Transcript provided by Kensho.

Lindsey Hall: I'm Lindsey Hall.

Esther Whieldon: And I'm Esther Whieldon.

Lindsey Hall: Welcome to All Things Sustainable, a podcast from S&P Global. As your hosts, we'll dive in to all the sustainability topics that are reshaping the business world.

Esther Whieldon: Join us every Friday for in-depth analysis and interviews with leaders from around the globe. Together we'll breakdown big sustainability headlines and cut through the jargon.

A question we've been hearing about a lot on this podcast recently is how do businesses sync up their climate strategies to their financial positions. Earlier this month, S&P Global Sustainable1 held an event that dove deep into this question.

Lindsey Hall: That's right. The S&P Global Climate Center of Excellence hosted its inaugural Climate Summit on June 5, and I was there as the event emcee.

Now the center is home to world-class scientists dedicated to addressing the frontiers of long-term climate, environmental and nature research and methodology development. The Climate Summit in New York City convened many of those scientists alongside financial institutions and industry leaders to help answer the question how do you translate the science into actionable insights that inform investment and financial decision-making. And in today's episode, we're going to hear from 3 of our event speakers. We're going to hear how financial institutions are thinking about these challenges from Sonja Gibbs, Head of Sustainable Finance at the Institute for International Finance. That's a global network of financial institutions. And we'll hear why financial decision-makers need data, not vibes in the words of our guest, Aniket Shah, Global Head of Sustainability and Transition Strategy at Jefferies Group.

First up to set the scene, here is Dr. Terence Thompson, the Chief Science Officer at the S&P Global Climate Center of Excellence. He explains more about the center, its goals and how it's working to break down barriers between different groups to address climate change.

Terence Thompson: Climate change provides an enormous intellectual challenge to address the risks and opportunities included in it. Climate change, of course, involves increasing physical hazards of different types, most often cited as temperature, precipitation, flooding, coastal sea level rise and the like. That is basically the hazard side of the climate equation. The transformation of hazards into risks is also part of the responsibility of the Climate Center of Excellence as well as understanding the economic impacts of climate change.

So this requires a multidisciplinary team, both the science of the way the planet operates, the atmosphere, the ocean, the cryosphere when we deal with glaciers and so on. That is very complex, and humankind is operating at the frontiers of knowledge in certain areas, some more than others in that side of the equation. Similarly, on the economic impacts, there are challenges in measuring, using a metric that will properly capture all of the different effects of climate change not only on physical capital but on natural capital. Think of ecosystem services, biodiversity and the like. And on human capital. Think of longevity, think of education levels and so on. So that very broad intellectual landscape is addressed by this interdisciplinary, multidisciplinary team in the Climate Center of Excellence.

Our responsibility, of course, includes interacting with clients, potential clients and the like in order to understand emerging needs in this space associated with climate change in general. The other side of the coin is interacting quite deeply with the scientific community from which the basic information comes that enables us to link client needs to the available science data, economics and so on to provide defensible methodologies, data and methodologies that address, again, climate risks and climate opportunities. So it's a 2-way street between the demand that comes from the client side and the basic information and insight that comes from the scientific and economic community. So we bridge those 2 poles if you like. And it's actually quite exciting. This is a very interesting way to spend one's day to interpret both the demand side and if you like, the supply side of this type of information.

Lindsey Hall: I asked Terry to share his main takeaways from the events. Here's what he said.

Terence Thompson: I think I would say there are 2 main takeaways for our organization and for me personally. One was the tremendous need to communicate the type of insights that we can provide to communicate clearly the strengths and potential weaknesses of what we can model, what we can estimate. Again, climate science and the economics associated with it are at the frontiers of human knowledge, so we need to be very clear about what we can estimate reasonably well and what we can't. That's the demand that we saw evidenced in the audience, the questions from the audience and so on.

On the other side, I was struck by the amount of information in members of the audience, primarily from the financial community that I personally would like to be much closer to. So this comes back to the client demand side, understanding their needs, understanding the knowledge that they already have. It's really a 2-way street.

