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Climate Week conversations: A global perspective
Amidst the excitement of Climate Week in New York, join Penta Partner Andy Whitehouse, along with Penta Managing Directors Cecilia Thorn and Alex Bluestone, as they discuss the latest in climate policy and the corporate race to meet ESG standards in the U.S. and in Europe. They share insights into how businesses are preparing for decarbonization and navigating the European Commission's ESG standards, set to take effect in 2024. The group also examines the evolving public attitudes toward renewable energy and the federal government's role in promoting it. They explain that data indicates a strong push for renewable energy development among American adults, but sentiment toward Climate Week and ESG overall is mixed.
You'll also get to hear about the upcoming European sustainability and due diligence directive, and the role venture capital plays in shaping the global conversation on climate change. Tune in for an informative conversation on the challenges and opportunities in communicating climate action!
For more on ESG from Penta, tune in to our upcoming webinar, "New ESG developments and standards - risks and opportunities for companies and investors" on Thursday, October 12 from 10:30 to 11:30 AM ET, moderated by Cecilia Thorn, Managing Director in our Brussels office. Register here and view the event on LinkedIn here!
Hello everyone, welcome to the latest episode of what's at Stake, a PENTA podcast. I'm your special guest host, andy Whitehouse. I'm a partner here at PENTA and I'm with my colleagues Cecilia Thorn and Alex Bluestone, who are involved in a great deal of our ESG work for our clients and have wonderful perspectives on questions relating to climate change, which is our topic for today. Cecilia is a managing director at PENTA, based in our office in Brussels, and Alex is a managing director based in London. Thank you both so much for joining me on the show today. It's great to be here.
Speaker 2:Thank you very much.
Speaker 1:So we're heading into a week where there will be leaders from corporations, from the nonprofit sector and from government coming together in New York City to discuss probably the most pressing issue of our time Question of how to think about and resolve climate change. Same time, the UN General Assembly will kick off on Tuesday next week. So there will be hundreds of side events organized by companies, by governments, by non-profit organizations and others to discuss climate and to discuss a host of other pressing geopolitical issues. But what we wanted to do today was to talk through and think through where the debate stands today in relation to climate change and to questions of ESG and get a sense just for how our clients and our colleagues are tackling these questions from various parts of the world. So maybe we can start, alex, just giving us a sense for where you see the debate right now from a European perspective and what it is that you think leaders coming to New York this week will be focusing on.
Speaker 3:Yeah, thank you, andy. I think in Europe and in the United Kingdom there isn't so much of a debate anymore, as you know, about the existence of climate change, but rather how best to advance the necessary technology and the corresponding policy developments to actually drive action, and I see a lot of clients from energy to the tech and telecom space talking about this and trying to develop solutions that enable the private and public sector to be joining the fight together. Interestingly, I'm also seeing a lot from outsourcing clients who have government contracts, who are really trying to figure out what the secret sauce is that it will enable them to be at the forefront of delivering some of this government-led decarbonization efforts. So in that respect, I guess it's a little bit of the early bird gets the worm. So there's a lot of movement going on right now. There's a lot of discussion. I think as people come from the EU to the New York General Assembly, they're going to be bringing some of that perspective with them. That will hopefully help their American counterparts link up the policy and corporate action.
Speaker 1:Cecilia, what's your take on it from being in Brussels?
Speaker 2:Thank you. Yeah, exactly what Alex said. There is no such thing as a discussion whether or not climate change exists or not here. I mean, there's always some on the fringes, but politically this is a given. What we've seen very recently is that the European Commission has adopted 12 standards, ESG standards, across ESNG, and that includes also climate change reporting. So they are going through the kind of secondary legislative process, which means that we have the legislation ready, the director is there and it's just the implementation of the technical standards that needs to be approved.
