EY helps clients create long-term value for all stakeholders. Enabled by data and technology, our services and solutions provide trust through assurance and help clients transform, grow and operate.
At EY, our purpose is building a better working world. The insights and services we provide help to create long-term value for clients, people and society, and to build trust in the capital markets.
In this episode, Bruno Sarda, host of the Sustainability Matters podcast, meets with prior guests to talk about the significant developments in sustainability over the past year, ahead of the upcoming UN Climate Change Conference or COP29 in Baku, Azerbaijan, later this November.
Amy Brachio, EY Global Vice Chair for Sustainability, and Matt Bell, EY Global Leader for Climate Change and Sustainability Services, share their experiences from the 2024 New York Climate Week. They discuss the transition from addressing environmental issues in siloes to a comprehensive view that acknowledges the interdependence of various sustainability factors that must be addressed together.
The speakers share their expectations for the upcoming COP29, underscoring emerging trends, such as the increased emphasis on finance and carbon markets to support the transition.
In the final part of the episode, Amy and Matt express optimism about the future, talking about the businesses’ desire for innovation, investment in new technologies and a collective willingness to undertake systemic change.
Key takeaways:
The upcoming COP29 is a milestone ahead of the big COP30 next year, where negotiators at a global level will set the stage for the decarbonization needed at a national level.
New York Climate Week showed that there is more recognition of social and other issues being connected to climate change and sustainability.
For your convenience, full text transcript of this podcast is also available.
Disclaimer: This podcast contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Member firms of the global EY organization cannot accept responsibility for loss to any person relying on this podcast.
This podcast has been recorded in September 2024, during the New York Climate Week.
Matt Bell
I don't think I went to a single panel, talk or lunch where somebody wasn't talking about innovation. And I didn't hear that even 12 months ago.
Amy Brachio
What I was hearing was more holistic and systemic discussion.
In the past, you would hear climate talked about over here, human rights over there. And you're starting to hear more of a recognition that all of those things are interrelated and need to be solved for in a consistent manner.
Bell
We need to seriously change the pace at which we decarbonize, probably halving our emissions before 2030 and getting to net zero before the mid-century.
Bruno Sarda
Hello and welcome to the EY Sustainability Matters podcast, our regular look at ESG and sustainability topics and how they impact businesses around the globe. I'm Bruno Sarda, EY America's Climate Change and Sustainability Services Leader, and your host for this series. We have an exciting episode today. I'm joined in person by my esteemed colleagues Amy Brachio, EY Global Vice Chair for Sustainability, and Matt Bell, Global Leader for EY Climate Change and Sustainability Services.
Thank you. It's great to be here.
It's great to be here. Thanks, Bruno.
Bruno Sarda
Good to see you both. So today, we'll reflect on the significant developments in the sustainability landscape over the past year, discussing major climate events that have caught our attention and how these shifts are influencing global climate action.
With the years since the global stock take at COP28, we will evaluate progress, challenges that lie ahead and what we can expect from the upcoming conference. Plus, we'll touch on maybe how political shifts around the world could impact climate policies and the implications for businesses navigating this evolving landscape.
So, we've got a lot to discuss. Thank you both again for joining me. And let's get started. So, it's been quite a year since we last spoke at this last Climate Week. And we've seen quite a few significant developments in the sustainability landscape. Maybe if I can start with you, Amy, can you speak to what you think have been some of the most significant climate events since then?
Brachio
Yeah. I do think it's important to remember why we're here and talking about this. So, when you reflect back on the last year, we've seen extreme and record temperatures around the world. We've seen extreme weather. We've seen flooding. We've seen wildfires that, of course, impact air quality. We've seen challenges with the coral reefs. And I could keep going on, but it's just a stark recognition as to why we need to focus on sustainability as we do.
And in some of the responses we're seeing, we see regulatory requirements coming on board and our clients getting ready to make sure that they have high-quality data that can be reported in a way that drives transparency. And we see faster adoption of renewable energy than anyone had anticipated. Now, not that there aren't challenges and we don't have to move faster, but it has been exciting to see that pace.
Sarda
Matt, what do you think? What have you been looking at mostly?