Lindsey Hall: We just heard Terry talk about how the work of climate scientists is a 2-way street involving, of course, climate scientists on the one side and then feedback from clients in the financial community on the other. Our next guest has some unique insight into how the financial community is thinking about climate. Here she is.

Sonja Gibbs: I'm Sonja Gibbs. I'm the Managing Director and Head of Sustainable Finance at the Institute for International Finance, otherwise known as the IIF. We are based in Washington, D.C. but a global association of financial firms, so think banks, insurance companies, pension funds, the whole 9 yards. We also have public sector members. So those would include multilateral development banks and international financial institutions, central banks and so on. Over 400 members in 70 countries around the world, so it's a really interesting place to work, and we're kind of a cross between a think tank and a trade association, I'd say.

Lindsey Hall: Thank you for that background. So at this inaugural Climate Summit, one of our goals was really to connect the dots between the climate scientists in our Climate Center of Excellence and financial institutions like many of those members that you were just describing. And you were one of our keynote speakers at this event, so would love to hear your reflections from the day.

Sonja Gibbs: Your Climate Summit in New York was really remarkable, I think, for several reasons. At a time when conversations around climate change are very politically charged, I think it was fascinating to see that you had a room with all different parts of what you might call the climate ecosystem. So I saw [ academics ]. I saw financial firms across the spectrum. I saw civil society. I saw lots and lots of really smart people who are very well informed about these climate discussions. And above all, I thought there was tremendous interest in how climate science is changing the conversations that we have around sustainable finance.

And what's interesting about this is that we're not in a world where ideology is very accessible at this point in time. So what I mean by that is that sustainable finance and climate finance, it's not a matter of just going out and doing good for the world because private sector is private sector. What there is truly is a focus on commercial opportunities around climate and sustainability. You can have lots of debates on the pace of climate change or the urgency of getting to net zero transition, but what no one can deny is that here and now, there is a higher incidence of natural disasters, extreme weather events.

And what was very interesting about your summit is how much progress there is on understanding these events and their impact, their financial impact, right? So for example, coastal erosion or damage to property and real estate, all of these things are here and now, clear and present dangers, and the financial sector is looking for ways to address these problems to finance the necessary investment in adaptation, climate adaptation and resilience. So there was a lot of interest across the spectrum in these issues.

Lindsey Hall: I'd love to know what you heard at that summit and how what we're discussing now connects to what you're hearing from IIF members. How are financial institutions that you work with thinking about climate risk, making that business case or measuring the financial impact of climate change?

Sonja Gibbs: What's interesting about it is that financial firms have to cope both with market realities. So in other words, how [ climate ] is being priced into asset valuation, for example, if you look at the housing market, how climate change is affecting the pricing and availability of mortgages. That would be one example.

Financial firms also have to address kind of policy and regulatory change and issues and developments around the world. Here, a good example is bank supervision and regulation, where finding international consensus on how to treat climate risk is difficult. So in the U.S., for example, the Federal Reserve has stated on a number of occasions that their interest is purely in safety and soundness and not so much in broader topics around driving finance toward climate-related opportunities, whereas in Europe, that conversation is very difficult.

So climate risk in many ways, it's hard to disentangle from other types of risk that financial firms deal with on a daily basis, whether that's credit risk, operational risk, liquidity risk. So the different approaches to climate risk regulation in different parts of the world are challenging for financial firms. So I think that's one of the things that climate science and climate research is helping to address. How do we understand these risks? How do we assess them? And how do we manage them? And your summit got to the sweet spot there in what is the role of climate science and climate risk research.

Lindsey Hall: We also heard a lot at the summit about the need to connect the dots or do this active almost translation between the science and the financial community. And we heard, for example, our Chief Economist, Paul Gruenwald, from S&P Global saying that sometimes it's like economists are from Mars and climate scientists are from Venus, right? So the connection is not always there. And I wonder if that is reflected in the conversations that you have as well.

