A vision for a Biden-Harris sustainable business agenda

November 17, 2020 by  
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A vision for a Biden-Harris sustainable business agenda Aron Cramer Tue, 11/17/2020 – 01:30 This article originally was published in the BSR Insight . Now that the results of the United States presidential election are in, it is time to focus on what business can do to promote a policy agenda that will accelerate the transformation needed to shift to a truly just and sustainable economy.  The U.S. government has been either absent or counterproductive on sustainability issues the past four years. This will change in a Biden-Harris administration. How much it changes will depend greatly on the actions and influence of the business community. BSR exists to catalyze business leadership to achieve a just and sustainable world. We believe strongly that sustainability is a primary source of strategic business advantage. We believe that comprehensive business action calls for companies to “act, enable, and influence,” creating change both through actions in the “real economy” and also in advocating for policy solutions. With a new government coming into power, now is the time for business to use its voice and influence to call for decisive action from a more receptive administration in Washington. With this in mind, here is the agenda that BSR urges businesses to call on the Biden administration to adopt, in the spirit of the campaign’s “build back better” mantra. It is time to focus on what business can do to promote a policy agenda that will accelerate the transformation needed to shift to a truly just and sustainable economy. Employment and economic Repairing the safety net:  It is time for business to engage with government in remaking the social safety net for the 21st century. 2020 has exposed the serious holes in the safety net, not least access to health care. It is also time to develop a consensus on portable benefits for people who change jobs or who work outside traditional jobs. Innovations such as the tax-deferred “401(j)” accounts proposed by Al Gore to allow employees to save for lifelong learning also would be a good step. These steps not only would enable economic security and mobility, they also would ensure opportunities for innovation and a dynamic workforce that businesses need. Income inequality: t is long past time for Americans to reverse the deep and widening inequality that plagues our country. While there are multiple reasons for this problem, three topics deserve to be made a priority. First is the need to raise the minimum wage to a level that is a genuine living wage. This would both enable families to support themselves and also reward labor in an economy in which capital has been rewarded more than it should be. Second is executive compensation, which has continued to rise far too fast. It is time for business leaders to take voluntary steps to reduce executive pay and for boards to commit to the same. Third, income inequality strikes communities of color especially hard and all pathways to prosperity need to address the wealth gap directly. Future of work: The changing nature of work is accelerating due to the confluence of COVID-19 and automation. Contingent or non-traditional work is the fastest growing category of work. There is no consensus on the rules governing such work or universal benefits people can access regardless of how their work is classified. Dialogue between business, government and workers’ representatives is needed to establish the rules of the road. Climate and environment Net zero target for the U.S.: Returning to the Paris Agreement will happen Jan. 20 — that is only the start. The U.S. should commit to a net-zero target the way that the European Union, China, Japan, South Korea and others — including many U.S. states and cities — have. The need for renewed climate diplomacy, with the U.S. playing a crucial role along with the EU, China and Japan, could not be more important in the run-up to COP 26. Climate justice/just transition: Awareness of the disparate impacts of climate — mainly hitting communities of color and those with less formal education — means that environmental justice should come to the forefront. The shift to net-zero is a generational opportunity for progress, not only removing the most toxic elements of the existing energy system but also generating economic opportunities in the clean energy economy as a means of combatting poverty and discrimination. Business should insist that the transition to net zero include policies that prioritize the phase out of toxic impacts on communities of color, incentives for investments that ensure that the clean energy economy delivers training, and employment for people who need opportunities the most, in both rural and urban communities. Green infrastructure:  Even with divided government, investment in green infrastructure is possible as a means of generating employment at a time when it is badly needed and to reduce the operating costs of U.S. infrastructure. Business should advocate for built environment and transport systems that accelerate and prepare for the net zero economy. The long debated Green Infrastructure Bank should become a reality, not least with the rise of green and “olive” bonds. And this is also the place where serious — and badly needed — resilience objectives can be achieved. Regenerative agriculture: At long last, there is mainstream recognition of the deep intersections of climate, human health and the vibrancy of America’s agricultural economy. What’s more, the political opportunity to bring the country together through heartland interest in thriving agriculture and coastal interest in climate action is one that could help unify a country that is divided against itself on climate action. It is time for business to make clear that it wants and needs strong support for human rights, with renewed action from the White House and State Department at a minimum. Social Racial justice: The Biden campaign made clear that racial justice was one of its four priorities, along with climate action, economic opportunity and public health. In fact, these four topics are interrelated and should be addressed as such. The business community should make sure that the many statements of support for Black Lives Matter in 2020 are strengthened by a long-term commitment to ensure that decisive action is taken to end the centuries-long scourge of systemic racism. As noted above, the wealth gap that exists in communities of color is a legacy of longstanding oppression. Steps taken to address climate, strengthen the social safety net, restore public health and invest in green infrastructure offer great promise in addressing the wealth gap, and business should support this objective vocally. In addition, business also should