The overriding message we took away from Climate Week NYC is that we are in the ‘messy middle’ of the net-zero transition, working to balance possibility and optimism with the reality of how much work needs to be done – and fast. One thing most attendees agreed upon is that the world needs to shift from debating climate and sustainability goals to decisive operational action in all parts of society and the economy. From governments to companies, investors, and civil society representatives, it’s time for all of us to step up.
I was in New York with a team of ERM experts and leaders with five key themes at the forefront of our minds. For each of these opportunity areas, here’s what we heard, saw, contributed, and learned at this year’s gathering.
Decarbonization is the first priority among all the actions organizations must take to reverse the critical momentum of the climate crisis.
A few key points emerged repeatedly during decarbonization-related discussions at CWNYC.
Companies need to take two actions: develop a clear and crisp transition plan and, equally important, a compelling narrative for all their stakeholders, illustrating how the company will deliver value and become more resilient through decarbonizing the business.
Regarding integration into business operations, most attendees agreed that transition planning is a system-wide endeavor that requires collaboration across business, finance, government, and society. On the policy side, harmonized disclosure frameworks and criteria for transition plans are crucial to enable comparability and support for investment decisions. Companies themselves need to carefully assess climate dependencies and barriers to develop transition plans and enable collective action to influence policy.
Companies also need a compelling narrative that makes clear how the company’s climate transition plan will deliver value by decarbonizing the business and creating growth opportunities. This story must convince investors, employees, customers, and business partners that they can successfully execute their plan and become commercially stronger. Overall, companies should realize that transition planning is not a disclosure exercise but an innovation challenge as well as a valuable tool to put climate goals into operational action in a systematic way.
Carbon Markets are crucial to helping companies curb residual emissions after they have done all they can to reduce emissions through direct operational action. The voluntary carbon market (VCM) has struggled to scale due to a lack of standardization and robust verification of credits and projects. This eroded trust in the market and limited corporate demand for credits. Now the carbon market is working to restore confidence in its ability to rigorously vet impacts, ensure sound management, and guarantee equitable distribution of benefits.
Earlier this year, the U.S. government announced its commitment to advancing the responsible development of the VCM, a major development in building trust and momentum. Other influential organizations such as the World Bank have thrown their weight behind the VCM, too. We started ERM's Climate Markets team with the explicit goal of playing an active role in this and providing our clients with high-quality credits.
One undervalued area arising in New York was energy efficiency, which plays a crucial role in reducing corporate carbon emissions while presenting excellent opportunities for cost-effective and cost-saving decarbonization measures. However, it’s still not getting sufficient attention from corporates. For example, just 13% of Fortune 500 companies have a specific energy efficiency target.
Demand for renewable energy continues to rise, driven by the need for clean energy to power new climate-critical technologies such as AI, data center expansion, and the critical assets and infrastructure that underpin the global economy. Many conversations at Climate Week focused on how to deliver it.
Streamlined permitting, public and private investment in grid infrastructure, clear regulatory frameworks, and public communication are required to make the energy transition feasible. Plenty of clean energy is ready to be deployed – but only if the tools to build and deliver it are put in motion. In the U.S. especially, the renewable energy backlog is mounting while the infrastructure the country needs for transmission of that energy ages out or lags.
Critical minerals will play a vital role in the energy transition – and we can’t access nearly enough of them. While we need to improve recycling and circular approaches, more mining will be required to help accelerate the production and deployment of renewables. For example, we need to produce the same amount of copper in the next 20 years as has been mined in human history. How we do this is essential: producing critical minerals in the most sustainable and just way possible will be paramount to avoid new negative and social impacts.
Renewables development depends on community and societal consultation and acceptance. When renewables development ensure stakeholder input and participation, including innovative ways to share economic benefits with local communities, social and political risks are less likely to slow progress. Therefore, to be successful, companies must proactively assess and mitigate the environmental and social downsides of their proposed projects, an approach we explain in more detail in our most recent report on Renewables Conundrums.
Vast public and private capital will be required to accelerate low-carbon investments in renewable energy infrastructure and decarbonize business operations. But there is currently a disconnect.
Companies tell us they continue to struggle with short-term investor expectations and that investors don’t sufficiently value sustainability risks and opportunities in their decision processes. Aspects of the net-zero transition inevitably play out over long periods of time. To use the copper example again, developing new mines typically takes at least a decade, often longer. The development cycle is capital-intensive and delays investor payback. How do we develop financing models that work for companies and investors for the more arduous parts of the decarbonization story?