Sonja Gibbs: I think what's changing is that they may be from Mars and Venus, respectively, but increasingly, there has to be a middle ground where these 2 groups come much more together. It's imperative, right? If these 2 groups don't talk to each other, then there will be no good solutions. But it is increasingly happening. Banks, insurance companies, asset managers, everybody is hiring climate scientists or developing partnerships. You see a lot of this kind of academic consortiums working together with the financial services industry because we know these questions have to be addressed, and we have to find a common language.

Lindsey Hall: You mentioned that your members are focused on opportunity as well as risk and finding financing mechanisms for addressing climate change. How are your members thinking about mobilizing capital and also derisking blended finance?

Sonja Gibbs: Those are very challenging subjects, and let me just first say that these conversations around derisking private sector investment are not new. And I would flag here infrastructure investment in particular. Infrastructure in general, think bridges or transportation systems or all of the kind of infrastructure we need to run the global economy, these are very big and very risky investments, and they happen all over the world. So there's elements of country risk as well as credit risk and operational risk, all these types of things.

What's new, I think, is the tremendous interest on the part of public sector entities, whether those be governments or multilateral development banks or development finance institutions to figure out how to best use their balance sheet capacity to catalyze private capital. So you're having tremendously interesting conversations between the private financial sector and this kind of public sector community. And I'd throw philanthropy in there as well because a lot of the big philanthropic organizations are taking part in these conversations.

And derisking essentially happens like this, that the public sector, which has a lower cost of financing, is able to take some of the risk that may be the first tranche of an investment, the first loss tranche or provide a guarantee in some sense, and that brings down the cost for the private sector to enter into these transactions. And it just increases the amount of capital available because as S&P knows well, the governments around the world are just inundated with debt. So only by catalyzing private sector funding are we going to come anywhere near global climate finance goals.

Lindsey Hall: Well, Sonja, I've asked you quite a few questions. But is there anything that I haven't asked that you think is important for our listeners to understand about just the current financial landscape for understanding climate risks and opportunities?

Sonja Gibbs: One thing I would say, and this is an area where S&P is doing a tremendous amount of work, is that the data set, the data around climate risk and opportunities are so important. And the way that we obtain this data, access to it, all of this is integral to the pricing of risk and opportunities.

Lindsey Hall: Sonja pointed to the role of data and understanding climate risks and opportunities. And this tees us up nicely for our final guest today, Aniket Shah. Aniket is Managing Director and Global Head of Sustainability and Transition Strategy at Jefferies Group. And at the S&P Global Climate Summit, he had a great way of summarizing the role of climate data in financial decision-making. I'll let him explain more. Here's our conversation where Aniket starts off by describing his role.

Aniket Shah: I have the best job in the world. It's as simple as that. I run the sustainability and energy transition research team at Jefferies. We are a global research and advisory team that has one mission, which is to know all that we can about the topics related to sustainability and the energy transition and digest that and engage with our clients to help them make better investment decisions. And so we get to spend all day talking to scientists, to business leaders, to policymakers, to technologists and chart how the energy transition is evolving and then make recommendations to our clients on how they should position their portfolios accordingly. So that's what I do. I sit in New York. Our team is global. And yes, I get to have a lot of fun every single day.

Lindsey Hall: See, I thought I had the best job because I get to have a lot of just really engaging conversations with really smart people from a wide range of backgrounds like yourself, for example.

Aniket Shah: It's a competition, we'll see, to win the best job competition, but we both are very lucky.

Lindsey Hall: So you were on a panel at our inaugural Climate Summit that I especially enjoyed where you gave a quote that was really my favorite of the day. You were talking about the way that financial decision-makers think about climate and climate risk. You told the audience that decision-makers need data, not vibes. People really picked up on that quote, and they repeated it throughout the day. Wondering if you can share with our audience for the podcast here, what did you mean by that. What is data, not vibes?

