions, which is the  biggest contributor of our Scope 3 emissions can be neutralized over time. So our job is to work with all  of our clients on the net zero transition plan and financing their green transition. So that makes the job  very interesting and exciting.  

Lindsey Hall: Karen went on to talk about how disclosure rules are evolving.  

Esther Whieldon: And speaking of rules, some of our most popular episodes of the year focused on ESG  and sustainability rules, standards and regulations. We saw a lot of interest from our listeners and the continuing evolution of disclosure rules coming out of Europe. And in the U.S., we saw a huge listener  appetite to understand how the Securities and Exchange Commission rules around climate disclosure  are evolving. That episode we did on the topic was our most popular in 2022, in fact.  

Lindsey Hall: This interest in the fast-changing landscape for ESG regulation and standards was also  evident in our second most popular episode of the year. And that featured an interview with Katie  Schmitz Eulitt in her role as Director of Investor Relationships at the Value Reporting Foundation, which  subsequently consolidated with another body, the IFRS. The IFRS Foundation develops global accounting  and sustainability standards. And I wanted to replay this clip Esther because you'll hear Katie talk about  the rapid consolidation of standards we're seeing here she is.  

Katie Schmitz Eulitt: But it really represents a very exciting time in my view, a consolidation of what was  becoming a somewhat unwieldy space, if you will, landscape of standards and frameworks and really in  my view, elevate sustainability disclosure up to the same level of financial accounting standards that  companies around the world are using to communicate with their investors.  

I think there's excitement about the harmonization that is happening in this space and maybe a little  frustration about, "well, why can't we just get it done now"? Like, "why do we have to wait?" But I think  we've come so far so fast that some of us are kind of pinching ourselves like, "wow. It's -- this is really -- this moment in time is something that we thought might not happen for a while and here it is all at  once." 

Esther Whieldon: We just heard about this harmonization that's happening. And I feel like it's happening  as a result of all the scientific findings that have been coming up, too, right? Our listeners were very  interested last year and with the UN's Intergovernmental Panel on Climate Change, or IPCC, had to say  about decarbonization pathways. In the past couple of years, the IPCC released multiple big reports that brought new scientific understanding of the urgency to adapt to climate change and to speed up the  pace of emissions reductions. IPCC is slated this spring to release what it's called a synthesis report that  will combine the findings of its most recent reports with those published in 2018 and 2019.  

For example, if you recall, Lindsay, the IPCC in 2018 published that landmark report the call for net zero emissions by 2050 to limit global warming to 1.5 degrees. That's relative to preindustrial levels. This  soon to be released report by the IPCC is meant to give policymakers a "high-level up-to-date  understanding of climate change, its impact and future risks and options for addressing it." In other  words, the synthesis report is likely to be the go-to document for policymakers and possibly even  companies and investors because it is effectively putting all of the findings together in one document. 

One theme we heard last year on our podcast was from John Bistline, who was a contributing author to  one of the IPCC reports. He talked about how there's no one-size-fits-all solution to decarbonization and  to reaching net zero emissions globally by 2050. John, by the way, is Program Manager in the Energy  Systems and Climate Analysis Group at the Electric Power Research Institute, or EPRI.  

John Bistline: I can say that the scenarios that are in the report isn't a one-size-fits-all approach to  decarbonization. There's a lot of different technologies and pathways to reach those emissions  reduction targets and the specific approaches depends a lot on regional circumstances and in the way  that mitigation intersects with other societal objectives.  

Ultimately, we don't know exactly what the net zero-emission system will look like. We know what it  could look like. And I think we do know quite a bit more about is what the next decade could look like. A  lot of these scenarios indicate that you're going to be deploying a lot of these mature technologies like  renewables, electric vehicles, heat pumps, but the sort of degree of deployment, the pace of  deployment can vary a lot even in the next decade or more. And then as you're thinking about net zero toward Mid-Century as you're approaching 80%, 90%, 100% emissions reductions, that's where these  questions about potential technology wildcards, social acceptability of different technologies and certain  policy design that gets you there. All of those things will play a role in what the system will look like. 

Esther Whieldon: We heard a similar theme from Dr. Edward Carr, who is a lead author of the IPCC  report on climate resilient development pathways. Ed is also Director of Clark University's International  Development Community and Environment program. In our interview, Ed talked about how  transformational change for companies and investors is no longer optional. 

Edward Carr: The very first takeaway from the report at the very top line really is about the need for  transformation. And the fact that the changes that human beings have wrought on the world since the  onset of industrialization are now so significant, and we've waited so long to act that there isn't really a  clear path forward for a safe, sustainable future that doesn't involve major transformations to the way  we live in the world. And that's going to create significant challenges, but also create significant  opportunities.  