make clear its support for criminal legal system reform, starting with policing, but also including access to the court system and incarceration rates. Finally, business should call for mandatory disclosure of employee demographic information, which leverages transparency in support of greater equity. Technology and human rights/privacy: It is well understood that policy moves more slowly than technology. At a high level, the U.S. government should establish the principle that new technologies should adhere to international human rights standards in their design, development and use. In addition, the U.S. government can introduce a federal privacy law along similar lines to the GDPR, ensure that any revisions to Section 230 of the Telecommunications Decency Act of 1996 are consistent with the protection of human rights, and introduce sector-based approaches to regulating disruptive technologies, such as artificial intelligence, machine learning and biometric technologies. Companies from all industries should advocate for a technology policy and regulatory context that protects interdependent rights such as freedom of expression, privacy, security, freedom of assembly, non-discrimination, public health and access to remedy. Restoring support for human rights and democracy: The U.S. government has provided implicit and explicit support for some of the governments most responsible for the worst human rights abuses over the past few years. The business community shied away from calling this out the way they challenged the Trump administration’s approach to climate. It is time for business to make clear that it wants and needs strong support for human rights, with renewed action from the White House and State Department at a minimum. Human migration and refugee policies: The xenophobia unleashed in the first days of the Trump years must be relegated to the past. Business consistently has called for immigration policies that enable the U.S. to welcome the breadth of human capacity that comes from literally every corner of the world. This is needed both for humanitarian reasons, which speak for themselves, but also because of the positive impact open societies have on economic vitality and innovation. What’s more, this will also help to restore America’s soft power around the world, something that benefits U.S. businesses and which has been seriously damaged since 2016. Governance Corporate governance reforms and listing requirements: It is time for boards to reflect more fully the world in which business actually operates. This means diversifying board composition. It also requires that so-called “non-financial” considerations be embedded in corporate governance and listing requirements. A good first step towards integration of ESG into corporate governance would be business advocacy for making the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) mandatory. This then can be extended to other steps including mandatory human rights diligence, executive compensation and workplace diversity. All these steps will strengthen the resilience of business and bring America’s trading rules in sync with advances in Europe and elsewhere. Restoring democracy: 2020 has made clear, yet again, of significant structural flaws in American democracy. Business associations stepped up to call publicly for democratic processes to be honored — and have continued to call for this post-election. This remains important as many have chosen not to honor the clear outcome of the election. Despite this, American democracy appears poised to survive in the wake of this unusual election, but issues remain. Business should use its voice to call for reforms that address voter suppression, campaign finance, gerrymandering and a judicial system infected by hyper-partisanship. This is an issue that many CEOs will seek to avoid for fear of appearing to pick sides, and that is understandable. But the reforms called for here should not be seen that way, as they are necessary for our system to function, for all people to have their voices heard and for faith in the system be restored. 2020 has made clear, yet again, that there are significant structural flaws in American democracy. Rules-based trading system with multilateral agreements: The U.S. was the primary architect of the rules-based trading system in the wake of World War II and the primary protector of that system over the past 75 years. While this system certainly needs significant reforms, the past four years have taken a scorched-earth approach that leaves us no hope of managing an interdependent world well and fairly. Business could not have more of a stake in restoring support for the concept of multilateralism and more of a need to make sure it is fit for purpose in the 21st century. Procurement: Finally, business should call on government to partner more aggressively on procurement policies. The U.S. government has immense purchasing power and it is not being used as fully as it could be to promote the creation and efficiency of markets for sustainable products and services. This is also a uniquely valuable way to address the wealth gap, with government partnering with BIPOC-owned businesses as suppliers. There will be a time to get more specific on policy solutions. For now, however, it is essential to define the areas where progress is necessary. Much of what is advocated here is also found in BSR’s call for business action to promote a 21st century social contract . The temptation to “go back to business as usual” will be strong for many, but that would be a mistake. Building a just and sustainable world never has been about opposing any single political leader. It always has been about building a future in which we can all thrive. It is about what we are for, not what we are against. After four years when the U.S. government failed to embrace — and often thwarted — the achievement of sustainable business, the business voice remains a powerful tool in creating an economy that works for all. Pull Quote It is time to focus on what business can do to promote a policy agenda that will accelerate the transformation needed to shift to a truly just and sustainable economy. It is time for business to make clear that it wants and needs strong support for human rights, with renewed action from the White House and State Department at a minimum. 2020 has made clear, yet again, that there are significant structural flaws in American democracy. Topics Policy & Politics Policy & Politics Paris Agreement Climate Justice Resilience Featured in featured block (1 article with image touted on the front page or elsewhere) On Duration 0 Sponsored Article Off President-elect Joe Biden and vice president-elect Kamala Harris on stage at the Queen Theater in Wilmington, Delaware during the 2020 election campaign. Photo by  Stratos Brilakis  on Shutterstock.

