Financial institutions, banks, corporates and investors convened in London May 8 for the third annual S&P Global Sustainable1 Summit. Panelists and keynote speakers discussed themes ranging from evolving sustainability standards to the energy transition to climate and biodiversity risks. Below, we outline our four key takeaways from the event.   

1. Data is one of the biggest sustainability challenges investors and financial institutions face.

We heard repeatedly throughout the summit that the lack of data on climate and biodiversity risks is one of the top barriers that financial institutions face in understanding sustainability risks. 

Financial institutions and investors highlighted the challenges of measuring and managing Scope 3 emissions in particular.

“At the [financial institution] level, they're really having to rely on the counterparties to disclose their Scope 3 emissions — both the upstream supply chain and then also their downstream emissions,” said Christopher Johnstone, a partner at management consultant Oliver Wyman who sat down for an interview with the ESG Insider podcast following his panel on sustainability risk.

“They will use proxies to fill in the gaps, looking at benchmarks based on what other companies in those sectors are disclosing. But at the moment, there are limited tools for financial institutions really to drill into their counterparties’ supply chain,” Johnstone said.

To address gaps in company-level disclosures, S&P Global Sustainable1 researches, standardizes and validates corporate environmental performance data covering more than 17,000 companies representing 99% of global market capitalization across six aggregated categories: Greenhouse gases (GHGs), waste, water, air pollutants, land/water pollutants and natural resource use. 

Providing data in a form that financial institutions can trust is incredibly important, we heard from conference panelists and attendees — especially as firms begin to expand beyond climate to measuring and managing nature and biodiversity risks.

Biodiversity and nature are gaining rising attention from companies, investors and governments but many companies are in the early stages of understanding the risks these issues pose to their business. To help address this challenge, the S&P Global Sustainable1 Nature & Biodiversity Risk Dataset assesses nature-related impacts and dependencies across a company’s direct operations including at the asset, company and portfolio level, covering more than 17,000 companies and more than 1.6 million assets.

We’re also using asset-level data to understand the physical risks companies face from climate change. The S&P Global Sustainable1 Physical Risk dataset helps quantify the impact of climate change on companies across nine climate hazards, four climate scenarios and eight time periods for over 21,000 companies and more than 2.2 million asset locations.

2. AI can help address many of these data hurdles, from climate to nature to the energy transition.

Several conference attendees pointed to the potentially transformative role of artificial intelligence in solving sustainability challenges and improving efficiency. For example, AI could help with mapping asset locations at scale, which has implications for understanding things like a company’s emissions, physical risks from climate change and nature-related risks across its full operations. 

“We know that artificial intelligence can help us enormously in terms of efficiency and providing comparability that we’ll need,” said Sagarika Chatterjee, who is Climate Finance Director and Finance Lead for the UN Climate Change High-Level Champions, and who spoke on a panel at the Summit. Better data can help guide investment decisions and accelerate the transition. 

3. Creation of international standards can also help address data challenges and create comparability.

The International Sustainability Standards Board (ISSB) released its first two standards in June 2023. Nearly one year on, global uptake of the standards is growing, said ISSB Vice Chair Sue Lloyd. Lloyd was a keynote speaker at the Summit and sat down on the sidelines of the event for an interview with S&P Global’s ESG Insider podcast. 

The ISSB is focused on interoperability of its standards across jurisdictions and plans to publish a jurisdictional guide including a regulatory implementation program to help jurisdictions making decisions and building roadmaps to introduce standards in an orderly and realistic way into markets around the world. 

“The very, very strong message that we got when we went out with the drafts of the standards before we finalized them was we really needed to make sure that this was a truly global baseline — that it wasn’t only fit for purpose for the most well-resourced, sophisticated company in developed economics, but could be used by smaller companies in emerging markets,” Lloyd said.

4. Sustainability strategies and energy transition timelines will look different in different parts of the world.

Companies in emerging markets are at different points in their sustainability journeys, due to a combination of factors, from geopolitics to lack of data to lack of access to capital. Technology and innovation can be drivers of change and help developing countries move away from fossil fuels to embrace renewables for their energy needs, we heard. 

“We've got huge need with 700 million people or so lacking energy access,” said Steve Howard, Vice Chair of Sustainability at Singapore-based investment firm Temasek, who sat down for an interview with the ESG Insider podcast after his keynote fireside chat. “There's an imperative to help people get out of poverty, have really the resilience in their life of access to energy and cooling and mobility and secure food supplies ... now the technology is there, so we need to mobilize more capital.” 

To facilitate the transition in emerging markets, getting finance flowing and lowering the cost of capital is necessary, panelists said. Private markets and innovation alongside public policy will play a part in solving this challenge.  

Accelerating the energy transition while sustaining economic development particularly in emerging markets is the “biggest challenge,” said Budha Bhattacharya, Head of Systematic Research at Lombard Odier Investment Managers. The global financial community can play a role here in raising awareness among companies in developing countries and helping them attract capital, he said.