Episode 21: What Climate Week NYC meant for business

The transcript highlights below have been edited for clarity. 

Mark Lee:  

We're recording this after Climate Week New York City 2024. I'm going to have a conversation with three of my fellow ERM colleagues, and delve into what we saw, experienced and felt last week in New York. I want to get some overall impressions of the week, Matt, what was your sense of what was going on? 

Matt Haddon:  

Last year was like a nature takeover of Climate Week. This year it felt much more about climate again. A bit of me wondered whether that was because the world's not going to the next climate COP and therefore New York Climate Week became almost the de facto 2024 meeting of the minds around climate. But it felt more climate oriented than it did nature compared to previously. Not that the nature and water piece wasn't in there. The second thing that hit me, I was reflecting on a speech that Johan Rockström gave. For those who do not know, he was the godfather of the planetary boundaries thinking from the Stockholm Institute. He made a point which I thought was incredibly powerful, that “nature isn't just a set of resources that we take or use in some way, it's also the buffer for everything else”. 

Mark Lee: 

Matt, if you go a bit farther on the Rockström piece, I know people can get overwhelmed; it's rooted in the science. It's like the, here is the truth, this is where we are. But sometimes it hits so hard on the doom or gloom side of things that people can walk away almost disempowered. How did you read it this year, and did it help maybe to hear things like nature is the buffer, we can use this if we get it right? 

Matt Haddon: 

I'm not sure to be honest, Mark. I think you're absolutely right. That lovely graphic that the Stockholm Institute uses is quite compelling visually, but it does make things look very bleak. I didn't speak to a lot of people afterwards who said that was motivating. I've long been fascinated by the use of language around climate change. I think people are still not switched on by the negative. That's where renewables has emerged as a powerful force because you can do something about it. 

Mark Lee: 

Alex, how about your overall view of last week in New York? 

Alexandra Guaqueta: 

I have a bit of a different take to Matt and maybe it's my own background and bias as an international relations expert, but we forget that climate week really happens on the back of the UN General Assembly, which also has an important summit which has focused on the sustainable development goals in the past. And so, this time around, there was a very important conversation happening around a pact for the future that was a series of commitments that governments decided to make, and they don't make them on their own. It happens after consultation with companies and with civil society. It takes quite some time to come to these agreements, so this pact covered the renewed commitment around the Sustainable Development Goals. It covered poverty, empowering women, food insecurity and of course climate. When I was sitting on the train on my way home, I was thinking, wow, this really is the largest, comprehensive sustainability summit in the world. It's not just climate, because we did address nature, poverty, living wages, and many other topics. It's the place where governments, companies and civil society come together to agree, disagree, discuss, find solutions, move things forward. I don't think there's any other event of this magnitude. To me, this was just fascinating that sustainability has become such a huge mainstream theme for the planet, for everyone.  

Mark Lee: 

Ollie what is your overarching view and what did you experience last week? 

Oliver Forster: 

I think this year felt busier and more widespread than ever. I was looking back at my notes and thought this was a really pithy summary of the challenge from Amazon's Head of Science called Jamey Mulligan. He said that we've just got to do three things - we've got to decarbonize corporate supply chains, protect nature and scale removals. At the end of the day, we’ve just got to do those three things. I did feel at New York the motto “It’s Time”. Lots of corporates have now set their net zero targets and they're kind thinking it's time now, we’ve got to do something.  

How to build trust in the voluntary carbon markets  

Oliver Forster: 

I think for the last few years, the voluntary carbon market has been grappling with the quality challenge and the main challenge for the market as a whole is what's good enough. How do you set benchmarks that everyone recognizes and is happy that a project is never going to be 100% perfect in every regard, but what is a threshold that we can all get behind and supports that scaling of the market. I would say the overall theme is still what's good enough, you hear that from the corporates and the suppliers.  

When you look at the demand side, one factor that's really clear is that there's been all this criticism. One response to that is to try and get closer to the project. Whereas previously corporates would look at projects through retailers often, now they're trying to go straight to the project supplier and that decreases your risk. It often means that you can have more of an influence of the impacts that the project has as it develops, you can make sure that what you're really concerned about is baked into how the project is run. I think that's still a really prevalent theme on the demand side of the voluntary carbon market. 

Mark Lee: 

Ollie, with these carbon markets projects, can you give us a few examples of what people are trying to verify?  

Oliver Forster: 

There are all sorts of different types of projects. The most common types are projects which are conserving rainforests, which fall under the umbrella of REDD projects. Then there are also carbon removals projects, which are efforts to take carbon that's already in the atmosphere and sequester it, normally in trees, but increasingly in the rocks as well where it can stay more permanently. 

