Listen: Next in Tech | Episode 89: Climate impacts at COP27

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Presentation

Eric Hanselman

Welcome to Next in Tech, an S&P Global Market Intelligence podcast where the world of emerging tech lives. I'm your host, Eric Hanselman, Chief Analyst for the Technology, Media and Telecom at S&P Global Market Intelligence. And today, we're going to be discussing the UN Climate Change Conference with our guest, Thomas Yagel, who's the Chief Operating Officer for Sustainable1. Thomas, welcome to the podcast.

Thomas Yagel

Thanks so much, Eric. It's great to be here.

Question and Answer

Eric Hanselman

Well, and it's great to have you on, especially when we're heading into the next iteration of the conference of parties as we start gathering really the world to be able to look at issues around sustainability, ESG more broadly. I guess to start off, I want to give -- head into a little bit of background for our listeners about really what the UN Climate Change Conference is all about, and what are its goals?

Thomas Yagel

Yes, absolutely, Eric. As you said, at a high level, COP is the conference of parties. The UN Climate Change Conference this year is the 27th, COP27, taking place in Egypt during 2 weeks in November. Last year's COP26 took place in Glasgow.

Eric Hanselman

And the conference -- well, basically, we're bringing together what is governments, corporations really to start to lay out plans of action around climate change, yes?

Thomas Yagel

That's right. And maybe starting with the Glasgow conference, COP26. I think one of the big observations coming out of last year's COP was that it really wasn't just about all of the governments coming together and negotiating new climate treaties, although there was progress on that front, and everybody was working towards agreements to try to secure 1.5 degrees. But also the fact that there were so many corporations and other nongovernmental parties that were there.

And one of the big successes was the extreme number of commitments that came out of COP26 from these corporations. COP26 delivered many big headlines. But one of the biggest was a commitment of over $130 trillion in total assets against net zero commitments by 2050 utilizing science-based targets, which is super impressive.

Eric Hanselman

Yes, if you think about what's actually being brought to the table in terms of the impact that it can have, that's impressive. Well, I guess, looking ahead to COP27, what's going to be different in Sharm el-Sheikh? And what are areas that COP27 is looking to tackle?

Thomas Yagel

Yes. So I mean, I think the -- especially given the massive amount of commitments from COP26, I think the world is really waiting to see whether we're delivering on those commitments from COP26, right? So this is -- I think it's a year of show me the money or show me the commitments in action in COP27.

Eric Hanselman

So we've -- the commitments happened, and now this is the point at which there's going to be some reckoning of, all right, commitments from last year were made, how well did we achieve them.

Thomas Yagel

Yes. And what's our progress? I think another area of increasing focus this year will be on biological diversity, both how businesses and economies leverage nature in their products and services and how those businesses affect the nature around them.

Eric Hanselman

That's an interesting addition to what were some fairly direct climate change goals, but to actually start to look at the biome of the planet and thinking about what -- really what those impacts are more broadly for the various species and impacts about business. That seems to be an interesting step beyond what had been sort of the core focus, yes?

Thomas Yagel

Yes, I think so. I mean, obviously, there's a direct correlation between trees and plants and the consumption of carbon dioxide. So it's not -- I would say it's not totally tangential but quite related.

Eric Hanselman

Well, clearly adjacent, but I think a good step to be able to expand into what is one more very significant factor.

Thomas Yagel

Yes.

Eric Hanselman

There's one other aspect that I know we had a chance to take a look at some of what's on offer in COP27. But there's also an expansion of what organizations are actually identifying as part of their impact on the planet. And I guess we've been looking at direct impacts for organizations, what get called Scope 1 and Scope 2, those things that organizations are doing, their direct impacts.

But now we're looking at supply chain, which Next in Tech listeners will certainly have gotten a lot of discussion around supply chain. But this is something where, again, one more area in which we're expanding visibility and really trying to gain a broader understanding about impact.

Thomas Yagel

Yes. I mean, the importance of measuring supply chain emissions and I think the complexity of doing so, both sort of understanding the full supply chain of companies and then either measuring or modeling the emissions in that supply chain, are certainly big topics at COP27, but also areas that Sustainable1 is looking at closely in terms of being able to provide that intelligence to the markets.

Eric Hanselman

Well, that's something that we think about. We've talked a lot about ESG impacts on the podcast in some very tech-specific ways. But I'm curious, what are your thoughts about the technology aspects that are in play at COP27?