So I encourage people to try to think of the opportunity side of this because those challenges are going  to create chances for us to think about new ways to do things in the world, new ways to generate  energy and new value behind that, new ways to grow and consume food and again, perhaps new values  around that. 

So top line, you have to think about transformation, but that doesn't mean that transformation is  coming to ruin everything for you. The second big point would be that it's not a choice to transform  anymore. You can proactively transform, you can think about how you want to change and what kind of  entity you want to be in the future, what kind of work you want to be doing or you can be transformed.  We've done so much to the earth's environment at this point that it is starting to impinge upon our  ability to do things in a business as usual kind of way. So we will have to change how we do things. We  can be reactive about that, but that generally isn't very efficient or effective.  

And I think the last point is to say that there will be costs associated with transformation. There are  costs associated with adaptation to climate change. But the notion that these are new costs or different  costs might not be very accurate. Most people, most entities, corporate or otherwise, in the world, are  already dealing with the impacts of climate change, just often in very indirect ways and they're paying  for them in very indirect ways. They're paying for them in direct impacts on the supply chain, but maybe  at the site where raw materials are gathered. So you don't necessarily see that except in maybe a delay  in delivery or slightly increased expenses somewhere that then radiates through that supply chain and  starts changing the price of goods at the point of manufacture, even at the point of sale. So we're  already paying for adaptation. The question is, are we doing so in a constructive and proactive kind of  way? 

Lindsey Hall: We just heard Ed talk about how transformational changes are ahead for companies. And  we also heard John mention the importance of considering social dynamics in the low carbon transition.  And this is a common thread through many of our interviews in 2022. This emphasis on the role of  people -- the social elements of combating climate change and nature loss. 

That topic came up in our recent interview with Amy Hepburn, CEO of the Investor Leadership Network.  That's a coalition of institutional investors representing more than $10 trillion in assets under  management. Amy is one of three guests we spoke to in New York during our first ever ESG insider live  event in December. Here she is.  

Amy Hepburn: We are operating under a deficit of trust. -- deficit of trust between investors and  governments and a misunderstanding of the roles of both in this conversation around blended finance, a  deficit of trust between investors and their beneficiaries, right, a deficit of trust between every single  actor of society, right? And we're expected to come together, and I know I've shared with you before, I  really believe in the 3 Cs: collaboration, cooperation and creativity. This is what we need to have happen  to make progress for climate finance. And if we're not going to go from billions to trillions, unless we do,  we need those 3 Cs.  

But those 3 Cs rest on trust. They are built on trust, and we are operating under a deficit of trust. So how  do we build trust. And so I think that -- and I could talk more about it. But I think just in short, that is a  real blocker for progress is sitting around the table with different voices and really trusting each other to  be creative and to collaborate and be cooperative.  

Esther Whieldon: We've heard a similar message about the need for collaboration and why I thought it  was one of the most interesting interviews in the past year, that was an interview with Ravi Menon, the  Chair of the network for Greening the Financial System or NGFS. Our colleague, Jennifer Laidlaw,  conducted that interview, which aired in August. In the last few years, Central Banks have played an  increasing role in measuring the impact of climate change on financial systems and economies. In 2017, a handful of central banks established NGFS to manage and measure the risks climate change poses to  financial stability. Here's a clip from Jen's interview with Ravi. 

Ravi Menon: The challenge of climate change is so pervasive, you really need a whole of nation whole of  society response and central banks being a major part of that ecosystem have an important role to play.  But it is not a primary role. It can't be the key needle mover. It needs to work together with the rest of  the government, the financial industry and other stakeholders in this effort. Where I think central banks  can make a focused difference, and I include regulators in this space is to inject supervisory practices  with respect to managing climate risks. We need to address the risks that climate and broader  environmental factors pose for financial stability. -- and inject that in our supervisory process, which is a  key focus of the NGFS. And when we do that, that will start to shift behavior among the financial  institutions. 

Lindsey Hall: What we just heard from the head of NGFS, that also really resonates with what we heard  from Elizabeth Mrema heading into CP15, DUNs conventional biological diversity that just took place in  December 2022. Elizabeth was Cott Executive Secretary, and she's also co-Chair of the Task Force on  nature-related Financial Disclosures or TNFD.Hereswot Elizabeth had to say in an interview we aired  before COP15. 

Elizabeth Mrema: To be able to deal with biodiversity challenges, we need to also look at whole of government and whole of society approach, all on hands on deck. Biodiversity is no longer to be left in  the hands of environmentalists or departments of environments alone -- it is human amenities, food  security, it is health security, and in the long term, it is social and economic security or development.  And that's why we need to look at biodiversity issues. We need to look at climate change issues, land  degradation, pollution in an integrated manner.  