Aniket Shah: Thanks, Lindsey. And I'll give credit where it's due just like I did on the panel. This is an expression that I stole with permission from a wonderful energy modeler at Princeton University, Jesse Jenkins, who told me that phrase last summer when we hosted him for a set of lunches with our clients in New York. And I just loved it because in 3 words, data, not vibes, it got to the very core of what I think is the biggest problem in the climate investment community right now, which is that we are all way too driven by vibes and we spend way too little time in the data.

And that is so strange to me because we operate in an industry, the financial industry, which should be about data, and we live in the most data-rich moment in human history. We have so much data, and we live in a financial world. And yet, we all operate through vibes. And so my argument on the panel was that all of us need to spend more time in the data when it comes to climate change and climate investment. And if you spend more time in the data like I do, you actually get a much more optimistic story about the current moment than if you are just reading the headlines, which are largely about the vibes of new administrations and the rollback of energy transition policy.

Lindsey Hall: Well, another thing that I wrote down during your panel is when you said that, it was a bit counterintuitive because I am reading all of the headlines, right? And you get a pretty pessimistic picture of the energy transition, of climate investment and of sustainability more broadly. So tell me a little bit more about why that's actually not really the picture.

Aniket Shah: Let me just do what I said I was going to do, which is let's talk data, not vibes. According to the International Energy Agency's World Energy Investment Report of 2025, we, as a global economy, invested $2.2 trillion last year in low-carbon energy and $1.1 trillion in fossil fuel energy. So the world spent 2x the amount in low carbon as high carbon, a number that was more like 50%-50% just 5, 6 years ago.

Just to drill a little bit deeper, in 2024, low-carbon power generation outpaced fossil generation 12:1. According to the International Energy Agency, we have shaved 1.2 degrees Celsius of warming by 2100 over the last 10 years. So in 2015, according to the IEA, we were on a 4-degree path by 2100. Today, we're on a 2.8-degree path by 2100.

Now I'm not here to declare victory. I'm not here to say that mission accomplished. But my goodness, those are great numbers. I worked on the Paris Agreement. If someone had told me 10 years ago that by 2025, we would be spending or investing $2.2 trillion in low carbon and that we would have shaved off over a degree of warming, I would take that any day of the week. First of all, I wouldn't believe it, but I would say that would be quite a remarkable achievement.

And none of this gets picked up, Lindsey. None of this gets picked up. The IEA puts out these reports. No press covers it. Very few of our clients or investors engage with it. And instead, we spend all day bemoaning what is coming out of Washington. And I'm not here to dismiss what's coming out of Washington at all, but again, people need to realize that the U.S. is only 11% of global CO2 emissions.

And so yes, we should be worried and concerned about what's coming out of the U.S., but it's not the full story. And so these are just some of the many data points that I spoke about on the panel and that I talk about with our clients every day. And it's again not to intentionally tell a positive story, but this is part of the story as well. It isn't just about the rollback of the IRA.

Lindsey Hall: It's very helpful to paint the bigger picture. When you look at your clients, for example, or other financial decision-makers, why do you think that they are not taking into account all of this vast amount of data that we have?

Aniket Shah: It's a great question. I would say there are a few reasons. Number one is that there is just now so much data. The problem that it has created is that there's basically too much. And people are effectively paralyzed by all the charts, all the data and all the reports. And so in general, there needs to be a translation of all of this data to the investment industry, and that isn't happening in -- I would say, as well as it needs to be. So that's one, just a lot of data and not enough translation.

Number two is that we live in a headline world. Narratives have always been part of financial markets, but I would say it's even more the case today when attention spans have declined and there's so much media all the time. And so I think it's just -- part of this is just this is the moment that we are in terms of how humans consume information.

And number three, more substantively is that I think investors often confuse real economy deployment of technologies with equity returns. So look, the reality is that the equity returns of a lot of low-carbon-oriented companies has not been great over the last 3, 4 years. But it is also true that the real economy deployment of technologies has been extraordinary during those last 3, 4 years.

But again, if you're a portfolio manager or a private equity fund manager, your job is to outperform in the financial markets. And I think because so many investors rightly are focusing on stock prices, they're not spending enough time looking at what's actually happening in the real economy. And that's what the message that I was trying to give and that I've tried to spend time in my work. So that's why I think we have this confusion.