Bell
Yeah, I'm with Amy. I mean, as we say in soccer, it's a game of two halves, right? And we've seen significant global warming. We may well have breached the 1.5°C tipping point since we started to talk about from a global temperature scenario, which is concerning because we know by the end of the century, we want to be below 2°C , hopefully below 1.5°C of warming from the post-industrial era. And yet at the same time, we have seen the number of organizations at the corporate level make some pretty strategic targets and goals, and start to drive toward those. And as Amy says, we've obviously seeing the expansion in renewables and electrification of vehicles — in fact, the electrification of everything.
But we're clearly not going fast enough. And I think what we saw after our last catch-up a year ago, when we went from Climate Week toward Dubai for COP28, was the UN's recognition that we are off track. We are not on track to meet our nationally determined contributions, and we need to seriously change the pace at which we decarbonize, probably halving our emissions before 2030 and getting to net zero before the mid-century.
Sarda
Yeah, I think we're all feeling this. And as you say, Amy, I think our clients are as well. So, here we are again - Climate Week. Many people converged in New York this week. What kind of key trends or insights did you find emerging out of the client discussions? We've had the public conversations and comments this week.
And how do you think those has potentially been setting the tone or shaping the lead up to COP29? Amy, maybe I'll start with you again.
Brachio
Yeah, sure. It has been an amazing and a busy week for anyone who's been in the city. So, I think when I reflect on last year, there was a hope to keep 1.5°C alive.
And that's what you would hear. And I think this year, there was recognition across most, specifically the scientific community that we will overshoot 1.5°C, and that there's action that can be taken that can help drive that curve down. But we're there. So, that I think was important to say out loud. I also really liked that what I was hearing was more holistic and systemic discussion.
So, I think in the past, you would hear climate talked about over here, you might hear oceans over here, nature and biodiversity over here, human rights over there. And you're starting to hear more of a recognition that all of those things are interrelated and need to be solved for in a consistent manner. And so, those are some of the things that jumped out at me.
Sarda
Yeah. Matt?
Bell
Yeah. Similarly, I mean, I think we need to look at this in a slightly different way. What is it we've seen in the in the context of progress? We've seen some frustration. Organizations in many respects dialing back their targets as they recognize, one, that they don't have the data available to be able to understand how they can decarbonize their own operations, or two — an acceptance of the complexity of being able to do that.
But three, what we're seeing is this disconnect between organizational design and desire, and the policy environment that gives them the long-term certainty to achieve it. So, we've got a period of time that we're coming toward now, particularly heading up toward COP29 into COP30, where negotiators at a country level are going to be setting the stage for the decarbonization we'll need at a national level.
And I think it's really important to recognize that companies are going to need to start to address how they help to enable that in each and every country, if we have a chance of getting back on track. Amy also then made this really important point around the connectivity to other aspects of sustainability, particularly actually, I think, nature and biodiversity.
And we've heard that a lot more here in Climate Week. We've heard organizations talking about the intersect between changing climates and erosion or degradation of natural environments, and the recognition that actually not just companies having an impact on biodiversity in nature is important, but actually their reliance on it for the business models to be successful anyway.
Sarda
Yeah. And in fact, you both touched on this idea that we are already in this place that years ago we feared we might arrive at and were working to potentially avoid. So, here we are. And this global stock take process that took place at COP28, which, again, for those of you who may not be familiar with the process, it's basically an evaluation at a country level of progress against country-specific goals to adapt or mitigate climate change.
So, when we look at all these things you just mentioned, how has the past year's progress either aligned with or potentially deviated from the goals and expectations set during that evaluation, knowing that often we deal with country or regional level goals that then corporations have to translate into what should they do about those?
Bell
Yeah. I mean, from my perspective, I don't think we know. And the truth is that the challenge we have around the general context of trying to understand warming scenarios is that the data is historic by default. And so, while we have the NDCs that give us a trajectory for emissions reductions, it takes some years until we are able to do the national level and then global accounting to understand where we've got to.
What the stock take showed us though is that on the current trajectory, and by the way, including every single commitment that has been made but not yet put in place, we would only get to around 2.7°C of warming by the end of the century. What scientists tell us is catastrophic climate change. Now, unfortunately, when those scientists are interviewed by the press, they are less generous around where they think we're heading.
