Tag: features

• While the world faces crises such as an uneven economic recovery and geopolitical instability, other threats also lurk on the horizon.
• The World Economic Forum’s Strategic Intelligence Outlook saw experts from different fields explore anticipated trends for 2024.
• Here’s what some of the event’s participants had to say on the outlook for issues such as climate, geopolitics and global business.

The world faces a multitude of interconnected crises – a spiraling climate emergency and the collapse of natural ecosystems, increased fragility and lack of trust in the global order, an uneven economic recovery, geopolitical instability and conflict. 

Other threats also lurk on the horizon, such as the profound societal disruption from rapidly evolving artificial intelligence (AI) and evolved health risks from growing antimicrobial resistance and climate change triggers.

At the same time, the mass mobilization and implementation of commitments necessary to address global challenges gather pace, aided by rapid progress in many technological domains that offer promising opportunities for business, government and wider society to build a more prosperous and sustainable future within planetary and social boundaries.

Strategic Intelligence Outlook 2023

The World Economic Forum recently organized the Strategic Intelligence Outlook 2023 event in Geneva, which gathered experts from industries, academia, international organizations and think-tanks, along with a virtual audience of the Forum’s digital members, to explore the trends they anticipate will become increasingly prominent in 2024.

They also contributed to building a transformation map, a dynamic knowledge tool that enables users to explore and make sense of the complex and interlinked forces that are transforming economies, industries and global issues.

The Strategic Intelligence Outlook 2023 featured a series of sessions providing a strategic outlook on the global business trends, climate risk, artificial intelligence, and geopolitics, enabling participants to understand how to build foresight and future preparedness capabilities. 

Here are some highlights from leaders who joined:

Outlook on geopolitics

“What the war in Gaza illustrates is that we are facing a very serious crisis in peace-making. Diplomatic efforts and economic tools like sanctions to end wars are failing and the deal making is getting a lot harder, leading to a distrust in the international system. 

“The other trend line is another set of fresh conflicts where no region has been spared. Not only are there more wars, the wars are lasting a lot longer along with human suffering and catastrophe. ” 

– Comfort Ero, President and CEO, International Crisis Group

“War is once again an acceptable grammar of negotiation. The reluctance nations had over many decades to use conflicts as a means of dialogue is over. Countries with the power to impose themselves are not holding back anymore.”

– Samir Saran, President, Observer Research Foundation

Outlook on artificial intelligence

“Customers are really curious about how generative AI, and more broadly artificial intelligence, can help them with their business growth and many organizations are now looking at areas within their business which can be supported by this technology and in some cases even undertaking proof of concepts and programmes. 

I expect that trend to continue with more use cases for this technology coming to the fore and more organizations looking at opportunities within their businesses for these sorts of technologies.” 

– Amit Sinha, App Innovation, Microsoft

Global business outlook

“There are five provocations that I would put out for corporate strategy making in companies. First, companies are not very good at understanding what policy means and how that impacts their business model. Second, few companies have fully designed their base scenario, and I think its de-risking. 

Third, global companies have not been trained in synthesized multi-polar views on the world. Fourth, companies are trying to use new capabilities, like trade compliance or supply chain analytics. And finally, companies need to track the foreign policy strategy of the country where their headquarters are situated and what quality of relationships it has with the US, China and other players.” 

– Markus Herrmann, Co-Founder and Managing Director, China Macro Group

Outlook on climate risk

“When something is too obvious, we don’t talk about it and we don’t value it. Everything that we depend on – clean air, water, food, our mere existence – is about nature, but we never think about valuing it because we always took it for granted and at a very conceptual level, as an economy, we should start valuing what nature gives us.

If we think about the economy, over 50% of GDP comes from nature; if we start losing nature, so many businesses are dependent on it if not directly, then indirectly through their supply chains and clients, it’s an important thing but such an obvious one that we don’t talk about it enough.”

– Sung-Ah Lee, Deputy Director General, Corporate Services, International Union for Conservation of Nature (IUCN)

HORIZON SCANS

A series of sessions also helped thought leaders expand their perspectives on the challenges facing the world.

