Baringa at New York climate week

Our team of climate and sustainability experts took part in an engaging New York Climate Week.

Four key themes emerged, underscoring the role of financial institutions and corporate companies in driving global decarbonization and more sustainable economic growth:

1. Transition Finance 
2. Nature & Biodiversity 
3. Infrastructure Resilience 
4. Corporate Innovation 

Transition Finance

Partnering in the Transition: The financial sector has moved away from an exclusionary mindset, and instead is doubling down on collaborating with high-emitting sectors to facilitate decarbonizing their business models. This continued financing is paramount to building an inclusive and resilient economy.

Importance of Emerging Markets: Development in emerging and developing economies must take place in a way which avoids carbon lock-in, in order to maintain global progress toward net zero goals. Data collection and accuracy, policy incentives, and direct engagement may facilitate more capital deployment in emerging markets. Financial institutions should develop concerted strategies for inclusion of emerging markets in their Net Zero approach to drive real world decarbonization and support a just transition.

Data and Taxonomy Development: Financial institutions are increasing their climate-related data infrastructure and analytics capabilities to prioritize understanding material risks and opportunities across their products, clients, and geographies.  To identify and track portfolio alignment to transition assets, many firms are developing internal taxonomies. These taxonomies enable monitoring of Net Zero pathways, target achievability, and portfolio risk.

Nature & Biodiversity

Strategy Definition: Addressing nature is a complex journey and requires a local and tailored approach that begins with clear vision and strategy. Frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) and its’ LEAP approach are valuable in understanding best practice for integrating nature into risk management, governance, and reporting processes.

Measuring Risk & Impact: Quantifying the impact of nature and biodiversity outcomes remains a challenge. Tools and technology such as geospatial information systems and bioacoustics monitoring track key impact measurements at a local level, however, require context to inform decision-making at a company or portfolio level. TNFD’s LEAP framework and scenario analysis help to quantify business risks and impacts arising from interactions with nature and facilitate target setting and investment decision making.

Taking Action: Disclosure frameworks, and the emergence of functioning markets in ecosystem services are needed to underpin increased investment in nature protection and restoration. Frameworks can be used to support capability building and establish a common understanding across an organization and its value chain. Strategy execution will be an iterative process, leveraging industry learnings from climate risk and its’ integration into value creation.

Focus on agriculture: Agriculture remains a focal point as the largest contributor to land use change and accounting for 70% of global freshwater demand. This has resulted in different industries (e.g., clothing, consumer products) relying on agriculture for raw materials to explore approaches to minimize and reduce nature impacts.  

Enhanced data collection: Geospatial data is critical to understanding nature impacts. For example, the Integrated Biodiversity Assessment Tool (IBAT) maps the presence of endangered species and key biodiversity areas across an organization’s footprint to enable risk assessments and Restor announced the launch of Restor Enterprise mapping projects and their impact to enable transparency and allocation of nature finance.

Infrastructure Resilience         

Interconnectedness of Infrastructure Systems: Our critical infrastructure – transport, energy, and water systems – are deeply interlinked. For example, the Metropolitan Transit Authority’s (MTA) pumping stations rely on grid power upstream while depending on sewage systems downstream. These systems face compounding challenges during severe weather, necessitating integrated planning that addresses vulnerabilities across the board.

Proactive Risk Reduction: Proactive risk reduction is integral to infrastructure planning. While the MTA has developed a high-level Climate Resilience Roadmap that outlines general risk areas, these risks must be mapped at the asset level. This approach ensures that specific vulnerabilities are identified and addressed, enabling more effective preparedness against future disruptions.

Community Involvement: Engaging communities is crucial for effective resilience strategies. Local input helps shape practical green infrastructure projects, even when initial resistance arises. Clear communication and transparency foster public support and ensure that community needs are prioritized in decision-making processes.

Corporate Innovation

Nuclear Revival at Three Mile Island: The revival of Three Mile Island shows how corporate partnerships are key to energy transitions. Constellation’s EVP highlighted Microsoft’s role in making the project viable. Support from policies like the Production Tax Credit (PTC) under the Inflation Reduction Act, along with efforts to repeal bans on new nuclear, have been essential. This example highlights how collaboration between private companies and regulators can drive significant emissions reductions.

Sustainable Aviation Fuel (SAF): Companies like Air Company and Lufthansa Group are advancing Sustainable Aviation Fuel (SAF) to meet stricter emissions targets. The challenge lies in scaling production, which depends on renewable electricity and funding. Although SAF currently accounts for just 0.2% of global jet fuel, growing regulatory pressure, such as the EU’s 25% target by 2035, highlights the crucial role of corporate innovation in expanding SAF availability.

Summary

In summary, we had an eventful week engaging clients and are excited about the caliber of the dialogue to tackle diverse and dynamic challenges, while capitalizing on a generational opportunity.

At Baringa, we are uniquely equipped to assist our clients in navigating the complex world of climate change and sustainability while seizing the opportunities inherent in it. 

If you’re interested in learning more about these topics, please contact Ryan Bohn, Simon Connell, or any member of our Baringa team.