And this is where whole of government, whole of society, with the engagement of all stakeholders, not  just governments, local communities, their youth, the business, the financial institutions and the like.  Everybody is responsible to make the changes. 

Lindsey Hall: If you listen to our recent episode covering Cup 15, you know that this conference resulted  in negotiators for more than 190 countries, reaching a landmark agreement from nature, known as the  global biodiversity framework. One thing we talked about a lot last year and it will continue to be a focus  in 2023 is a rising understanding that addressing climate change and addressing nature loss, those 2 go  hand-in-hand.  

This is a focus in my interview with Capitals Coalition CEO, Mark Gough, which took place before the UN  COP 27Climate Conference in November. The Capitals Coalition, by the way, advocates for companies to  identify, measure and value their impacts and dependencies on natural capital, social capital and human  capital. And Mark talked to me about the big changes in the way companies and investors are approaching nature in recent years as well as the importance of sinking nature and climate goals. Here's  Mark. 

Mark Gough: The financial institutions are stepping for in a way that we've never seen before. Back in  2017, we launched a financial sector supplement on nature -- we launched it in Hong Kong. We had  about 13 people turn up to a massive venue. No one was interested. No one wanted to be there. I  thought it was the biggest failure I'd ever done. But what I realized since then, it was just a sense of timing. At that time, in 2017, there were very few financial institutions that we're actually starting to  think about nature or biodiversity and how that should be brought into the way that they were making  financial decisions, investments or asset managers, et cetera. So there just wasn't a market out there.  That wasn't the pull. So we were pushing with this criteria, saying this is something you should start  thinking about, but there wasn't a pull from the markets to pick up on it.  

That, like I say, has changed. And I think one of the key reasons is the connections we are seeing  between these agendas between climate change and nature. We know that actually nature-based  solutions are going to be almost 40% of the solution to the climate problem we've got. We can't  disaggregate these issues.  

If you're going to start looking at climate, you have to start looking at nature because that's what's going  to help to drive the changes. Only 2% of the finance is going into nature-based solutions in the transition  planning, et cetera. That's just not enough if it's going to be 40% of the solution. And yet we've got a lot of money going into technical solutions like electrification of cars, which he's only going to be a small  part of the solution we need for climate change.  

So we need to take that on this, that's why I think financial institutions are interested because they've  now got the legs much more strongly between not just climate to nature, but nature and people as well,  how do we bring the equity question into all of this. 

Lindsey Hall: So a lot of these themes we've covered in 2022 will continue to play out in 2023. As sir for  you, what topics are you most interested in tracking this coming year? 

Esther Whieldon: Yes. For me, the big issues to be watching is how companies and investors address  supply chain risks and also how they integrate social equity and biodiversity challenges into their low  carbon transition plans. How about you Lindsay, what's on your radar? 

Lindsey Hall: No, it's a really long list, but I would say at the top of it is this continuing evolution of  adaptation, how are stakeholders adopting to the physical risks of climate change and how are they  financing this adaptation. And then related to that, how are the public and private sectors working  together to achieve these goals. And then as we talked about, the evolution of sustainability rules and  disclosure standards will continue to be top of mind in 2023. We have so much planned for the year  ahead, so we hope you'll continue listening.  

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 ©2023 by S&P Global  

DISCLAIMER  

By accessing this Podcast, I acknowledge that S&P GLOBAL makes no warranty, guarantee, or  representation as to the accuracy or sufficiency of the information featured in this Podcast. The  information, opinions, and recommendations presented in this Podcast are for general information only  and any reliance on the information provided in this Podcast is done at your own risk. This Podcast  should not be considered professional advice. Unless specifically stated otherwise, S&P GLOBAL does  not endorse, approve, recommend, or certify any information, product, process, service, or organization  presented or mentioned in this Podcast, and information from this Podcast should not be referenced in  any way to imply such approval or endorsement. The third party materials or content of any third party  site referenced in this Podcast do not necessarily reflect the opinions, standards or policies of S&P  GLOBAL. S&P GLOBAL assumes no responsibility or liability for the accuracy or completeness of the  content contained in third party materials or on third party sites referenced in this Podcast or the  compliance with applicable laws of such materials and/or links referenced herein. Moreover, S&P  GLOBAL makes no warranty that this Podcast, or the server that makes it available, is free of viruses,  worms, or other elements or codes that manifest contaminating or destructive properties.  

S&P GLOBAL EXPRESSLY DISCLAIMS ANY AND ALL LIABILITY OR RESPONSIBILITY FOR ANY DIRECT,  INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL OR OTHER DAMAGES ARISING OUT OF ANY  INDIVIDUAL'S USE OF, REFERENCE TO, RELIANCE ON, OR INABILITY TO USE, THIS PODCAST OR THE  INFORMATION PRESENTED IN THIS PODCAST.