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A vision for a Biden-Harris sustainable business agenda

What does ‘climate risk’ actually mean?

August 31, 2020 by  
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What does ‘climate risk’ actually mean? Joel Makower Mon, 08/31/2020 – 02:11 If you stick around the world of sustainable business long enough, you’re sure to see an immutable march of memes — terms that rise up and become popularized, often without agreed-upon definitions. Then, over time, they become used, and overused, to the point where they lose much of their meaning. Or, at least, they can mean whatever you want them to mean. Some of those memes get traction — “zero waste” and “net zero” are two relatively recent examples that are having their moment. Others come and go — “responsibly sourced” anyone? Now comes “climate risk,” a term that has been kicking around for years — I first wrote about it back in 2013 — but that has risen to a point where major financial and governmental institutions around the world are baking it into their policies and programs. Last week, for example, the UK government proposed mandatory climate risk-related governance by large pension plans, to be disclosed in line with the recommendations of the Task Force on Climate-related Financial Disclosures , or TCFD. The proposed scheme requires pension funds to analyze the implications of a range of temperature scenarios on their holdings and “to prompt strategic thinking about climate risks and opportunities.” The UK move is part of a larger trend taking place in Europe, according to a report issued last week by Mercer, the actuarial and benefits consulting arm of Marsh & McLennan Companies. It found that European pension funds’ awareness of, and desire for, action on climate change-related investment risk has surged, with 54 percent of those surveyed now actively considering the impact of such risks in their investment allocations, compared to just 14 percent in 2019. It’s no longer just about “What business is doing to the climate.” It’s also about “What the climate is doing to business.” Why now? There’s no single precipitating event. Rather, the surge of attention to companies’ climate-risk profile appears to be the tipping point of a yearslong pursuit to flip the script on the conversation about business and climate change. That is, it’s no longer just about “What business is doing to the climate.” It’s also about “What the climate is doing to business.” That understanding is heating up in lockstep with the planet itself. But it’s not always what it seems. So, what does “climate risk” actually mean? Minimize or manage? First, it’s important to understand that “risk” means different things in business than it does in our personal lives. For most individuals, the word is synonymous with “danger” — the risk that we might be infected with coronavirus, for example, or that we could fall into financial distress because of a job loss or some other event. Or that something we don’t want others to know gets found out. Risk, in that context, is something to be minimized or avoided altogether. Not so in business. Risk is part of the everyday landscape, referring to things that could negatively impact a company’s financial performance or even cause it to fail. In finance, risk refers to the degree of uncertainty inherent in an investment decision. In general, the higher the risk, the greater returns sought by investors, who want compensation for taking such risks. Therefore, in business, risks are not something to be avoided but something to be managed: You want to measure, assess and track them, not necessarily avoid or eliminate them. Without taking risks, companies would never grow or, in many cases, prosper. Within the TCFD framework, climate risk is seen through the eyes of investors and financial institutions — that is, how will their loans and investments fare in a world of climate-related disruptions? The framework’s stated goal is “to price risk to support informed, efficient capital-allocation decisions.” Climate change poses significant financial challenges, and the risk-return profile of companies exposed to climate-related risks may change significantly as more companies are impacted by climate change, climate policy and new technologies. A 2015 study by The Economist Intelligence Unit estimated that as much as $43 trillion of manageable assets may be at risk globally between now and the end of the century. So, the TCFD framework is about protecting those assets, and the companies that own them. It’s strictly about disclosure to protect investors and lenders, not reducing impacts to protect people and the planet. According to the TCFD: [P]ublication of climate-related financial information in mainstream annual financial filings will help ensure that appropriate controls govern the production and disclosure of the required information. More specifically, the task force expects the governance processes for these disclosures would be similar to those used for existing public financial disclosures and would likely involve review by the chief financial officer and audit committee, as appropriate. Nothing there about companies actually lowering their emissions or otherwise investing in climate solutions, only about disclosing the potential risks to a company’s finances from the growing climate crisis. Thus, a company reporting on climate risk under the TCFD protocol isn’t necessarily committing to fight climate change. Rather, it is declaring, “We understand the potential impacts of climate change on our business and have made our financial projections with that in mind.” Business as usual? In theory, companies might make different business decisions to avoid those risks. But not necessarily: They could decide to incorporate those risks into investment or operational decisions in order to maintain business as usual. So long as a company discloses those risks, investors may be satisfied. So, an oil and gas concern such as Chevron or the South African mining company Gold Fields can report its climate risks using the TCFD framework without necessarily changing its operations or emissions one bit. As Chevron Chairman and CEO Michael K. Wirth wrote in the introduction to his company’s TCFD disclosure : This report demonstrates that we proactively consider climate change risks and opportunities in our business decisions. We have the experience, processes and governance in place to manage these risks and opportunities, and we are equipped to deliver industry-leading results and superior stockholder value in any business environment. No gauzy verbiage there about leaving the world a better place. It’s drilling and refining as usual — but with fuller disclosure. The climate-risk bandwagon has the potential to effect change. As I noted recently , financial institutions are beginning to link borrowers’ sustainability performance to the cost of loans — better performers get lower rates — which could spur companies to change. As climate impacts worsen and the risks grow, investors and lenders may well press companies to more aggressively reduce the greenhouse gas emissions associated with their operations and value chain. So, the question to ask about disclosing climate risk is what difference it will actually make — and what it will take for companies to go beyond simply managing risk to actually reducing their contributions to the climate crisis. How many “once-in-a-century” wildfires, droughts, hurricanes or floods will it take before companies recognize that the stability of their facilities, supply chains, operations, employees and customers is being jeopardized? Or that the infrastructure they rely on — roads, bridges, tunnels, railways, airports, electric grids, water works, broadband fiber — cannot be taken for granted in a climate-changing world? Disclosure is good: Sunlight is the best disinfectant, as the saying goes. But without actually addressing what’s causing the infection in the first place, the patient’s prognosis may be doomed. I invite you to  follow me on Twitter , subscribe to my Monday morning newsletter,  GreenBuzz , and listen to  GreenBiz 350 , my weekly podcast, co-hosted with Heather Clancy. Pull Quote It’s no longer just about “What business is doing to the climate.” It’s also about “What the climate is doing to business.” Topics Risk & Resilience Climate Change ESG GreenFin Featured Column Two Steps Forward Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Shutterstock