Speaker 2:But this means actually that in Europe, if you're a company, European company or you are a non-European company with substantial operations in Europe as of the reporting of 2024, you will have to do this in the management report. So there are certain indicators that are mandatory, others that are subject to kind of complier explain and others that are I wouldn't use the word voluntary because you have, as a company, you will have to do a materiality assessment on all these aspects, and it range from, let's say, workers, supply chain, biodiversity. So you have to do the homework yourself, and whether or not your report on it externally is another issue. But what is important when people are coming now to New York and in the global context is that we will have, for the first time, really stringent and detailed legislative standards for corporates in Europe.
Speaker 1:And how that's so interesting. Celia, how well prepared do you think most companies are to respond to that new mandate?
Speaker 2:They are not that prepared there because we had legislation in Europe it was called non-financial reporting and that was a directive that gave much more lee-room to companies to report on using different frameworks. Some use GRI, maybe, some use national framework, and that was okay. And the commission at the time said we don't want to develop European framework, but we had the so-called CSRD directive. That went through and the big change was that we would decide to develop specific European sustainability standards and not only companies conscious to a sustainability standalone report. This should be integrated into the management report, so that means that the first kind of set of companies that have reported before must now anyway do the European sustainability standard. So it's a big shift for many and it's a new way of looking at things. So I would expect a lot of work. There is a lot of questions about what they should report on, what should they prioritize, and I guess we'll go into it later what stakeholders expect of companies as well.
Speaker 1:I think that's interesting. Certainly, my sense from here in the US is that the leaders of most companies now feel that making change and progress from inside their institution, on climate change in particular, is a real priority. But, linked to what you were just saying, cecilia, at the same time, I think many of them just aren't clear what it is that they should be doing. We might not have, I think, in this part of the world quite the same framework in terms of mandated reporting and such. But within that broad context, I think there's real appetite here from the corporate sector to contribute, to make a significant difference. But, as I say, for many companies, I think they're still somewhat unclear on where they should start. Is that the case? Do you think, alex, from the UK context, is the story slightly different there?
Speaker 3:No, I think what unifies a lot of the markets, especially in the West, is a need for data. Whether or not you have a mandatory framework that you're reporting on or you don't, you need an evidence base to make decisions on, and increasingly, as we are exposed to better and more efficient ways of analyzing and interpreting data, it's becoming more and more significant and this is just as much the case with ESG and the fight against climate change, I would say and in the UK there's a bit of a lag, I think, behind the US and the EU right now in terms of government-led intervention, but that doesn't mean that corporates are slowing down in the UK. So I think everybody could be benefited by clear and more readily available data on what issues to prioritize, specific to their sector, but also specific to their stakeholders' needs as well.
Speaker 1:And Alex, I know you've been doing some thinking about stakeholder expectations and how it is that different groups are thinking about ESG and climate change in particular in the context of all of the other big pressing public topics. Can you just give us a sense of where you think the public conversation is around this, how it is that the public is prioritizing this topic versus others?
Speaker 3:You know, it's really interesting and I've been having a lot of conversations both with clients and with colleagues about one of the thornier aspects of advancing the climate change agenda, which is especially in the UK.
Speaker 3:I think most people agree that action needs to be taken, that it needs to be strong and not just empty, but there seems to be a disconnect between the desire for things like renewable energy implementation and a lack of desire to have that in their own backyard.
Speaker 3:So what I'm seeing actually is a lot of local issues which are cropping up, which are affecting a lot of energy providers and people that work adjacent in that space, where they're getting strong pushback from local communities and it's presenting a real issue because protests are emerging which are starting online and there's kind of a coalescence actually against things like the kind of infrastructure that's needed to carry renewable energy from the places it's produced to the cities where it's being consumed. So I found that a bit interesting lately that there is a strong desire for action and there are citizens who are pushing their elected officials to act, but yet they don't want it in their backyard. So it's a classic NIMBYism case and I think it's going to take some real thought about how to get around that and how to convince those local stakeholders to get on board, even if it means a disruption of their view or potentially increasing certain times of vehicle traffic in their area, which are the primary complaints.