“The coming surge in demand for quantum-safe ecosystem solutions will be propelled by new standards and regulation. We will start to see regulations and regulators acknowledging ‘quantum’ as a new risk category, and companies will be expected to have plans to keep customers and data safe with the latest practices and technologies.”

– Michele Mosca, CEO, EvolutionQ, Canada

“A shift towards regenerative development models is crucial for mitigating environmental damage, addressing social inequality, and building the resilience needed for ecosystems and communities to evolve and adapt harmoniously. A positive relationship between people and the planet can be achieved through circular and ethical practices.”

– Özge Aydogan, Director, SDG Lab, Switzerland

“Disinformation is deepening polarization and division around the world – and much of it is focused on migration. Disinformation and hate speech about migrants can stoke xenophobia and direct hostility and discrimination at innocent victims, which in turn can lead to the legitimization of anti-migrant policy by government authorities. These links between disinformation and policy are, however, frequently overlooked and unmeasured.”

– Marie McAuliffe, Head, Migration Research, International Organization for Migration (IOM), Geneva

Future preparedness

Other session explored themes to help business, government and society prepare for the future and enhance their future-preparedness and resilience. 

Building strategic intelligence

“We should describe an augmented intelligence, rather than an artificial intelligence, where the practitioner is still the centre of innovation and creativity, and they leverage these technologies as an augmentation and a force multiplier.” 

– Igor Jablokov, Chief Executive Officer, Pryon Inc Business in the Digital Age

Business in the digital age

“The small to medium enterprise segment has historically been underserved by banks. Globally, SMEs need financing to the tune of $5 trillion in developing countries alone. 

In the UK alone, there are 5.5 million SMEs that make 99% of the businesses and provide 60% of the employment. […] This makes SMEs a very crucial sector and their development is a top priority for governments.”

– Kanika Hope, Chief Strategy Officer, Temenos

Mastering foresight for organizational transformation

“We are not building foresight to predict the future, we are doing this to understand the present, to understand the forces and factors likely to shape our long-term future but also to understand the choices, the options, and the policies which can help bring one of those potential solutions to life.”

– Maria Langan-Riekhof, Director, Strategic Futures Group, National Intelligence Council (NIC) of the US

“Foresight is not something some people should do all the time but something all people should do some of the time…

We must be engaging the general public in conversations around the future so that they can feel that the future is not happening to them but is something they are engaging with […] and that they can play an active role in it. […] We must be including people in designing futures that they want to feel, touch and be part of.” 

– Abdulaziz AlJaziri, Deputy Chief Executive Officer and Chief Operations Officer, Dubai Futures Foundation

Source: World Economic Forum  

Backed by $30M from Bloomberg Philanthropies and the COP28 Presidency, the Accelerator will turbocharge implementation across energy, heavy industry and transport sectors, finance, and public policy in the world’s largest decarbonization effort to date

On December 2, 2023, COP28 President Dr. Sultan Al Jaber, UN Climate Change Executive Secretary Simon Stiell, UN Secretary-General’s Special Envoy on Climate Ambition and Solutions Michael R. Bloomberg, and UN Secretary-General’s Special Envoy on Climate Action and Finance Mark Carney launched the Industrial Transition Accelerator (ITA), to catalyze decarbonization across heavy-emitting sectors, including energy, industry, and transportation, and accelerate the delivery of Paris-aligned targets. The ITA Secretariat, which will be hosted by the Mission Possible Partnership (MPP), brings global industry leaders together with policymakers, finance, and technical experts to unlock investment and rapidly scale implementation and delivery of projects needed to cut emissions, consistent with credible 2030 1.5°C pathway targets as determined by the International Energy Agency (IEA).

The announcement took place at the COP28 World Climate Action Summit where the ITA co-chairs were joined by heads of state, CEOs, and climate leaders across civil society. The ITA is one component of the Global Decarbonization Accelerator (GDA), a series of landmark initiatives designed to speed up the energy transition and drastically reduce global emissions. 

