Over 600 sustainability, finance and investment leaders gathered at Pier 60 in New York City at the end of June to hear industry leaders share their insights at GreenFin22, the GreenBiz-hosted conference described as the premier ESG event aligning sustainability and capital markets. Over two days of keynotes and breakout sessions, a few key themes emerged, many of which were highly relevant to private market investors as they start on their journey to reduce their financed emissions in line with the Paris Agreement. Here are key takeaways that stood out to the Pathzero team in attendance:
According to the panelists in the session “Private Markets: Capital Arbitrage or Climate Progress?” - private markets allow firms to try out various accounting methods, allowing financial firms to innovate and refine the process of reporting Scope 3 financed emissions before doing so in public markets, which are under sharp scrutiny. This approach will support an easier transition for private firms who have taken the time to test and implement a range of best practices.
Throughout the conference, from the keynote address by UN Special Envoy for Climate Mark Carney, to various breakout sessions, panelists kept returning to the idea that real emissions data - not estimates - is critical for the transition to net zero. The panelists emphasised that high-quality information is necessary for firms to make key decisions on emissions and to get their portfolios Paris - aligned. However, panelists acknowledged that accessing and communicating that data is a key challenge, especially from portfolio companies. Carney reminded conference-goers that “your Scope 3 is somebody’s Scope 1,” so there are opportunities to successfully retrieve that information. For a deeper dive on this keynote session, read our recent article, Carney emphasises importance of 'real' emissions data in GreenFin keynote.
When companies have quality information, there is more confidence to take action. For an asset manager, this is more confident, informed and efficient stewardship decisions based on the emissions in a portfolio. At the portfolio company level the decisions to decarbonise can equally be taken confidently because they are removing real emissions as opposed to an estimate. That was a concept echoed by several of the panelists including Mark Carney who pointed out that such action often leads to greater value creation.
A few panels at GreenFin including “Can the ISSB Actually Fix ESG Standards?” and “A Discussion with the Experts: TCFD, SEC and GFANZ” focused on the future of reporting standards which are very relevant for private market investors. The consensus was that we are at critical juncture in the process to develop an agreed approach to climate accounting. Panelists pointed out that on one hand the so-called “Alphabet Soup” of reporting frameworks is converging. However, they also highlighted that we are at risk of regulatory fragmentation as various regulators around the world start to weigh in. The TCFD was described as the backbone of many of the rules, including the SEC proposal, while the ISSB was hailed for its ongoing work to try and establish a global baseline for disclosure. Regardless, private markets investors need to stay on top of all developments to get their portfolios ready for compliance with whatever direction regulators take.
Companies were urged not to wait for the myriad of rules to be cemented and standardised and instead begin their carbon accounting journey now. In the words of one panelist, “Lay a foundation and then drill into the details at a later date.” From preparing greenhouse gas inventory, to building governance structures, to educating internally, there are some steps companies can take now to begin their journey. As multiple panelists said, “don’t let perfection be the enemy of the good.”
Several of the panels including “Private Markets: Capital Arbitrage or Climate Progress?” explored whether engagement or divestment is more important toward achieving climate goals. The consensus across the board was that engagement or stewardship is key, and financial firms were urged to maintain an active role with their portfolio companies. Panelists pointed out that through engagement, private markets investors influence their portfolio companies, urging them to align with the Paris Agreement. That is a big contrast with divestment, where a private investor loses its ability to influence a portfolio company after divestment, thus ultimately not furthering the global effort to decarbonise.