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Verizon, NRG, Oliver Wyman share tips on TCFD scenario planning and reporting

July 21, 2020 by  
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Verizon, NRG, Oliver Wyman share tips on TCFD scenario planning and reporting Aaron Mok Tue, 07/21/2020 – 00:30 More than 1,000 global leaders have implemented recommendations from the Task Force on Climate-related Financial Disclosure as part of their climate action plans. But many organizations are still grappling with how, exactly, to do this. TCFD reporting offers a standardized framework for companies to disclose information on climate-related financial risk to their investors and stakeholders who seek greater corporate transparency. The core elements of the TCFD framework include: governance; strategy; risk management; metrics; and targets.  During last week’s GreenBiz webcast “How Businesses Can Overcome Barriers to Achieving Climate Goals,” three corporate sustainability leaders offered insights for how businesses can best adopt TCFD recommendations into their carbon reduction strategies.  In particular, TCFD reporting expands the scope of climate-related financial transparency, considering issues related to both corporate social responsibility and risk management, noted Edwin Anderson, partner with management consulting firm Oliver Wyman. Businesses are exposed to two types of climate risks: physical and transition. Physical risk refers to climate-related events such as natural disasters, while transition risk encompasses the financial costs associated with institutional changes required to decarbonize, Anderson said. In the TCFD framework, these risks are assessed through a climate-scenario analysis, a methodology companies use to set science-based targets in line with their climate goals and to provide insight into climate change’s potential opportunities and risks. Most senior executives are sympathetic to the problems that the world faces, and you have to face the roles and metrics they rely on. Greg Kandankulam, senior manager of sustainability at NRG Energy highlighted the importance of engaging a third-party expert to aid scenario-planning. “Don’t be afraid to get external on your scenario process,” he said during the webcast. “Sometimes, institutional thinking doesn’t provide everything you need.”  Using the TCFD framework, NRG developed its own scenario, then received recommendations from the International Energy Agency and Intergovernmental Panel on Climate Change, Kandankulam said. He also emphasized collaboration with individuals on the governance team to increase the likelihood of buy-in.  “Direction from the board and CEO helps,” Kandankulam said. “As the TCFD conversation evolved between 2017-2018, we approached leadership with a body of work and engaged with institutional investors to discuss how important it is, what decision-making is useful, and what stakeholders will be looking for in credibility and disclosure. A collaborative process engenders a greater level of buy-in on a management and executive level.” Emily Bosland, director of ESG reporting and engagement at Verizon, stressed the value gained from speaking to investors during the reporting process.  “We found having very honest, transparent conversations with our investors and governance to be exceptionally helpful,” she said. “Feedback from investors and governance on the report has been entirely positive.” After conducting a scenario analysis with IEA’s assistance, Verizon drew on the TCFD recommendations to include this disclosure in its recent sustainability reporting: “Even with growth in electricity usage, carbon prices and electricity prices, Verizon is resilient in a carbon policy environment that is aligned to 1.5-2 degrees Celsius.” (The company aims to achieve carbon neutrality by 2035.) Verizon plans to reach its carbon goal by reducing its carbon footprint across all its operations, using tactics such as adopting newer, energy-efficient technologies and optimizing the temperature control of its data centers, Bosland said. At the end of the webcast, speakers shared their closing thoughts on best practices for businesses to adopt the TCFD disclosure recommendations. Bosland reiterated Kandankulam’s advice that receiving outside help is useful if feasible. Likewise, Kandankulam expanded on his previous point about prioritizing internal collaboration, advising listeners, “Start canvassing your companies and start finding those champions — risk, strategy, investor relations, get them to understand why this is important and necessary.” Finally, Anderson underscored the effectiveness of explaining the value of TCFD disclosure to executives through monetary terms. “Pull it back to dollars and cents. Not because it matters most, but because that’s the lever they require to pull,” he said. “Most senior executives are sympathetic to the problems that the world faces, and you have to face the roles and metrics they rely on.” Pull Quote Most senior executives are sympathetic to the problems that the world faces, and you have to face the roles and metrics they rely on. Topics Reporting Climate Change ESG TCFD Climate Strategy Risk Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off