Thomas Yagel

Yes, I think I'm going to answer -- start off generally on this question and say that I think -- I thought a lot about technology -- the intersection of technology and climate and sustainability. And I think it loosely breaks down into 2 very broad categories.

The first is how we leverage technology to measure and monitor climate change and the drivers of climate change and whether it's automation to collect the data that's necessary or AI modeling and other capabilities to be able to make analysis on those changes. It's a big part of it. It's obviously critical to moving the sort of frontier of reporting and monitoring and even science forward on the topics.

And then on the second hand, there are the very significant progress that's been made in terms of technology, both in the field of -- batteries is one critical example for how we can leverage and utilize renewable energy that's not necessarily consistently delivered throughout the day as well as the very pressing need to sort of accelerate research and development on direct carbon capture technologies as well. So in my view, technology is central to the subject and to the solutions.

Eric Hanselman

Well, and you've hit on what are the 2 pieces. I think a lot of what we've talked about in previous episodes are really what technology is doing in terms of consumption and emissions and a lot of the aspects of that. You think about the foundations of so much of technology, data centers, cloud capabilities.

These are all consuming resources, generating emissions. But I think the point that you made is really important and impactful, which is that you can -- technology plays a big role in visibility and in understanding what those impacts are and trying to make sense of them and looking for answers for how you manage them.

Thomas Yagel

That's absolutely right. So technology is part of the solution in terms of pushing the measuring and monitoring and science forward and in terms of some of the critical solutions. And it is also interconnected with the challenges.

And I did want to talk about a couple of those areas also. One area that maybe we could start with is physical risk sort of measuring the impact of climate change on either due to things like heat wave, cold wave, flooding, drought, et cetera, wildfires to physical assets.

So I mean, at S&P Global, we've sort of measured the impact of physical risk on a large database of assets for companies. So what we found was that 92% of S&P Global 1200 companies have at least one asset that's highly exposed to the physical hazards of physical risk.

Eric Hanselman

Yes. We've seen a lot of that data. And whether or not that happens to be in flood zones as we look at rising sea levels or as you were identifying, wildfire risk, these are things that if we think about the -- go beyond just the technology fundamentals, we're now talking about the physical structures that are actually housing and managing all of this. Those are things that were -- are just as critical to understand what those impacts are of climate change as the efforts are to be able to manage what's driving it.

Thomas Yagel

Yes. I mean, you touched on data centers and the significant amount of emissions that can come from those. Data centers are particularly vulnerable to physical risk, to extreme heat, which can cause excess cooling costs and in turn, high operating costs. Extreme heat can also lead to accelerated degradation of equipment, also the risks of bar stress and many other impacts on that one example asset.

Eric Hanselman

Oh, yes. And that -- if we start extending that to so much more of the technology pieces, if we start looking at the aspects of semiconductors and the role they play, looking at all of the potential risks that exist within those facilities, we're backing back up the supply chain. And it's important to understand the risk that comes into play for each of these various aspects.

Thomas Yagel

Yes. S&P Global runs the Corporate Sustainability Assessment survey. We actually looked at the respondents from the tech industry. And actually, lots of great data comes out of that. We dug in on the software industry specifically and found that on average, 79% of their data center electricity supply is coming from renewables. On the other hand, for IT services, only 53% of that data center energy is coming from renewables. So lots of great insights into lots of different assets.

Eric Hanselman

Well, that's an aspect we think about what -- these various influences. I mean, we think about things like cloud. And I think there's an understanding of data centers or physical things. But a lot of times, I think there's this idea that cloud capabilities are this abstraction. But of course, there is a data center behind all of this capability.

And that -- all of this has associated risk for where these facilities are located and the kinds of aspects that come into play when they -- the various factors that are playing out around the globe can potentially impact them. And those are things -- and it's -- the data center piece, in particular, is actually -- there's an interesting piece of research that actually does some really impressive mapping about where this fits that I will point our listeners to.

But I want to get into maybe what the actual process of producing that and talk a little bit about Sustainable1 and really what does Sustainable1 do? I mean, we've talked about some of the assessments that are taking place, but it would be great to dig into a little more depth into what does Sustainable1 do around this.

