The world’s biodiversity is in peril and its loss poses big financial risks to businesses and the global economy. More than half of the world's economic output — or about $44 trillion — is moderately or highly dependent on nature, according to the World Economic Forum. Moreover, the collapse of biodiverse ecosystems could hurt global GDP by $2.7 trillion annually by 2030, the World Bank warns in a new report. Until recently, biodiversity loss was rarely viewed as a substantial risk to corporations. But that is changing and a new task force has been formed to help companies and financial institutions better understand the scope of the risk. The Task Force on Nature-related Financial Disclosures, or TNFD, aims to create a voluntary framework that companies can use to assess their nature-related risks and opportunities. In this episode, we talk with Elizabeth Mrema, who is co-chair of the TNFD, about the goals of the task force, how she envisions them being implemented and how biodiversity is inherently linked to climate change.

More than 50 years ago, explorer Jacques Cousteau introduced millions of viewers to the marvels of the undersea world. In 2021, the ESG world is increasingly focused on biodiversity, and the oceans are a big part of that picture. Goods and services from the world's oceans and coasts are worth at least $2.5 trillion annually, while the overall value of the ocean as an asset is at least 10 times that amount, according to a 2015 estimate from the WWF. In this week’s episode, we interview Cousteau’s grandson, Philippe, the co-founder of a nonprofit called EarthEcho International that works on ocean health. “It’s important to start thinking about a restoration ethic and returning the oceans to abundance,” says Philippe. “For far too long, the environmental movement has been a movement of deprivation and doom and gloom. It has not been enough of a movement of opportunity and hope.” We also hear from Doug Heske, CEO of impact investing company Newday Impact that has teamed up with Philippe to promote ocean restoration, especially among younger investors. And we interview fund manager Paul Buchwitz from one of Germany’s largest asset managers, DWS, about how the company is aiming to ocean-related risks while tapping into new investment opportunities offered by ocean restoration projects. Photo credit: Getty Images

Investors are increasingly calling on companies to reflect climate-related risks in their financial results. In September 2020, global investor groups representing more than $103 trillion wrote an open letter asking companies and their auditors to include climate-related risks in financial reporting. Accounting standard setters and international auditing boards are also requesting that firms pay more attention to future climate risks when they produce their financial results. "There has been a big kind of anomaly there, almost a loophole, that climate has not been taken into account," David Pitt-Watson, executive fellow at Cambridge University’s Judge Business School, tells us. We also interview International Accounting Standards Board (IASB) Vice Chair Sue Lloyd about plans for a new international sustainability standards board. “I still talk to a lot of investors who are surprised that there isn't more information in the notes to the financial statements about the assumptions that have been used,” Sue says. And we speak to Veronica Poole of Deloitte for an auditor’s point of view. She says recent guidance the International Auditing and Assurance Standards Board (IAASB) issued on the topic of climate-related risk “is extremely valuable, and I think certainly should be looked at and used by auditors in their work as they challenge the assertions made by clients around the impact of climate change risks and opportunities on their business.”

On June 17, 2021, U.S. President Joe Biden signed legislation making Juneteenth a federal holiday. In this episode, we’re looking at how corporate America is changing its approach to diversity — and race in particular. June 19th, or Juneteenth, marks the official end of slavery in the U.S. in 1865. But the ugly systemic racism that slavery was built on endures. In 2020, the murder of George Floyd put that racism front and center for the world. And in response, many companies begin publicly addressing race and inequality. One way that change has manifested itself is recognition of Juneteenth. In 2020, many companies started observing the holiday — including our own parent company, S&P Global. We spoke to Tamara Vasquez, Global Head of Diversity, Equity and Inclusion at S&P Global, about the company’s decision to observe Juneteenth and her experience of the growing intersection of business and diversity. And we speak to Rodney Sampson, professor, angel investor and nonresident senior fellow at the Brookings Institution. Rodney is also Executive Chairman and CEO of Opportunity Hub, a platform he co-founded to build inclusive ecosystems for innovation, entrepreneurship and investment. “We have a theory that until there's capital at stake, whether it's investment capital or revenue, companies aren't really going to double click and actually become transformative in their investment as it relates to their racial equity or Diversity, Equity and Inclusion,” Rodney says. Further reading from S&P Global: How The Advancement Of Black Women Will Build A Better Economy For All Image credit: Getty Images

Regulators and supervisors around the world are increasingly concerned about the effects of climate change on financial stability. So they’re turning to climate stress tests to amass key data on financial institutions’ exposure to potential stranded assets and their ability to manage risk. Since the 2008 financial crisis, stress tests have become a critical tool for regulators to gauge how well banks can withstand hypothetical adverse scenarios, such as a sharp market downturn or an economic shock. Regulators can then determine, for example, whether banks need to hold more capital to protect themselves against risk. In a world first, the French central bank conducted a climate stress test on its financial sector. In this episode, we speak to Laurent Clerc, director for research and risk analysis at France’s Prudential Supervision and Resolution Authority, which conducted the tests in its role as the supervisory arm of the French central bank. “What is not necessarily perceived by institutions is the urgency,” Laurent tells us. “Delays in reshaping lending or delays in insurance policies might also delay the necessary transition.” Image credit: Getty Images