Lindsey Hall: A brief interjection. In this next clip, you'll hear Aniket mention Omnibus. That's shorthand for the Omnibus Simplification Package that the European Commission released in February 2025, and it would drastically reduce the number of companies subject to corporate sustainability reporting requirements. Among other things, the Omnibus package includes measures to simplify the Corporate Sustainability Reporting Directive, or CSRD. That's another acronym Aniket mentions. We'll include a link in our show notes to our recent podcast episode about the Omnibus proposals.

Lastly, Aniket mentions BYD. That's the big Chinese electric vehicle company. Okay. Back to our conversation. I asked Aniket to take listeners behind the scenes in the conversations he's having with clients. What are their key questions when it comes to tying climate change to financial decision-making?

Aniket Shah: Let me suggest that there are a few main issues that are on investors' mind, and if they're not, then we're trying to put it on their minds. But I think the 2 worlds are converging. So first, look, I have to start with, again, just in the spirit of intellectual honesty that what is on everyone's mind right now is what the Trump administration will do to all of the different tax credits that have been put in place through the Inflation Reduction Act and what that will mean for the deployment of low-carbon power and energy in the United States; and also all of the different programs that the current administration is dismantling, what the impacts of that will be for the U.S.'s role in the energy transition.

That, first and foremost, is on everyone's mind, even though it occupies too much of people's minds. It is definitely on people's minds. That's number one. Number two, which is where I'm trying to drive our clients but they are there, but we're trying to drive them more, is the role of China. China is the largest player in global energy transition, period. That country invests $900 billion a year into the real economy in low-carbon technologies. That's solar, wind, batteries, electric vehicles, nuclear, hydro. You name it. And they are at the technological frontier of most of the underlying technologies for those sectors.

What we are seeing right now is China's role in the world is expanding and China's exports of these low-carbon goods is expanding significantly as well. So our clients are trying to understand, for example, what does it mean that companies like BYD are selling electric vehicles at a fraction of the cost of any other car manufacturer and that BYDs are now increasing exponentially globally. Is this a positive shock to the energy transition on the one hand but could potentially be a real competitive challenge to many incumbent car manufacturers around the world on the other hand? So that question of China's role is increasingly on our clients' mind, and we're trying to push them there because we think that there are a lot of derivatives of that, that need to be addressed.

The third topic that's on our minds at Jefferies and on our clients' minds is a greater focus on climate adaptation and resilience. As I said earlier, Lindsey, I'm not celebrating, of course, that we are on a 2.8-degree pathway through end of century because that's going to have a lot of impacts on physical climate.

What we are seeing, though, is that investors and corporates are realizing that this is now baked into the cake and investments around resilience and adaptation will need to be made. And we're seeing this in terms of new climate funds focused on adaptation being set up, more and more orientation of corporate strategy around adaptation and resilience. And so we're trying to help our clients figure out how do they think through that, what are the sectors that will benefit, for example, the cooling industry, water management industry, perhaps the reinsurance sector, engineering and construction. Those are all areas that we are discovering with our clients. What are the best investment opportunities therein?

And then finally, a topic that's near and dear to my heart, which I would say investors are not there yet, but we're trying to get them there is around carbon removal. Carbon removal is one of those industries that will need to be formed one way or the other because no matter the pace of decarbonization that we go down, there is an excess amount of CO2 in the atmosphere that will need to be removed through both engineered and nature-based solutions. And the good news is that there's more and more of the underlying technology for that process now does exist.

And so we've been trying to take our clients down that journey as well. So yes, it's low-carbon prospects in the U.S. It's the role of China and their technological and manufacturing leadership. It is adaptation and resilience and it's removal. And those are the 4 main areas on our minds and on our clients' minds.

Lindsey Hall: Well, thank you for laying that out so clearly for our listeners. As we look forward, can you give us a sense of what's next on your calendar? For example, we're having this conversation shortly before London Climate Action Week kicks off. What are you looking ahead to in the next couple of months?