COP28 President Dr. Al Jaber said, “Today we welcome a historic new era of energy action. We have presented solutions to drive a full scale and full speed transition of the global energy system, and I welcome all efforts and collaboration that will drive deep emissions cuts and improved efficiencies. Today’s historic announcement, across the entire energy ecosystem is something to be welcomed and celebrated, but we must recognise this is a first step towards a transformation that we all require.”

Michael R. Bloomberg, UN Special Envoy on Climate Ambition and Solutions and founder of Bloomberg LP and Bloomberg Philanthropies, said, “Reducing emissions from heavy emitting sectors like industry and transportation is one of the biggest obstacles we face in tackling climate change. This new partnership will bring together industry leaders, financial institutions, policymakers, and technical experts. Together, the coalition will work to help companies cut carbon emissions and develop public policies that incentivize those cuts – and to do so in ways that will help industries continue to grow and raise living standards around the world.”

Mark Carney, UN Secretary-General’s Special Envoy on Climate Action and GFANZ Co-Chair, said, “The rapid decarbonization of heavy-emitting industries is essential if we are to remain within our global carbon budget. These industries are currently in transition traps. They know what they need to do but struggle to get the investment they need to meaningfully cut emissions. The Industrial Transition Accelerator will go where the emissions are and drive decarbonizations in heavy-emitting industries by bringing new technologies to maturity, dismantling regulatory barriers and boosting the demand for sustainable products.”

Simon Stiell, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), said, “The ITA represents a strategic convergence of policy, finance, technology, and collaborative efforts, to make significant strides in various sectors including heavy industry, energy, and transport to keep 1.5°C within reach. From the UNFCCC perspective, a key aspect of ITA is the policy connection. This initiative can play a crucial role by annually feeding back the progress and challenges faced across industries, to the COP process.”

The ITA will focus on decarbonization solutions across industry, transport and energy, focusing on sub-sectors that generate a third of global emissions, including steel, aluminum, cement, chemicals, shipping, aviation and parts of the energy supply chain.¹ Without rapid action, carbon emissions from these sectors alone are likely to increase by more than 30% by 2050 ² – making it impossible for the world to meet the goals of the Paris Agreement. Given the interconnections between heavy-emitting sectors, slow progress in one sector delays action in another.

Dr. Fatih Birol, Executive Director of the IEA, said, “Accelerating the clean energy transition in sectors where emissions are hard to reduce, such as heavy industry and long-distance transport, requires collaboration among many stakeholders. Stepping up efforts by businesses and financial institutions is particularly important at this critical time to ensure that projects currently underway reach final investment decisions as soon as possible. I welcome the objective and efforts of the Industrial Transition Accelerator to catalyze collaboration in this regard.”

Francesco La Camera, Director-General at IRENA, said, “Keeping the 1.5°C target alive requires all hands on deck. IRENA’s World Energy Transitions Outlook calls for radical action to overcome the deeply entrenched barriers across grid and physical infrastructure, legal and policies, institutional capacity and skilled workforce stemming from the systems and structures created for the fossil-fuel era. Hard-to-decarbonize industry sectors require a range of solutions to become aligned with the 1.5°C target. Through our global membership, we at IRENA will contribute to the ITA goals by leveraging international collaboration in technology transfer and investments prioritizing the industrial decarbonizations in developing countries.”

Faustine Delasalle, Chief Executive Officer of the Mission Possible Partnership and Executive Director of the ITA Secretariat said, “We have clarity on what we need to do and where we need to be by 2030 to decarbonize the heavy emitting sectors in line with the Paris Agreement. But time is not on our side, and the pipeline of necessary near-zero projects is falling short because industry can’t do it alone. The ITA gives us the breadth and scale to create a flywheel of collaboration that can create the exponential change that we need. I am thrilled to see the COP28 Presidency and UN prioritizing this challenge and delighted that MPP is hosting the secretariat.”