If we don't put the current policies in place, we could be heading toward 3.5°C of warming. It's a real concern. But having said that, we're in this process, as I said right now, Bruno, where we get the opportunity. So, in February next year, the new NDCs will be submitted, and they'll be ratified, hopefully, at COP30, at COP27, the Troika.
So, those are the countries associated with the current COP processes, hope to put their NDCs in place and present those to the COP29 delegates, hopefully setting the stage for a mechanism that drives us back toward the goals that we need to be achieving. But I don't think we truly know, in the last 12 months, whether or not progress has been sufficient.
And in fact, I think it's that lack of clarity that means we need to have a much more defined process coming out of these next few years.
Sarda
Yeah. Amy, maybe if I can go to you. So, we work with clients that often operate globally, have their own commitments, have their own data sets as to where their risks and opportunities might be.
And they hear a lot, this idea of needing to go from commitment to action, but not always being clear, certainly about some policy uncertainty or confusion, not always knowing exactly where to land. What are some of the key challenges that you're hearing from clients in terms of trying to really make decisions to act on those commitments?
Brachio
Many of our clients are getting ready for the reporting requirements, coming out of the EU and the ISSB standards that are being adopted around the world. And what they're finding is, first of all, challenge around the data and making sure that they have accurate information to be able to report. And if you don't have accurate information to report, you also don't have accurate information to make decisions based off of.
And so that recognition that more specificity is needed. The other thing though is that it is requiring quite a bit of thought and reflection on where you are as an organization, because once this all becomes public, the world will know where you are as an organization. The other challenge is that, for many organizations, since they made their original commitment, they've done the stuff that's easier or wholly within their control.
And so, now we're getting to the place where changes have to be made that require a systemic change to come together and real changes to business models. And so, I think that in one way, that's a challenge because it is getting harder. But in another way, it's positive to recognize that organizations are taking that deep of a look and gaining a true understanding of what it's going to take to drive the change we need.
Sarda
Matt, you touched on earlier talked about COP28 and COP30. You said some things might get potentially presented or ratified at COP29. But I think it's fair to say the expectations have dipped a little bit for this year after I think a very significant groundswell of engagement and participation at COP28.
I think a lot of expectation for what might have happened in Brazil at COP30, including, as you were mentioning, Amy, bringing even more close together the climate and nature conversation. But what are your expectations for COP29? What do you think we can or should expect at this year's convening?
Bell
Yeah. I mean, we know what the main topics are at COP29, but I think it's worth reflecting on the fact that we have relatively recently moved toward an annual COP. These were not annual processes previously. And so, we had a longer period of time for each of the sort of annexes, the areas of focus, of the parties, the countries to be able to drive forward.
And we don't have that grace anymore for a couple of good reasons. We're running out of time. So, we need to act more quickly. But also, because we need to make active changes on an annual basis and make sure we're moving forward in this policy environment on an international stage. So, we are talking about this as a Troika, as I mentioned, which is the Dubai through Baku, into Brazil
in next year as an opportunity to cover this policy landscape and ensure that we are driving forward a number of key topics. So, we will see progress on international carbon trading. We expect this year, as we saw in Dubai, we'll expect to see, I hope, additional commitments made to financing and funding of things, such as the loss and damage fund.
But frankly, I think everybody expects that this COP coming up in Baku is going to be focused around both the public and private sector coming together to ensure that we can actually finance the transition and finance the adaptation that we'll need to be able to respond to and deal with the consequences of climate change. So, really, in many respects, this is being termed the finance COP, despite it despite it being in Azerbaijan. And again, it's the build that will be necessary for us to head toward Brazil, where we will really be setting out the commitments at an international stage of what each country will do in order to get us back to the targets that we've set to keep warming to within 1.5°C.
Sarda
Amy, you’ll be there as well. What are your expectations?
Brachio
I think really similar to what Matt laid out, is that a concentrated focus on finance. And that's one that the dialogue's been happening for a while, but we've got to get to some resolution around it. We also expect to hear focus on things, like the carbon markets, and ensuring that we can take a step forward so that those can function in a way that helps us through the transition.