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Verizon, NRG, Oliver Wyman share tips on TCFD scenario planning and reporting

Whether pandemic or climate crisis, you better get your data right

June 25, 2020 by  
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Whether pandemic or climate crisis, you better get your data right Paolo Natali Thu, 06/25/2020 – 00:30 According to polls, it was  mid-March  when most of us in the United States understood the severity of COVID-19. At the same time, we collectively were searching for data to drive lifesaving decision-making. Close all business and keep people inside homes? Or allow some degree of freedom? What would be the exact growth curve of virus cases, and most important, how could we flatten it? By early April, a consensus had emerged around the role of accurate data, even if it could not help contain a first wave of infections. This lesson on the importance of actionable data did not go unnoticed for those of us working on industrial decarbonization. With growing consensus on the gravity of the climate crisis, countries and companies are adopting carbon reduction targets. If we are to learn from the pandemic, there’s one critical element for any effort to have a chance of success. Less catchy than a target reopening date, and perhaps more like an immunologist telling you to get tested: Do we have the right data to act upon? Pressure is growing to take action The question is relevant because there is mounting pressure to take action against the climate crisis. Pressure to make emissions visible has been around for a while: Consumers want to know how much carbon is embodied in the products they buy. Investors are concerned about the viability of long-term assets in high emissions sectors at risk of being hit by negative policy or market developments. For example,  one chocolate bar  could emit as much as 7 kilograms of CO2, equivalent to driving 30 miles in a non-electric car. Alternately, if the cacao is grown alongside agroforestry or reforestation, the same bar could have zero or even negative emissions via the trees removing carbon dioxide from the atmosphere. If consumers knew the difference, would they pay a premium for the climate-smart chocolate? A company’s financial accounts are used to make reasonable decisions about how that company will do in the future. Alas, to date the same isn’t true of carbon performance. This year, Larry Fink, CEO of BlackRock, the world’s largest asset management company, made thundering news in his  annual letter to investors , touting, “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.” Since then, the asset manager  backed two proposals  at the annual general meetings of both Chevron and Exxon, related to the manner these companies conduct themselves in relation to Paris Agreement targets. Earlier in the year in Australia, investors at both Woodside Petroleum and Santos passed annual general meetings motions to  adopt a “Scope 3 ” (indirect emissions) reduction target. This trend of shareholder and consumer scrutiny has strengthened in recent months, and most S&P 500 companies — in fact, 70 percent of them — already make climate-related disclosures to the reporting platform CDP (formerly the Carbon Disclosure Project). Translating demands into dollars Yet, to date, there is no way to exactly translate these demands for action into dollar figures. You walk around trade conferences (or, more likely these days, Zoom workshops) and everyone is asking: What’s the premium that a consumer is willing to pay for low-carbon products? Is a bank really willing to decline loans for an investment that fails to fulfill certain sustainability standards, for example as pledged by the 11 global banks that signed the  Poseidon Principles  for shipping finance in 2019? If the European Union agrees on a border price for carbon, what should it be? All of this pricing talk begs the question: How can we have such discussions without clear metrics that everyone can stand by? A company’s financial accounts are used to make reasonable decisions about how that company will do in the future. Alas, to date the same isn’t true of carbon performance. For a start, while financial accounts are reported via one of two standards — U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) — a variety of methods can be used for carbon accounting (CDP accepts 64 of them). While financials make the performance of a chemicals company comparable to an iron ore miner, the carbon accounting metrics differ in a way that is difficult to reconcile. This becomes a problem for an automotive company, which needs to combine the performance of both to make an accurate declaration about the carbon content of a product that has over 30,000 parts. It is also a challenge for a fund manager who needs to combine stocks of different sectors, and has a fiduciary duty to use financially material metrics to do so; or for a commercial banker who lends money to different asset classes, and needs to determine the amount of “climate risk” involved in each investment decision. From the perspective of the climate crisis, we still haven’t figured out how to attribute the right price to something nobody can see, such as the amount of noxious gases emitted