Aniket Shah: I would say a couple of things. First of all is that Europe plays an important role in low-carbon discussions. And to be honest, I think there's been too much focus about European ESG regulation, CSRD and Omnibus and all of that kind of stuff and not enough focus on European Union and Europe in general on low-carbon transition because they're 2 worlds. They are related, but they are 2 different worlds.

And I think the point is that there are many lessons to be derived from Europe's leadership on the low-carbon transition that the rest of the world needs to hear and needs to listen and learn from. And by the way, we're already seeing this. I write a lot about Japan. A large part of Japan's energy transition program around carbon pricing is derived from Europe's approach to its emissions trading scheme.

So the first thing that I'm looking for in the next few months is a greater focus on lessons learned from Europe. There was news recently, Lindsey, that Europe is effectively going to hit its 2030 decarbonization goals. That's a 55% reduction in CO2 emissions from 1990 to 2030. That's amazing that Europe is on track to do that despite all of the uncertainty, despite all the conflict, despite all of this.

And I think London Climate Week is a great moment to sit back and say this is what we have achieved. This is how we've achieved it, and this is what it means for the rest of the world. So that's the first thing that's on my mind. And London Climate Week, I think, will be a great catalyst for it.

The second thing that's on my mind over the next few weeks and months is Japan. I mentioned it already, but Japan has one of the most significant energy transition programs in the world that very few people in the world appreciate, and it's called the Green Transformation Policy, the GX policy. And it's a remarkable set of policies that the Japanese government has set into place in order to hasten their energy transition. And in the second half of the year, we're going to see a lot of announcements coming out of Japan around GX, namely to do with the establishment of 2026 emissions trading scheme and other associated policies. So I'm going to be focused on that.

And the final thing that I'll be looking for, of course, will be how the IRA shapes out of the budget negotiations coming out of the reconciliation package. Those are the 3 things: Europe, Japan and the U.S., and there's so much more, but that's what I'm paying attention to in the short term.

Lindsey Hall: Well, we'll be sure to have you back on the podcast to talk about all of these topics if we can get you back on again.

Aniket Shah: Of course. No, I'm always here.

Lindsey Hall: So today, we heard about the importance of bringing together groups that might not have historically been speaking the same language. Maybe in the past, economists were from Mars and climate scientists were from Venus. But we heard about some of the headway that's being made in bridging these gaps, and that's thanks in part to the work of groups like the Climate Center of Excellence at S&P Global. We'll include links in our show notes if you'd like to learn more about the center and its inaugural Climate Summit.

Esther Whieldon: We heard from Sonja that there's a rising focus on commercial opportunities around climate and sustainability. And this echoes something we've heard in recent interviews where guests have used terms like back to basics to describe their approach to sustainability. We've been hearing how the current landscape of geopolitical volatility and policy uncertainty is leading companies to focus on making a clearer commercial case for their approach to things like climate change. We'll include a link in our show notes to those episodes if you'd like to learn more.

Lindsey Hall: And we heard today how important data is in driving financial decisions, data, not vibes, as Aniket put it. And he said, when you really dig into the data, the picture is actually more optimistic than many of the headlines about climate and energy transition might lead you to believe.

Looking ahead to London Climate Action Week and beyond, Aniket highlighted several key areas of focus: low-carbon prospects in the U.S., including how the Inflation Reduction Act shakes out; the role of China and its technological and manufacturing leadership; greater focus on climate adaptation and resilience; and the potential from carbon removal technologies. He's also watching developments in Europe and Japan when it comes to low-carbon commitments.

Esther Whieldon: We'll continue to track these developments on the global stage, so please stay tuned.

Lindsey Hall: Thanks for tuning in to this episode of All Things Sustainable. If you like what you heard, please subscribe, share and leave us review wherever you get your podcasts.

Esther Whieldon: And a special thanks to our agency partner, the One Nine Nine. See you next time.

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