Sarda
And surrounding all of that, of course, is a complicated political process. And this year, I think, has been highlighted as many countries representing a significant percentage of the world's population having significant elections. Of course, here in the US, among others, but with, with so many significant elections taking place around the world that could potentially lead to shifts in climate policies.
We've certainly seen it going both ways, depending on change of the administration. How do we anticipate these political developments? And how do we think that might impact these global climate change efforts? And specifically then what implications would that have for our clients? Maybe, Amy, start with you.
Brachio
Yeah, certainly. And as those listening can tell, I have an American accent. And so, I live in the US and watching the election closely, of course. I think that one of the things that we recognize is that you certainly have a different platform on climate change, depending on who wins the election. But when I talk to a number of our clients and business leaders, they reflect on the fact that this focus on sustainability really is around driving resiliency into their business for years and years to come.
And they have stakeholders from their employees to their customers, to their investors that expect them to run their business in that way. And so, while we would certainly see some policy differences, I think with respect to the traction, particularly in the private sector, we're going to continue to see a focus on what most business leaders deem as good business.
Sarda
For sure. Matt, what do you think?
Bell
I’m either naive or hopelessly optimistic. I'm not sure which. But the truth is, I mean, I think we've had a lot of fearmongering in the context of almost every election we've had over the last 12 months. You’re right. We've got two billion people going to the polls. But the truth is, in all of those circumstances, the change in government or the expected changes in government that we're seeing is not leading to a lack of engagement in the context of climate change or nature, or in fact, any of the topics that we deal with in our business.
But the opposite — the need for a collective effort, the need of sharing that burden, the need of being more proactive. The other comment I would make though is no country is an island anymore. I think one thing we saw coming out of COVID-19 pandemic and going through our processes last year is that we are so fundamentally dependent on other countries now for our international and global supply chains in a reasonably profound way.
And what that's driving is a couple of policy changes that are either budget is being climate-driven, or in terms of national interest-driven, but they're actually seen as a significant development of the electrified marketplace of green technologies and renewable energy. I mean, here in the US, we have probably over US$1 trillion worth of investable capital being put through the IRA, the Inflation Reduction Act, driven to just these sorts of technologies.
And the data showing the majority of that is actually going to states that you would imagine might not be quite so “ESG friendly.” And so, I think less of this will be driven around the political narrative of what's important around climate change and more around the narrative of what's necessary to grow our economy toward the direction that it has to grow, whether that's limited by planetary limits and the sort of climate impacts that Amy mentioned up-front in her introduction, or if it's driven by the fact that the fastest growing markets are one in the same. The last thing I'd say is we are an international marketplace from a supply chain perspective, but we're also increasingly international in the context of regulation. Amy touched on the European laws that we're seeing come through and regulations around disclosure. We have the carbon border adjustment mechanism.
We have the anti-deforestation legislation. We have the supply chain due diligence expectations to all of those have extraterritorial impact outside of the EU. And for anybody that expects to be part of this global trade and to sell their products into Europe, they become part of the need to decarbonize to address societal risks and think about nature risk too.
So, I am pretty optimistic, actually, that regardless of where we land in any one country, on any one end of the political spectrum, we'll continue to see progress over the mid and short term.
Sarda
Great. I share your your optimism and still understand that that our clients are always looking for a bit more certainty. Maybe staying on this topic with you, Matt, speaking of policy and regulation, we've seen a significant number of new rules, including the EU's Corporate Sustainability Reporting Directive (CSRD) or even some of the climate disclosure laws passed in California that have brought a lot of focus to measurement and disclosure, and some wondering whether that has taken the focus away from action and transformation for the benefit of measurement and reporting. Are you seeing that and are you seeing kind of best practices in terms of how businesses are navigating this policy floor being raised while still kind of looking more to the ceiling than the floor in terms of where action is needed?
Bell
Yeah. I mean, look, if you are going to go and talk to any sustainability practice right now, they will tell you they're underwater dealing with the compliance regimes and the reporting obligations. But actually, I think it's a little bit of a misdirect for us to say that that is drawing people away from taking action. I think it's an integral part of understanding what actions need to be taken.