by a factory in a land far, far away. Remember the core of the coronavirus debate: The number of confirmed cases are better known than the total number of cases. This uncertainty generates debatable data, upon which it is difficult to make decisions that will have an enormous impact on the destiny of societies. From the perspective of the climate crisis, we still haven’t figured out how to attribute the right price to something nobody can see, such as the amount of noxious gases emitted by a factory in a land far, far away. And if the cost of those gases to a community and ecosystem isn’t clearly visible, conversely, how can we measure good interventions so that investors feel confident to put their money toward them? This is particularly ironic because market demand for product sustainability creates a win-win situation for everyone involved: make a plan to increase product sustainability, shape the world to be a better place. In most cases, low-carbon technologies are either readily available, such as in the case of low-carbon electricity and carbon-neutral concrete, or less than a decade away, such as hydrogen-based trucking. But if it’s so easy, why isn’t it happening? And most importantly, what needs to happen? Harmonizing the efforts The current ecosystem of reporting is built on bottom-up efforts that are not harmonized. The previously mentioned CDP has a large database of disclosures. The Taskforce on Climate-Related Financial Disclosures (TCFD) has a widely adopted set of metrics that companies use to report (including to CDP). The Sustainability Accounting Standards Board has — you guessed it — standards solid enough to guarantee “financial materiality,” that is, to allow the analyst in the above example to “buy with confidence” when making investment decisions based on sustainability. The Science-Based Targets Initiative promises to take all this to the next level and link carbon disclosures to the trajectories that companies need to undertake in order to comply with the Paris Agreement. Companies that need to report emissions lament that this is too complex or that it doesn’t allow apples-to-apples comparisons due to discrepancies in the way different methods prescribe calculations. Investors lament that they can’t base financial decisions on current metrics, because they aren’t reliable or standardized. Consumers still have to see eco-labels that are truly credible. It is imperative that emissions accounting shifts from a notion of disclosures (a still image of current emissions) to climate alignment, a forward look into a company’s future emissions. As confusing as it sounds, the good news is that between existing methods, standards and platforms, the elements of a functional system do exist. Despite the gloomy portrait that we often read in the news, of a humankind sleepwalking toward climate disaster due to a selfish inability to act together, this ecosystem actually represents a wonderful testament to the ability of society to recognize a challenge and address it. The importance of climate alignment A few years ago, the Smart Freight Center introduced the Global Logistics Emissions Council (GLEC) Framework, creating a common guidance for logistics companies to report in a unified manner. The GLEC Framework is a guidance that specifies how disclosures need to be made in each of the existing methodologies and platforms. Once a company discloses according to the GLEC Framework, analysts will be able to compare a disclosure made for different purposes using different methods, and trace back what it actually means. It is urgent that this expand to supply chains at large. It is also imperative that the emissions accounting focus shifts from a notion of disclosures (a still image of current emissions) to climate alignment, a forward look into a company’s future emissions. With unified and simplified standards, companies will be able to be easily ranked based on their actual and projected contribution to meeting the Paris Agreement, thus keeping climate change at bay. Why do this? To reap the benefits of being in sync with what stakeholders request more and ever louder. This is only wise, considering that not even a global pandemic and looming economic recession has silenced these requests. According to a recent Deloitte  report , 600 global C-suite executives remain firmly committed to a low-carbon transition. They are perhaps finding opportunity in shifting from risk and need clear data to make their decisions. Pull Quote A company’s financial accounts are used to make reasonable decisions about how that company will do in the future. Alas, to date the same isn’t true of carbon performance. From the perspective of the climate crisis, we still haven’t figured out how to attribute the right price to something nobody can see, such as the amount of noxious gases emitted by a factory in a land far, far away. It is imperative that emissions accounting shifts from a notion of disclosures (a still image of current emissions) to climate alignment, a forward look into a company’s future emissions. Contributors Charles Cannon Topics Energy & Climate COVID-19 Data Collective Insight Rocky Mountain Institute Rocky Mountain Institute Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off