As much as investors and investment approaches need to evolve, companies must better articulate the commercial value their decarbonization and broader sustainability strategies will deliver. Sustainability and a just transition approach must be embedded in business in ways that help companies differentiate in the market, increase resilience, support innovation, and create value.
Some investors and companies still claim that investing in decarbonization and sustainability has little to no commercial value. On a macro level, this is easy to refute. Regarding value creation, look at the massive new markets for solar, EVs, and other transition technologies that did not exist just a few years back. In terms of risk, consider the real costs faced by the insurance industry, which has had to pay more than $100 billion annually over the past four years for economic damage caused by climate change.
Several announcements just before and during Climate Week NYC pointed to hopeful shifts in investor approaches toward climate risk. For example, the Net Zero Asset Owner Alliance, representing $9.5 trillion in institutional assets, communicated that it has reduced its financed emissions by 30 percent since 2018.
What was clear in New York is that more and more investors and companies do see the commercial value of decarbonization and sustainability. However, to ramp up low-carbon investments, more entities – and their leaders – - must better understand the costs of inaction as well.
The waiting lists for events at Climate Week’s Nature Hub were long, a testament to the growing interest in nature-positive, climate-related action. To keep climate change within manageable levels, we need to halve emissions by 2030 and reach global net zero by 2050. The Intergovernmental Panel on Climate Change (IPCC) and climate scientists across the globe stress that this will be impossible without protecting and restoring nature.
Climate scientist Johan Röckstrom eloquently laid out the stakes at the beginning of Climate Week with the publication of the first Planetary Health Check. The health check makes clear that nature not only delivers economic services like fertile land for harvests, insects for pollination, and fresh water for cities and industries, it also serves as a buffer against human-caused pollution. Every time we destroy a piece of nature (think logging a rainforest that serves as a carbon sink), we also shrink that buffer.
Two nature topics jumped out to us in New York. First, many discussions revolved around the close link between nature-positive action by companies and the rights of local communities. There was broad consensus that nature-positive action will only succeed if done in close collaboration with local and Indigenous communities, respecting their rights and sharing benefits.
There was also comprehensive agreement among companies, investors, government, and NGOs about the need to multiply investments in high-integrity natural climate solutions (NCS). In 2023, $7 trillion flowed into activities with a net negative impact on nature, while just $200 billion flowed into nature-positive solutions.
When designed well, NCS projects – from forest and watershed restoration to regenerative agriculture – increase long-term resilience and create value by reducing costs, lowering carbon emissions, and generating co-benefits for ecosystems and communities. For NCS projects to succeed, project design and management must be rock solid, but above all, local communities must be involved, engaged, and informed.
Scaling Social Impact and Respecting Human Rights
Climate action will not occur at the pace we need if social support is absent – after all, it is people who elect leaders who formulate policies that enable incentives and technological advancement for decarbonization. This is why the just transition has emerged as a fundamental piece of our larger puzzle. Companies, governments, and civil society will need to collaborate more purposefully.
The following practical needs relating to social impact and human rights took the center stage in New York:
First, companies must be clear about their responsibilities, especially since human rights and environmental due diligence are now binding requirements. One example is the EU Corporate Sustainability Due Diligence Directive, which will help companies understand and address any potential adverse impact of decarbonization.
Secondly, climate transition plans must include social risks, impacts, and opportunities. Our recent report, “Embedding Just Transition into Corporate Climate Action Strategies,” provides guidance to start that process. Third, we need more social innovation to support worker evolution, people’s climate resilience, and broader benefit sharing to achieve our transformational ambitions.
Various announcements during Climate Week illustrated how crucial it is to connect the dots and put people at the center of climate action.
One was the launch of the Taskforce on Inequality & Financial Disclosures (TISFD), which will develop a framework with standardized social impact and human rights metrics that companies can use for financial reporting and to guide their strategy and operational decisions. Along with the Taskforce for Climate-Related Financial Disclosures (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD), the TISFD is the third pillar developed to capture the financial outcomes for companies embracing or neglecting the sustainability aspects of their operations.
The second announcement that stood out in this domain was the U.N. General Assembly’s adoption of the Pact for the Future. Among many other things, the pact doubles down on the Sustainable Development Goals (SDG), which already influence the sustainability strategy of many companies. The Pact also elevates the influence of developing economies on international financial institutions and offers better mechanisms to increase low-carbon investments in those economies, which is genuinely a global just transition issue.
It’s time to step up.
Despite – or maybe because of – major geopolitical events that threaten climate progress and the uptick in ESG backlash in various parts of the world, most attendees at Climate Week this year were deeply invested in cooperation, collaboration, and acceleration of the transition to a just, low-carbon world. ERM was honored to be part of it.