Adair Turner, Chair of the Energy Transitions Commission, said, “The work of the Mission Possible Partnership has shown clearly how to decarbonize all the supposedly “hard” sectors of the economy – from steel, cement and chemicals to shipping and aviation.  We know the technologies and we know that net zero by 2050 is possible. But we must now turbocharge the pace of progress, with public policies and private financial support to drive the investment needed. The Industrial Transition Accelerator will play a key role in galvanizing action across the world.” 

While progress has been made, a critical mass of projects must reach their Financial Investment Decision (FID) phase in the next two years and be brought online by 2030 to keep alive the goal of limiting warming to 1.5°C.

Analysis from MPP shows that delivering the global emissions reductions needed will require 300 sustainable aviation fuel (SAF) plants, 200 ships using zero-emissions fuel, 70 zero-emissions steel plants, 40 new low-carbon smelting and refinery plants and over 40 commercial-scale carbon capture, utilization, and storage (CCUS) plants. ³

Heavy-emitting sectors will require a wide range of technologies to be commercialized and deployed to cut emissions at scale, including green hydrogen, long duration energy storage, and CCUS. 

This unprecedented, collaborative effort will connect and elevate existing decarbonization initiatives within the public and private sectors to unlock investment and deliver emissions reduction projects that help new technologies reach commercial scale. Importantly, the ITA will connect companies in developed and developing countries to relevant existing initiatives and engage international policymakers and international organizations to address cross-sectoral challenges. 

Recognizing the importance of cooperation with national governments, the ITA will work closely with partner countries. After the launch, Governments will be invited to engage with its efforts through participation in multi stakeholder workstreams and high level dialogues. The ITA will also offer practical implementation support to partner countries, with the goal of ensuring that the Accelerator supports delivery of on-the-ground projects. 

Rodrigo Rollemberg, Secretary of Green Economy, Decarbonization and Bioindustry, Ministry of Development, Industry, Commerce and Services, Brazil, said, “The Secretariat for Green Economy, Decarbonization and Bioindustry, of the Ministry of Development of Industry, Commerce and Services of Brazil recognizes the importance of bringing together industry, finance and policymakers to help achieve the accelerated emissions reductions necessary to achieve our goals in 2030 and 2050. As the new president of the G20 next year and COP30 in two years’ time, we look forward to playing a leading role at ITA to help accelerate the implementation of projects both nationally and internationally.”

Mr. Izuru Kobayashi, Deputy Director-General for Technology and Environment, Ministry of Economy, Trade and Industry, Japan, said: “We welcome the launch of the Industrial Transition Accelerator to support the scaling of collective efforts to decarbonise high emitting industries. The Japanese Government recognises the importance of bringing policymakers, industry and finance together to solve these challenges and is willing to contribute to the ITA to achieve these goals together.”

Dr. Salisu Dahiru, Director General of the National Council on Climate Change, Nigeria, said, “The Industrial Transition Accelerator (ITA) will help to accelerate the decarbonization of high emitting industries, globally. The Federal Government of Nigeria welcomes the launch of the ITA and looks forward to working with other policymakers, industry and finance to solve these collective challenges.”

Agnès Panier-Runacher, Minister for Energy Transition, France, said, “Through participation and leadership in the Climate Club and the Breakthrough Agenda, the French Government recognises the importance of bringing together existing efforts to accelerate the decarbonisation of heavy emitting industries. We look forward to working with the ITA ecosystem of policymakers, industry and finance providers to scale decarbonisation projects in line with 1.5 degree pathways.”

Steven Guilbeault, Minister of Environment and Climate Change, Canada, said, “The launch of the Industrial Transition Accelerator can help lower emissions from hard to abate sectors. Canada also faces similar challenges from heavy emitting industries and understands there are no quick and easy fixes, but together we can share solutions and help mobilize the financial capital we need to succeed and build a cleaner future for all.”

Under the leadership of the COP28 Presidency, UN Climate Change, and Bloomberg Philanthropies, the ITA will help address the critical challenges to significantly expand the number of approved decarbonization projects that secure investment approval by 2026.

It will bring together producers, their customers and suppliers, financial institutions, and governments to improve project economics by significantly increasing demand for sustainable products, ensuring the right policy settings are in place, and supporting the development of new financial instruments needed by heavy-emitting sectors to fund their transition.  