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Whether pandemic or climate crisis, you better get your data right

Whether pandemic or climate crisis, you better get your data right

June 25, 2020 by  
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Whether pandemic or climate crisis, you better get your data right Paolo Natali Thu, 06/25/2020 – 00:30 According to polls, it was  mid-March  when most of us in the United States understood the severity of COVID-19. At the same time, we collectively were searching for data to drive lifesaving decision-making. Close all business and keep people inside homes? Or allow some degree of freedom? What would be the exact growth curve of virus cases, and most important, how could we flatten it? By early April, a consensus had emerged around the role of accurate data, even if it could not help contain a first wave of infections. This lesson on the importance of actionable data did not go unnoticed for those of us working on industrial decarbonization. With growing consensus on the gravity of the climate crisis, countries and companies are adopting carbon reduction targets. If we are to learn from the pandemic, there’s one critical element for any effort to have a chance of success. Less catchy than a target reopening date, and perhaps more like an immunologist telling you to get tested: Do we have the right data to act upon? Pressure is growing to take action The question is relevant because there is mounting pressure to take action against the climate crisis. Pressure to make emissions visible has been around for a while: Consumers want to know how much carbon is embodied in the products they buy. Investors are concerned about the viability of long-term assets in high emissions sectors at risk of being hit by negative policy or market developments. For example,  one chocolate bar  could emit as much as 7 kilograms of CO2, equivalent to driving 30 miles in a non-electric car. Alternately, if the cacao is grown alongside agroforestry or reforestation, the same bar could have zero or even negative emissions via the trees removing carbon dioxide from the atmosphere. If consumers knew the difference, would they pay a premium for the climate-smart chocolate? A company’s financial accounts are used to make reasonable decisions about how that company will do in the future. Alas, to date the same isn’t true of carbon performance. This year, Larry Fink, CEO of BlackRock, the world’s largest asset management company, made thundering news in his  annual letter to investors , touting, “The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.” Since then, the asset manager  backed two proposals  at the annual general meetings of both Chevron and Exxon, related to the manner these companies conduct themselves in relation to Paris Agreement targets. Earlier in the year in Australia, investors at both Woodside Petroleum and Santos passed annual general meetings motions to  adopt a “Scope 3 ” (indirect emissions) reduction target. This trend of shareholder and consumer scrutiny has strengthened in recent months, and most S&P 500 companies — in fact, 70 percent of them — already make climate-related disclosures to the reporting platform CDP (formerly the Carbon Disclosure Project). Translating demands into dollars Yet, to date, there is no way to exactly translate these demands for action into dollar figures. You walk around trade conferences (or, more likely these days, Zoom workshops) and everyone is asking: What’s the premium that a consumer is willing to pay for low-carbon products? Is a bank really willing to decline loans for an investment that fails to fulfill certain sustainability standards, for example as pledged by the 11 global banks that signed the  Poseidon Principles  for shipping finance in 2019? If the European Union agrees on a border price for carbon, what should it be? All of this pricing talk begs the question: How can we have such discussions without clear metrics that everyone can stand by? A company’s financial accounts are used to make reasonable decisions about how that company will do in the future. Alas, to date the same isn’t true of carbon performance. For a start, while financial accounts are reported via one of two standards — U.S. Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS) — a variety of methods can be used for carbon accounting (CDP accepts 64 of them). While financials make the performance of a chemicals company comparable to an iron ore miner, the carbon accounting metrics differ in a way that is difficult to reconcile. This becomes a problem for an automotive company, which needs to combine the performance of both to make an accurate declaration about the carbon content of a product that has over 30,000 parts. It is also a challenge for a fund manager who needs to combine stocks of different sectors, and has a fiduciary duty to use financially material metrics to do so; or for a commercial banker who lends money to different asset classes, and needs to determine the amount of “climate risk” involved in each investment decision. From the perspective of the climate crisis, we still haven’t figured out how to attribute the right price to something nobody can see, such as the amount of noxious gases emitted by a factory in a land far, far away. Remember the core of the coronavirus debate: The number of confirmed cases are better known than the total number of cases. This uncertainty generates debatable data, upon which it is difficult to make decisions that will have an enormous impact on the destiny of societies. From the perspective of the climate crisis, we still haven’t figured out how to attribute the right price to something nobody can see, such as the amount of noxious gases emitted by a factory in a land far, far away. And if the cost of those gases to a community and ecosystem isn’t clearly visible, conversely, how can we measure good interventions so that investors feel confident to put their money toward them? This is particularly ironic because market demand for product sustainability creates a win-win situation for everyone involved: make a plan to increase product sustainability, shape the world to be a better place. In most cases, low-carbon technologies are either readily available, such as in the case of low-carbon electricity and carbon-neutral concrete, or less than a decade away, such as hydrogen-based trucking. But if it’s so easy, why isn’t it happening? And most importantly, what needs to happen? Harmonizing the efforts The current ecosystem of reporting is built on bottom-up efforts that are not harmonized. The previously mentioned CDP has a large database of disclosures. The Taskforce on Climate-Related Financial Disclosures (TCFD) has a widely adopted set of metrics that companies use to report (including to CDP). The Sustainability Accounting Standards Board has — you guessed it — standards solid enough to guarantee “financial materiality,” that is, to allow the analyst in the above example to “buy with confidence” when making investment decisions based on sustainability. The Science-Based Targets Initiative promises to take all this to the next level and link carbon disclosures to the trajectories that companies need to undertake in order to comply with the Paris Agreement. Companies that need to report emissions lament that this is too complex or that it doesn’t allow apples-to-apples comparisons due to discrepancies in the way different methods prescribe calculations. Investors lament that they can’t base financial decisions on current metrics, because they aren’t reliable or standardized. Consumers still have to see eco-labels that are truly credible. It is imperative that emissions accounting shifts from a notion of disclosures (a still image of current emissions) to climate alignment, a forward look into a company’s future emissions. As confusing as it sounds, the good news is that between existing methods, standards and platforms, the elements of a functional system do exist. Despite the gloomy portrait that we often read in the news, of a humankind sleepwalking toward climate disaster due to a selfish inability to act together, this ecosystem actually represents a wonderful testament to the ability of society to recognize a challenge and address it. The importance of climate alignment A few years ago, the Smart Freight Center introduced the Global Logistics Emissions Council (GLEC) Framework, creating a common guidance for logistics companies to report in a unified manner. The GLEC Framework is a guidance that specifies how disclosures need to be made in each of the existing methodologies and platforms. Once a company discloses according to the GLEC Framework, analysts will be able to compare a disclosure made for different purposes using different methods, and trace back what it actually means. It is urgent that this expand to supply chains at large. It is also imperative that the emissions accounting focus shifts from a notion of disclosures (a still image of current emissions) to climate alignment, a forward look into a company’s future emissions. With unified and simplified standards, companies will be able to be easily ranked based on their actual and projected contribution to meeting the Paris Agreement, thus keeping climate change at bay. Why do this? To reap the benefits of being in sync with what stakeholders request more and ever louder. This is only wise, considering that not even a global pandemic and looming economic recession has silenced these requests. According to a recent Deloitte  report , 600 global C-suite executives remain firmly committed to a low-carbon transition. They are perhaps finding opportunity in shifting from risk and need clear data to make their decisions. Pull Quote A company’s financial accounts are used to make reasonable decisions about how that company will do in the future. Alas, to date the same isn’t true of carbon performance. From the perspective of the climate crisis, we still haven’t figured out how to attribute the right price to something nobody can see, such as the amount of noxious gases emitted by a factory in a land far, far away. It is imperative that emissions accounting shifts from a notion of disclosures (a still image of current emissions) to climate alignment, a forward look into a company’s future emissions. Contributors Charles Cannon Topics Energy & Climate COVID-19 Data Collective Insight Rocky Mountain Institute Rocky Mountain Institute Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off