Matt Haddon: 

Just connecting Ollie's point about quality with Alex’s point about all the different aspects of sustainable development coming together in New York, really the quality question is about what's the biodiversity impact of that reforestation project or conservation project? What's the impact on the indigenous land stewards of those forest resources? I think what we're starting to see is the different aspects of sustainable development coming together in different ways and the quality conversation is not just about how much carbon is there, it's about what are these other co-benefits or co-impacts. 

Oliver Forster: 

I couldn't agree with you more Matt. I think for as long as there has been carbon markets, there's always been this tension between it being about carbon or also about the wider impacts of projects on society. And I think in New York last week, it was brought back a little bit towards being around co-benefits. So much of the integrity discussion has focused on permanent additionality, all these really technical aspects about whether the carbon itself is of high quality, but actually we know that the challenges we face are about a much broader set of things around the how. How is the project being done, how the communities are being engaged? Is it going to be sustainable in the long term? All of those things which are really important.  

That's a good segway into what I was going to say about supply. For the last couple of years, the laser focus has been on quality. Last week, some research was published which just looked at projects in the carbon market, and they looked at the existing pool of projects where overall you find that quality is questionable. There's a really broad spectrum, but the kind of middle quality is not particularly high and not where you'd want it to be. What they also did was looked at five hundred new projects that are just in the early stages of registering to issue carbon credits, and what they found is that the quality of that pool of new projects is much higher. What that shows is with the focus on quality, there's been an overall reaction on the supply side of the market to be higher quality, which I think is really good news. 

The role of social performance in the low-carbon transition 

Alexandra Guaqueta: 

I think there was a very clear focus on just transition. It's been amazing to see how only folks like the International Labor Organization (ILO) were starting to talk about this a few years ago and now a broader set of stakeholders have embraced the conversation of just transition. They are asking what does it mean, who has what role and what responsibility in just transition. But I think it's already obvious for people why we need to put people at the center of our climate discussions and decisions. One is that if we don't have social acceptance, we won't be able to build all of the new energy infrastructure that we need, at the pace that we need. If you think how many more copper mines we need, how many more miles of transmission lines we need etcetera, this is going to touch millions of people.  

There was a person in one of the sessions that I attended in the Renewables Summit that also linked it in a very clear way to politics, which was a good basic reminder. People elect politicians. People who are unhappy with our climate strategies will then elect politicians who will not support climate action going forward. So the discussions really increased that awareness of putting people at the center and that we need to be very practical about it. What does it mean for companies when companies are thinking about changing their supply chain, when companies are thinking about changing their contracts for energy, phasing out projects, etcetera? I felt that conversation happening way more than compared to years past. 

Integrating nature data into business strategy  

Matt Haddon: 

It's almost like this was a very interconnected sustainable development conference and a whole series of conversations where people are starting to see that “oh this connects to that” and “this creates that” and “I'm dependent on this”. The big theme that we're seeing in nature is this word dependency that the Taskforce on Nature-related Financial Disclosures introduced into the conversation. Companies have thought about impact. What's my company impact on the environment. The big shift is how is your business dependent on the natural world for its access to land, water, agricultural material, people and labor. So that idea of our businesses being interconnected and interdependent has been a big one that people have started to really grapple and understand.  

The other big theme in the nature space is technology. We're building what we call the Nature Tech Alliance with Salesforce, Planet Labs (the satellite imagery people) and Nature Metrics (that does the on the ground environmental DNA work). We're starting to see a lot of companies really recognize the power of new technologies, including AI for solving some of these challenges. I had some fascinating conversations with some incredibly smart and enthusiastic 25 to 30-year-olds who are harnessing these technologies to create entirely different insights and put them in the hands of decision makers.  

Alexandra Guaqueta: 

One of the main themes of the UN General Assembly was a global digital compact. And we've all seen the conversation about artificial intelligence growing. The more we need that tech capability, the more energy we will need for that tech capability. I also saw very strongly how tech and energy saw their interdependencies in a clearer way today, not just the solutions but also the challenges that creates.  

Matt Haddon: 

I started to talk to people about edge AI, which is basically using lower power AI models, out in the community rather than bring it all back to the center but using different sorts of technologies to empower people on the very front lines. Many people in the world have cell phones as ways to both bring data back to the middle, to a corporation or a financier or a carbon developer, but also to start to put information in the hands of people who are living out in the world managing these forests that Oliver's going to invest in. Even incentivizing passing money across through transactions that are now enabled in very different ways. Which takes nothing away from your point, Alex, about the massive energy needs, but it starts to bring more people into the conversation and to empower them in different ways rather than perhaps our one-way travel that we've had before. 

How to measure and tackle inequality  

Mark Lee: 

Matt mentioned the Taskforce on Nature-related Financial Disclosures (TNFD), which followed the Taskforce on Climate-related Financial Disclosures (TCFD) and now there is a TISFD. What is it and why was it something that I heard on many people's lips last week? 