Climate Week has been fascinating, actually. I've heard so many more conversations around the need for organizations to be producing transition plans around climate risk than we ever have. Though not just producing a TCFD or aligning with the California expectations on disclosure or meeting the obligations under the CSRD in Europe. But actually, thinking through how organizations realistically need to holistically report on how climate change is going to impact their business, their industry sector, create opportunities for them, create risks, and the scenarios around those so that they can demonstrate how they're going to change over time. And a range of stakeholders, all the stakeholders Amy touched on — not just investors, but customers, employees want to understand that so they can help to align their businesses with that business or not, as the case may be.
Sarda
So, as we bring our conversation to a close, and you just brought us back to Climate Week and is very exhilarating week, we've been living through, what gives you, in fact, the most hope for the future of both sustainability as a continually evolving corporate function and practice and set of behaviors, including climate action and then the outcomes that we seek? And have you seen any recent particular developments, initiatives, or innovations maybe that inspire your optimism and give you a sense that we are, in fact, focusing on the right path. Maybe, Amy?
Brachio
Yeah. We've been talking a lot about the macro topics in this, and I may just bring a micro example to life, but we, as part of Climate Week, working with the Sustainable Markets Initiative, we brought a group together looking at the carbon market.
So, everyone from people who develop projects to those that are helping to make the markets work, to those to buy them. And one of the things we did was an intro activity, and we asked everyone to say what were they doing in their personal lives to be part of the solution. And the board just lit up with people who had put solar on their home, people who rode their bike instead of driving to commute, people who changed to plant-based diets, and I could go on and on about the behavior change.
And so, it was heartening to see, and granted, that room is people who focused on this, but it was heartening to see that people were not only talking about the systemic change and things that have to happen at the macro level, but they were taking it into their daily lives on the behavior changes they needed to make to be part of the solution.
Sarda
Sure. Matt, what about you?
Bell
A couple of things for me I found fascinating this week, actually. The first is that I don't think I went to a single panel, talk or lunch or breakfast or dinner or some in between coffee chat, as these weeks tend to go where somebody wasn't talking about innovation. And I didn't hear that even 12 months ago.
We weren't talking about innovating within our business models. And that's reasonably profound, I think. And again, going back to the terminology innovation, that doesn't mean doing something new. It means doing something in a different way. And I think that's really useful to hear. Coupled to that, again, we've heard about people talking about the development of new technologies and their application to addressing some of these large systemic risks.
AI, which is being talked about a lot in the press in the context of the energy consumption dilemma that we might face — I actually had a number of conversations around how AI will be used to help us solve the climate crisis. And I don't think anybody thinks it will solve it unanimously and independently.
But it's a clear opportunity for us to use some of these evolving technologies to accelerate action. And then the last thing that I've really found interesting is businesses are starting to make investments of whatever scale in the sorts of technologies that we need to develop into the future in a way that they aren't waiting for researchers or government funding or large programs to do.
So, one of the clients that we were chatting to at a roundtable had told us that they'd taken an investment in direct air capture at quite an expense. But the project they're looking to invest in will be removing, half a million tons of CO2 next year as a large-scale pilot program. And the reason they're doing it is because they believe their business model will be reliant on the mass extraction of CO2.
And if they aren't helping to spur that industry forward, they don't think that their business model is tenable. And so, there's been a real change, I think, in how people are thinking about how their business not just connects to climate change, to the risk to their business, but how are they going to innovate, use new technologies and help those technologies develop.
Sarda
Fantastic. Well, Matt and Amy, thank you both for joining us again for this fruitful and inspiring and insightful discussion on both the significance of the upcoming COP29 and the week just lived through.
Sarda
I'm looking forward to what the outcomes will be and how they will hopefully address the required urgency for both robust action on climate change from governments and corporations.
So, as I said at the beginning of the episode, this is the Sustainability Matters podcast. You can find all past episodes of the show on ey.com or wherever you get your podcasts. And you can also find this episode in video format on YouTube. Thanks for listening. If you enjoyed this episode of Sustainability Matters, we'd love for you to subscribe!
Ratings, reviews and comments are also very welcome. Please also visit ey.com where you'll also find a wide range of related and interesting articles and reports that will help put these bigger topics in the context of your business priorities. I look forward to welcoming you on the next episode of Sustainability Matters. My name is Bruno Saada. You can find me on LinkedIn and feel free to connect with me there.
Thanks so much for listening.