Thomas Yagel

So Sustainable1 has a strong history of looking at physical risk and the measurement of the -- sort of the impact of climate change on physical assets, which it currently have a database of about 3 million assets connected to corporate ownership. So we can really take a look at those assets, their latitude, longitude, the type of asset and how they are impacted by physical risk.

We took another big step forward at the beginning of 2022 with the acquisition of The Climate Service. And what that really gave us the ability to do is not only to sort of generally measure the impact of physical risk on those assets but also to assign an actual financial impact of those physical risks on the asset.

So really taking our precision and ability to understand exactly how impacted those assets would be based on physical risk. So it's been an area that we put a lot of research into and are very proud of the work there.

Eric Hanselman

Well, it's something that for us on the TMT side, those are also things that start to impact things like availability risk because, again, you've most -- hopefully, you've designed in resilience. But there comes a point at which if you've got hosting facility environments, data center capabilities that at some point, you're going to run out of additional resilience there.

And it also has an impact on the overall environmental footprint of those facilities as well because when you shift into a recovery mode, if you've got to shift facilities, if you lose power because the grid's gone down due to heat, those sorts of things, it does have a marked impact on that -- the footprint of the facility itself. If you got to switch to generators, if you've got to shift to other options, a lot of different pieces that start to come into play there.

Thomas Yagel

Absolutely. That's in the topic of physical risk. We think about biodiversity, which is also closely related in the sense that it's about the latitude and longitude, the exact location on the planet that you're talking about. There are many other important factors.

At present, many companies don't understand their exposure to nature risk. And this was one of the key themes that came out of -- with Climate Week in September, which is what -- sort of one of the big lead ups into COP in November. We can't necessarily be net zero without being nature positive in the long run.

What we found is in one example from our data that we've been pulling together is that -- take transmission lines. Maintenance of transmission lines in key biodiversity areas can cause further disturbance to the natural environment in those locations.

Eric Hanselman

Yes. I mean, it's already something that we, unfortunately, have many examples about the impacts, but simply the distribution of energy has a whole set of impacts as well as the consumption of it. We think about where we've got transmission lines moving across the country, there's just a lot of land they cover.

And of course, the maintenance of those power lines now starts to impact that potential concern for -- you want to make sure that you've cleared out the transmission line so that we don't get situations like PG&E environment, where poor maintenance increases the risk of fire. But the problem is if you're cutting around transmission lines, you may also be impacting habitat.

And I think the thing to keep in mind is that it's not just energy industries. There are so many different pieces. I'm curious, a lot of the data that we accumulate around this is really you'd mentioned its latitude, longitude. These are really identifying biosensitive areas around the globe and allowing organizations to really make that additional assessment, right?

Thomas Yagel

That's right. But -- and again, in both directions, both how their assets are impacting nature and how they are, in fact, reliant on nature for running their operations in many cases.

Eric Hanselman

So this really is both sides of this coin, as we keep coming back to. It's wonderfully interesting data and perspectives that, of course, have got global relevance. Interesting things. Are there other aspects that we should be aware of about some of these impacts? And I guess, other things that we should be looking out for in COP27?

Thomas Yagel

Yes. Thanks so much, Eric. There was just this past week an update from the IPCC. IPCC is the UN Intergovernmental Panel on Climate Change stating that temperatures will increase by between 2.1 and 2.9 degrees Celsius by the end of the century even if current climate change promises are kept.

So if we were to succeed in keeping warming below 2 degrees, the technology will be crucial, both as part of the solution and as part of measuring our effectiveness in getting there. At COP27, we'll be looking for the public and private sectors to come together again at this critical time to find solutions that will put us on a path to the future.

Eric Hanselman

Well, an important work to be done. But it does get back to the question that you actually led with, which is a lot of what we're going to be doing is seeing how well those commitments are made. But hopefully, things will be moving forward with all due speed. Well, thank you for being on the podcast, Thomas. This has been great.

Thomas Yagel

All right. It's been great, Eric. Thank you very much for your time and this opportunity.

Eric Hanselman

And we'll have links in the show notes to point folks to some of our COP27 information. I hope you get a chance to check it out. And that is it for this episode of Next in Tech. Thanks to our audience for staying with us. And thanks to our production team, including Caroline Wright; and Ethan Zimman on the Marketing and Events teams; and our studio lead, Kyle Cangialosi. I hope you'll join us for our next episode, where we're going to be digging into a whole set, different aspects of what's coming next because there is always something Next in Tech.