Alexandra Guaqueta: 

That would be the Taskforce on Inequality and Social-related Financial Disclosures. The process launched last week and they're aiming to come up with a framework like TCFD and TNFD in two years’ time. It is the same architecture that clarifies companies’ governance strategy, formulation of metrics within the social space, focusing on human rights, wellbeing and living wages. It's about avoiding harm to people and maximizing benefits for people, that's what the social space is about. So TIFSD will bring those two aspects of social together and speak the same language that companies are now used to speaking with these other frameworks, so that they have clear pathways forward. 

Mark Lee: 

While I heard excitement about TIFSD last week, I also heard concern particularly about the pace. TCFD and TNFD were both developed in more than two years each and it might be argued that they have simpler metrics because more of them are more easily quantified. Do you share any of that concern about how fast TIFSD is going to roll out? 

Alexandra Guaqueta:  

I have to confess that I was a little bit surprised that they gave themselves a two-year time frame. I think that's ambitious. On the other hand, the rationale for that is understanding audiences are impatient. Companies are going through very large, heavy transformations of their business models and their sustainability agendas. If there are ongoing moving pieces, they’ll just lose their attention. So I think it's ambitious, but if they take another year, that's good. I thought they were going to set a timeline for four or five years, but there you go. 

What companies can expect at COP16 and COP29 

Mark Lee: 

Climate Week New York is one of three big sustainability events that take place in this latter portion of the calendar year. We happen to be in a year where the bi-annual nature COP process lands, so the last time was COP 15, Montreal in 2022. This year, the nature COP is going to take place in Cali, Colombia. And it's coming up in just a few weeks, followed with COP29 on climate in Baku. Matt, given your role at ERM, what's going to happen in Cali and what threads are going to have pulled through New York? 

Matt Haddon: 

It's going to be a big one. You and I were both in Montreal Mark and there were a thousand to twelve hundred corporate representatives. The previous version of the biodiversity COP had something like 40 apparently, so two orders of magnitude difference. I was talking to the Head of Nature from WBCSD while I was in New York and he said he knows at least of at least 750 WBCSD member representatives that are going to be in Cali. I don't know what that means, but I'm confident in saying it's more than Montreal. So one of the main things I think is a continued upswing in corporate interest in the nature agenda, I think that's one of the first things.  

I think the second thing probably from a policy perspective, I'm not expecting any giant changes in the policy agenda and we had the revised global biodiversity framework in Montreal. We will see countries start to report out or talk about their national stock takes and where do they stand on those things, so that will be a step ahead.  

I think the third thing is going to be some of the pull through around youth and the whole society coming together. And then the fourth thing is that Colombia is one of the most biodiverse places on earth, so I think that's going to be a massive motivating force through the whole thing.  

Mark Lee: 

Ollie, what threads do you see pulling through from here to Baku in a couple of months?  

Oliver Forster: 

The name of the game for my area regarding COPs is Article 6, which is the article of the Paris Agreement which talks about carbon markets. I and anyone who's been observing the COPs over the last year will know that it's been an area of slow progress and contention between the countries. I think what you really saw at New York Climate Week and it is a change actually in flavor, is that the governments and particularly the US government are now being very encouraging around the voluntary carbon market and whether that translates into them playing a wider role at COP, I think remains to be seen.  

But at climate week, for example, you've seen the Integrity Council for the Voluntary Carbon Market setting out the core carbon principles, which will set the integrity threshold for supply. What you saw in New York was the US Government Department, the Commodity Futures and Trading Commission recognizing in their policy guidance the core carbon principles as a kind of standard framework. What you're seeing is this convergence between all of the good work that's going on the voluntary side to prop up quality and governments saying we could actually use this in our international and national frameworks and policy. I think that's a really interesting confluence and an area to watch. 

Mark Lee: 

I heard someone talking last week about how with Article 6, if we get this locked down, the major articles of the Paris Agreement are all locked down. It ties nicely to the “It's time”, we're done talking, we've mapped it out. Baku has the opportunity to be the first COP following the negotiation of the key articles from Paris. Alex what do you see, looking ahead, on the social side of things towards Baku? 

Alexandra Guaqueta: 

One theme that I noticed in New York and will pull to Baku is public-private coordination. Now targets have been set, we all need to get things done. In order to get things done we need to get specific about which policy, program, financing, process etcetera. And that requires coordination between governments, companies and others. I saw this theme coming up quite a bit. I had a chance to speak to the high-level champion for COP29. They said that even from logistics to panels etcetera, they were going to provide more space for these more concrete coordination conversations to happen between companies and governments. 

The other one is financing. This is the financing COP. If we're going to get things done, somebody has to pay for things. Of course, there's going to be a list of things. How much for new energy solutions? How much for climate adaptation and community resilience, those affected by extreme weather patterns? How much gets invested in the north? How much gets invested in the South? Blended finance, how to pull resources from international organizations, investors and companies? So I think that these two themes, public-private coordination and financing, will be at the heart of conversations.

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