Speaker 2:I think it's very interesting what you're saying, because we see that at the grassroot level and we're going to have elections in EU elections here in June 2024. And the president of the European Commission gave a state of the union speech here that you might have seen. And one, of course, key package is the kind of green deal that the EU has been pushing and we see this. Actually, if you think about, there is this emerging trend that people are. They have to focus on the energy usage and the high cost of energy inflation, and that is having an impact and going into the election. We also saw that she was still pushing the kind of green deal agenda, but with the caveat all time competitiveness, thinking about SMEs, companies. We don't want to make them uncompetitive. So there is this balancing act and we see this now reflecting even on the European political side.
Speaker 1:That's very interesting. I wanted to understand the degree to which US citizens were moving in terms of their views on some of these questions. The conversation about Nimbism is really important. This is a sort of general sense here. I think in the US that there's less support for action on things like renewables than you might see in the EU or in the UK or elsewhere.
Speaker 1:But I found some interesting polling data just from the last few weeks.
Speaker 1:This is pure research center data that suggests that something like two-thirds of adults in the US now believe that the country should be prioritizing the development of renewable energy sources so a bigger number than I would have expected in that polling.
Speaker 1:Almost half of if you split it by political party, almost half of those poll that describe themselves as Republicans help that view that we should be prioritizing the development of renewables.
Speaker 1:90% of people on the democratic side help that view. And as you sort of poll people by or sort the data by age, generally for the younger demographics, irrespective of political party, enthusiasm for renewables go up. Similarly, if we ask people whether they feel like the government should be getting involved in this, two-thirds of Americans feel that the federal government here should be encouraging domestic production of wind and solar power. Again, I feel like that's possibly something of a shift in public attitudes over recent years and perhaps looks a little bit more like the views that you'd expect to find in the UK and Europe and in other parts of the world. If the two of you are giving advice to your clients preparing to come over for climate week, what would be the things that you'd be urging them to think about to make best use of time in New York with all of these different players from around the world assembling?
Speaker 3:From my perspective as an American living and working in the UK, I think that business interests from the UK and to have considerable exposure in the UK should be pressing Westminster out of climate week and on the sidelines of climate week to have a follow-up to the US Inflation Reduction Act, or indeed the EU's Green New Deal and some of the follow-up equivalents to the American Inflation Reduction Act that are being proposed and discussed.
Speaker 3:The UK is going to be on the sidelines. Otherwise, and I think, crucially for businesses and including, I think, legacy brands that exist not just in the UK but are based there, really need to be pushing Westminster for some of that government support and government-led intervention. That's what I would say is my main advice to UK clients. For European clients, I think it's thinking about how to work best with the American government and companies based on the Inflation Reduction Act. I think that kind of turbo boosted the conversation both in the United States and in Europe about the joining of public and private investment to fight climate change. I think it was a really crucial step. The IRA and I hear about it in meeting after meeting after meeting, especially in the UK, about some equivalent piece of legislation that needs to come out. It's a really interesting time.
Speaker 2:Yeah, I agree. It's also important, I think, for European actors, governments, companies too, to understand that the sentiment is different. You would look at it differently from a political context. We see on the global level, we had recently the ISSB framework. That was two reporting frameworks on climate. That is giving a baseline for companies operating across the world. Many jurisdictions will want to implement that in terms of national legislation.
Speaker 2:It's the complexity and the trends. I would like to just add that what we see as an important trend, specifically also in the US and the UK, is how much investors are pushing for this. As Alex said, everybody wants more data, regardless of the politics around this space. It's about getting more data in order to assess companies, allocate capital and even say, in the public space, esg data will have an impact on public funding. Whether or not the politics around it is volatile, we still see the trend and it's going in one direction and it's more reporting. Its companies taking the seriously, stakeholders getting more involved. I would see that with a various degree of granularity across jurisdictions, but I think that's interesting to keep in mind.