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Whether pandemic or climate crisis, you better get your data right

How Businesses Can Overcome Barriers to Achieving Climate Goals

June 15, 2020 by  
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How Businesses Can Overcome Barriers to Achieving Climate Goals Join us and discover the findings of research conducted by NRG Energy and GreenBiz Group, examining key plans and actions businesses are taking to address climate change. The research represents responses from hundreds of business executives and thought leaders, revealing that many are taking the right steps to reach their goals. A range of factors, however, threatens to disrupt progress including a lack of attention to risk, developing consistent resilience and financial disclosures such as those recommended by the TCFD, and a general need for greater expertise. In this one-hour webcast, GreenBiz Vice President and Senior Analyst John Davies will lead a wide-ranging discussion, showing you how: Risk management and sustainability efforts converge as climate change disrupts businesses and challenges green goals New reporting standards gain traction with demands for greater transparency Existing standards like those of the TCFD have been addressed by companies like yours Scenario analysis becomes the preferred approach to set science-based targets  Collaborations with energy service companies help achieve emissions reductions Moderator: John Davies, Vice President & Senior Analyst, GreenBiz Group Speakers: Greg Kandankulam, Senior Manager, Sustainability, NRG Energy Edwin Anderson, Partner, Oliver Wyman Emily Bosland, Manager, CSR Strategy & Reporting, Verizon If you can’t tune in live, please register and we will email you a link to access the archived webcast footage and resources, available to you on-demand after the webcast. taylor flores Mon, 06/15/2020 – 16:09 John Davies VP, Senior Analyst GreenBiz @greenbizjd Greg Kandankulam Senior Manager, Sustainability NRG @gregkandankulam Edwin Anderson Partner Oliver Wyman Emily Bosland Manager, CSR Strategy & Reporting Verizon gbz_webcast_date Tue, 07/14/2020 – 10:00 – Tue, 07/14/2020 – 11:00

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How Businesses Can Overcome Barriers to Achieving Climate Goals

Why 2020 is the crunch year for climate risk reporting

March 12, 2020 by  
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Companies are still failing on one of the most important recommendations from the Task Force on Climate-related Financial Disclosures: using scenario analysis to project the impacts of future risks on their resilience and strategy.

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Why 2020 is the crunch year for climate risk reporting

The climate risk juggernaut

January 15, 2019 by  
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The dirty little secret about investor returns? They’re in danger from climate change.

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The climate risk juggernaut

7 ways to navigate the complicated new climate disclosure maze

March 22, 2018 by  
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It’s been almost a year since the Financial Stability Board’s (FSB) Taskforce on Climate-Related Financial Disclosures (TCFD) released voluntary guidelines designed to help companies, investors, banks and insurers better understand and react to the complex climate risks affecting financial markets.

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7 ways to navigate the complicated new climate disclosure maze

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