Last week the ESG world saw a major shakeup at one of the world’s largest oil majors. Specifically, at Exxon Mobil’s annual proxy meeting, shareholders voted to replace three board members with directors put forward by a small activist investor group — known as Engine No. 1. The group claimed Exxon was not moving fast enough to address climate change and that the board needed a fresh perspective to steer the company in the right direction. Shareholders have threatened for years to oust board members if companies don’t move fast enough on climate change. But last week, they carried through on that threat. To better understand the implications of the vote for both Exxon and other companies, we talked with Andrew Logan, senior director of oil and gas at Ceres, which works with investors to press companies to tackle climate change. "I think this will certainly get the attention of other boards in this sector and beyond," Andrew said. "Nothing focuses the minds of a corporate director like the possibility that they might lose their job." Image credit: Getty Images

What do Chipotle, an air conditioning company and one of the world’s largest activist investors have in common? They’re all tackling the challenge of how to incentivize executives to advance corporate sustainability goals. In this episode, we talk with Chipotle Head of Sustainability Caitlin Leibert about the company's plan to tie 10% of annual executive incentive bonuses to sustainability goals. Linking executive compensation to ESG goals is a way for companies to "put your money where your mouth is,” Caitlin says. But European activist investor Cevian Capital believes that many companies could make their ESG-linked incentives more robust and transparent, says Harlan Zimmerman, a senior partner at the firm. We also hear from Marcia Avedon, Trane Technologies’ Chief Human Resources, Marketing and Communications Officer, about how the air conditioner and heating company is looking to incentivize all its employees to act on its sustainability targets. "We are weaving sustainability...into everything we do as a company," Marcia says. Photo credit: Getty Images

As more companies look to adopt ESG-friendly strategies, they sometimes run up against the challenge of finding the financial justification for doing so. Furthermore, opponents of ESG initiatives often question whether such efforts cost companies more money than it brings them. This is the heart of the debate over ESG – are companies sacrificing financial returns as they move to become more socially and environmentally responsible? A number of studies have found that companies with strong ESG practices tend to perform better. But it can be difficult to measure the financial impact of less tangible factors. For example, what’s the payoff of cutting your company’s emissions? What is the financial impact of expanding your paid sick leave? In this episode, we'll explore a methodology developed by the Center for Sustainable Business at the New York University’s Stern School of Business that helps companies put a price on things like employee retention, avoided costs, and improved insurance rates. The methodology is called the Return on Sustainable Investment, or ROSI. From the center's director Tensie Whelan, we'll hear how the methodology has helped companies understand the financial benefits of their ESG programs. And we'll talk with Kate Chisholm, the Chief Sustainability Officer at Capital Power, a publicly-traded independent power producer in Canada, that used the ROSI tool to assess its decarbonization strategy and decided to retire its coal-fired power plant fleet in 2023 as a result. ROSI "helps you put numbers where intuition was the best thing you could do before," Kate said. Photo credit: Getty Images

The European Union’s new Sustainable Finance Disclosure Regulation, or SFDR, is expected to drastically change the scope of sustainable investing by providing greater transparency and increasing disclosure. And this is a particularly big deal for the private equity world, which has historically relied on self-regulation. Broadly speaking, private equity refers to investments in or ownership of private companies, and in this episode, we ask how SFDR is impacting the private equity industry. We hear from Sophie Flak, managing partner in charge of ESG at French investment firm Eurazeo. Sophie was a member of an EU expert group that put in place some recommendations on SFDR. She says that the industry has a long way to go on ESG, and this new regulation will help drive progress and transparency. "But the road is a bumpy one,” she adds. We also talk to Andy Pitts-Tucker, who works closely with private equity firms in his role as managing director of APEX ESG Ratings. He expects that SFDR will require “a significant leap” for a majority of the industry. “ESG is quite new to a lot of people in the private market world,” Andy says. SFDR comes from the EU, but has a reach that extends far beyond Europe. Andy says international regulators are watching closely and learning. “It’s a game-changer,” he tells us. “What we’re certainly going to see is regulators around the globe adopting their own policies.” Photo credit: Getty Images

We’ve seen an explosion of companies setting net zero targets in 2021. That prompted us to ask: What comes next? After you set a decarbonization goal, how do you go about meeting it and measuring progress? To answer these questions, we talked to some of the world’s largest companies — Walmart, AT&T, Duke Energy and State Street Global Advisors — in a recent S&P Global webinar. This episode of the podcast highlights some of the key takeaways we heard from those executives. Walmart Chief Sustainability Officer Kathleen McLaughlin tells us how the retail giant is working with thousands of suppliers to achieve zero emissions by 2040. AT&T Chief Sustainability Officer Charlene Lake talks about how the telecommunications giant is working up and down its supply chain to pursue its science-based target of reducing emissions. Duke Energy Chief Sustainability Officer Katherine Neebe explains how the utility, which has most of its emissions occur in the production of electric generation, is seeking the most reliable and affordable path to net zero. And we hear from Carlo Funk, the lead ESG Investment Strategist at State Street Global Advisors covering Europe, the Middle East and Africa regions. Carlo unpacks how the asset manager is engaging with companies to lower its portfolio emissions. Photo credit: Getty Images