Speaker 3:If I can just jump back in and add to Cecilia's point. I mean, just a few weeks ago we saw one of the largest single-day venture capitalist investments in the climate space. Two billion in one day was allocated to different clean energy projects. In some ways, the reflection on that move was that the debate is on the sidelines now. Venture capital is moving forward, investors are moving forward, they're ready, they are bringing these projects to scale. That should signal to governments that the time to sit on your hands is past and there needs to be action followed up.
Speaker 3:Specifically that's why I pointed out that the UK government's silence is a bit deafening right now, I think for companies operating there, I think as well. Going back a little bit to the EU perspective, coming into New York, I think initially EU companies were worried about the impact that the subsidies and tax breaks that the IRA put forth were going to affect their ability to compete. We haven't seen that yet, with the exception maybe for batteries. But actually the IRA, I think, at its core, has just invigorated international discussion around what steps are needed, and there may be differences market to market in terms of what policy levers are pulled, but at its core it seems that most corporates are ready to take up the baton, and you're seeing both their investors and their government partners meeting in the middle.
Speaker 2:And I agree that it's interesting. It has actually pushed the EU to put forward a green new deal. I mean the worry you see from politicians here is not for certain European companies with substantial US operations, but they will step up. Some of you know, maybe slow down a bit in certain jurisdictions in Europe because there is, you know, more favorable in terms of public funding. So there's a little bit of a competition and a worry that some companies will prioritize US rather than EU because of the IRA. But still I think overall it's positive because it's has pushed the kind of green and renewable agenda in a serious way and, as Alex said, it's also have re-vigorated the private investors to really invest, also long term, in this space.
Speaker 1:Very good, let's take a quick break. When we come back, we'll talk a little bit more about how PENTA clients and government corporations and others are communicating around and thinking about reaching their climate goals, and let's spend a little bit of time talking about some of the the results that we expect to see coming out of 2023 climate week. So back in a minute. Thank you, alex and Cecilia.
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Speaker 1:Welcome back to this latest episode of what's at Stake, where we're talking about ESG in general and climate change in particular, heading into New York Climate Week, which is coming up. So let's dive back in the next part of the conversation. I talked a little bit earlier about some new peer research on attitudes to climate change here in the US, and in this little section of the podcast we want to talk a bit about what it is the corporates are doing and the kind of commitments they're making. What I thought was really interesting in the data is that this sample of Americans asked about whether corporations and big businesses here are doing enough to reduce the effects of climate change. Two thirds of those polled said that corporations are doing too little. Roughly one in five think that corporations are doing about the right amount and only one in 10 think corporations are doing too much.
Speaker 1:So since here from US citizens that their expectations for companies are not being met in terms of action on climate change, and the same truth for government, so majorities of those polled in this particular survey saying that they felt that state elected officials are not doing enough, that the energy industry is not doing enough, so an expectation here, at least, that the companies should be doing more. The government should be doing more. So, as we think about the companies and the clients that we work with and the agenda that they're setting out for action on climate change, how should we think about the communications component of it? Obviously, there is real appetite from citizens to see companies taking action and to understand what they're doing. How are you both helping organizations think through that piece of the assignment, getting the message out about the action that they're taking?
Speaker 3:I think one of the things that I find myself discussing a lot with clients or just with peers at other companies is the need to authentically communicate about what your organization can really do, what its impact can be on this, and not a pie in the sky goal that is kind of unattainable.
Speaker 3:The more honing in on what your operations produce in terms of their emissions and what type of emissions those are, and really honing in on what you can do to drive those down enhance other aspects.
Speaker 3:I think we often forget about the social and governance aspect when we're talking about ESG. A lot of people focus on the emissions because they're the kind of most in your face. But I think the authentic communication around this and authentic is maybe an overused word in today's communications and corporate affairs circles, but I think it's important because otherwise what you can open yourself up to are claims of greenwashing and that can completely deflate the positivity, positive sentiment amongst stakeholders around the real efforts that you're making, and it can kind of take the wind out of your sails in terms of building partnerships and expanding the great work that you're doing. So even before you're able to start scaling, it can kind of take that energy away from you. So I think the authenticity about what we're committing to, why we're committing to it and how we propose to really reach that commitment is very important and it shouldn't be overlooked.
Speaker 2:Yeah, to add to that's a good point that ESG is.
Speaker 2:You know it's governance, social, environmental issues. We see from clients in Brussels there is a forthcoming directive around due diligence, sustainability and due diligence, and that means that companies, specifically large global companies, will have to be very careful about their supply and value chains, and the focus is on environmental and human rights issues, and this will go as far as a civil liability regime which will allow NGOs, trade unions and other stakeholders to sue companies for any breaches on environmental and human rights across the value chains globally. So this is quite far reaching legislation. It's going through the final stages in the EU process before it's agreed. They expect to agree at the end of this year but that means that companies will have to really understand their value chain, all the risks and also all their suppliers and what they are doing. So that goes very far. Plus, of course, you have the element of stakeholders that are concerned and you then need actually to very to engage with them in a very constructive manner and also learn about where where your risks are or potential risk and where you can do better.
Speaker 1:It's very interesting. It's going to obviously there's going to be a pretty significant data and sort of reporting challenge associated with what you're just describing there, cecilia. I mean a very significant change in the way that companies are going to have to gather information about the organizations that they work with and assure themselves that they have confidence in the data that's being provided to them, because it's no longer enough just to sort of make sure that they've got their own house in order, but they're also now relying on all of their suppliers to be to be living up to expectations. So a real premium, I would think, on everybody having great reliable data and being able to to communicate that information in a way that is accessible and understandable and gives people confidence that the action measures up to what it is that's being claimed.
Speaker 2:Yeah, exactly, and I think the challenge is also this will apply to non just European companies and it will have a global application. So there are a lot of companies that will. They are not aware that this is coming or they haven't really thought through how to deal with it, because it's tricky, it's difficult and we don't know yet to what an extent. You know you have to put the value, to what an extent are responsible, how long is the value chain? These are all the details being negotiated at the moment, but it is very interesting development that we'll see. Forthcoming European legacy we had it in a couple of European countries. There's something similar in France, for instance, but of course on a European level, with extraterritorial implications for companies. Even American companies will mean that, exactly what you say they need to start to rethink their processes reporting, but also internal kind of compliance processes in order to cope with this.
Speaker 1:Right, I guess, alex, you talked a little bit about greenwashing. I'd love you to say a little bit more about that, but one thing I'd say, reflecting on what Celia was just arguing there, is that the risk of being accused of telling a story that isn't completely true must be going up in a context where expectations are changing in the way that you just described Celia. So, alex, tell us a bit more about greenwashing and give us a sense of whether you feel like that accusation is going to be leveled even more often, given the increasing expectations.
Speaker 3:Well, I think it's interesting that this year's Conference of the Parties is in a location famed for its abundance of oil and, in fact, the presidency of the Conference of the Parties this year has come under fire and scrutiny because it represents one of the local national oil companies. And so even at the level of something as official as the UNFCCC's COP just a major event that coming under scrutiny for the leadership. Whether that's fair or not, I'm not making a judgment, but it's, you know, it has been a topic of discussion for the past few months since that announcement was made. So, even at that level, there are claims of greenwashing and claims of lack of credibility and in terms of that, now, I think that goes a little bit too far sometimes, because oil, in particular, is still a necessary component that is powering our economy. It doesn't mean we don't need to move away from it, but it is still a reality. So it's an interesting conversation because even up at that level, I think that these discussions are being had.
Speaker 3:In terms of how to not fall into that trap, though I think it's just being smart and asking yourself whether it's you're sitting on a comms team or on a public affairs team. It's being smart and I'm not trying to be smart, alec, by saying that, but it's you have to sit in question your actions and put on the hat of different stakeholders and ask yourself what would the reaction be if I said I was going to help invest in continuing education for hourly workers at my big box store in the United States and I set aside, maybe on average, $500 for each employee. That's telling a story, but it's not really going the full length that you could go, or perhaps you could structure it differently so that more people could have a higher funding stream. So it's just thinking through, I think, in a slow way, which we aren't used to doing so much anymore. I think we're used to rapid decision making, but I think this is a serious issue that requires more methodical thought and making sure that the story you're telling actually lines up to what you're doing.
Speaker 1:So a last question for me, for you both. We know that ESG in general and climate change in particular are amongst the topics that are keeping executives that we work with up at night, and I know that both of you are not only expert but incredibly passionate about sustainability as a topic. So let me ask you both what would be your hope or your aspiration for what might come out of climate week, either in general, for some of the clients that you're working with. What do you hope that we'll see coming out of this important gathering in New York?
Speaker 3:Well, I would like to see a little bit of development on leveraging AI for the advancement of climate change, and it's something we haven't discussed here, but I've been biting my tongue on it, but I've been wanting to talk about it the whole time.
Speaker 3:So thank you for giving me the opportunity.
Speaker 3:But I think AI is kind of a double-edged sword in this case and it needs to be regulated properly, as has been the discussion, especially coming from the Biden administration.
Speaker 3:But the role of AI presents several challenges and several opportunities, one of which it could create lots of job losses, which would affect, obviously, the S and the G component of ESG, but at the same time, it can accelerate efficiency and point out optimization around certain things like energy usage or how to transition most effectively, or which area should be prioritized for renewable energy development, and indeed how we can nudge people to make the right choices using behavioral economics, and AI could be a really powerful tool. So I think AI is the biggest opportunity for climate week and I think actually the climate week conference conveners have actually been speaking a little bit about this in the last few days, but it's something that hasn't been talked about a lot in the popular media and I haven't seen it or heard about it from clients as much, but I think it's kind of the golden goose a little bit and it's kind of sitting there waiting to be adopted.
Speaker 2:Yeah, I think that's a very good point I would like to add what I would like to see more is because right now it feels sometimes that you have various jurisdictions and countries are pushing different agendas, but most of our client we work with a lot of multinational companies.
Speaker 2:So, regardless what is happening in some individual countries, they need to start to think, and that's what Alex was talking about as well.
Speaker 2:They really reflect, because you have requirements, very far reaching requirements, and we know that the information does not stop at the border or at the EU level. So if you start to report on and you take certain issues very seriously in one jurisdiction and you do something different another, you're going to have a problem. Maybe stakeholders also as a board or executive committee, you need to start to think strategically on these issues. So what I would hope is that we have a kind of more baseline and an understanding that you need to take it seriously and, as we said, taking something seriously means that you need data points and you need to be aware internally in your organization, but also be prepared to externally talk about issues without greenwashing, because the sensitivities are there and people can easily find out nowadays if you are saying something that is not particularly true. So I mean, in terms of a reporting framework, I think having a kind of a general baseline, and also with the understanding that the investors are expecting this, would be very helpful.
Speaker 1:Very good. Well, thank you, alex. Thank you, cecilia, for joining the show and having this conversation today. You know, obviously we're seeing in the news and feeling the fact that we are living in at a time of extreme weather events. It looks like it's going to be the hottest year globally on record and, as we've talked about over the last few minutes, it's clear that there's a huge expectation on companies and on governments to make a difference. But for many leaders, it's still a real challenge to know how best to intervene. So I think this conversation will be very helpful for executives who are reflecting on what it is that their organizations can be doing to make a difference on the ESG agenda. Thank you to our listeners for joining us today. Please come and chat with us on the social platform of your preference. I'm your guest host, andy Whitehouse, coming to you from Washington DC today. Thank you for listening to what's At Stake.