Mary Schapiro, Vice Chair of the Glasgow Financial Alliance for Net Zero (GFANZ), said, “Delivering the emissions reductions necessary to avoid the worst impacts of climate change requires an economy-wide effort. Our collaborative work to create solutions to decarbonize heavy-emitting sectors is crucial to this transition. GFANZ looks forward to supporting this important initiative, bringing private finance to the table to help boost investment where it is needed to foster development and accelerate the transition.”

Building on important groundwork already laid by businesses, financial institutions, and other leading net-zero initiatives, the ITA will focus on addressing the critical challenges that are holding up existing projects from reaching their FID in the next 2-3 years. These focus areas may include: 

• Decarbonization solutions: Reaching economies of scale in energy technologies – such as green hydrogen, CCUS, sustainable fuels, and long-duration energy storage.  
• Green demand: Mobilizing governments, financial institutions, and companies to boost demand for sustainable products, such as through the First Movers Coalition, and facilitate investment in green industrial projects.
• Policy environment: Identifying, tracking, and promoting policy levers proven to have successfully accelerated decarbonization efforts.
• Financing solutions: Creating financing solutions, such as the use of concessional finance, to help bridge investment today with demand for green products in the years ahead. 
• Sector-tipping points: Elevating and accelerating progress of existing sector-specific projects that nudge us over tipping points to mass deployment of decarbonization solutions in each sector.

The ITA’s progress will be measured by emissions reductions achieved across the sectors of focus, relative to the credible net-zero pathways of the IEA and MPP, and how it supports countries in achieving and raising their NDCs towards 2030 milestones.

The ITA Secretariat calculates that heavy-emitting sub-sectors, including steel, aluminum, cement, chemicals, shipping, aviation and parts of the energy supply chain could plausibly cut emissions by 5.7GT (over a third of their emissions) by 2030 to get on a 1.5C pathway. The ITA will support projects that contribute to that transition.

Peter Bakker, President and CEO World Business Council for Sustainable Development (WBCSD), said, “I am thrilled that WBCSD will be a key partner in the Industrial Transition Accelerator announced today, an essential catalyst to unlock investments and get green industrialization solutions to scale. WBCSD’s members, together with our unique global network alliance of more than 60 independent business-led organizations worldwide, are working in every sector throughout the value chain and will play a major role by building green industrial plants, buying green products and developing the skilled workforce needed for a just transition.”

Dr. Ilham Kadri, Chair of WBCSD, added, “In our world, which is running full speed well beyond 2°C, the ITA creates the scale-up conditions and the momentum for key industries to change the trajectory now and to keep 1.5°C as a viable target. Bringing together global industry leaders with policymakers, finance, and technical experts towards this goal is now an urgent necessity.”

Børge Brende, President of the World Economic Forum, said, “Effectively addressing industry decarbonization is a systemic issue and as such requires systemic thinking and action. It is encouraging to see many organizations stepping up their efforts individually and they should continue to do so. However, accelerating the global pace of industrial emissions reductions requires coordinated collective action across all stakeholder groups. These issues are too complex, interrelated and quickly evolving. The World Economic Forum stands ready to work with the Industrial Transition Accelerator for scale and impact.”

UK Minister for Energy Security and Net Zero Graham Stuart, as a co-lead of the Breakthrough Agenda, said, “Industrial sectors are some of the world’s biggest polluters, so speeding up the green transition will require a concerted and focused effort. That’s why the UK is committed to working through the Breakthrough Agenda, in partnership with other governments and businesses, to focus on particular sectors and deliver transformational results at COP28 and beyond. We see real potential for the Industrial Transition Accelerator to unlock investment in a wave of first mover green industrial projects around the world. By decarbonizing heavy industries, we are safeguarding not just the environment but those industrial jobs which are at risk from the rising cost of carbon.”

The ITA will be driven by leading companies and sector initiatives, working in partnership with leaders from the real economy, financial sector, technical experts, and the policymaking community. To demonstrate this support, companies participating in the ITA’s work agree to:

• Set out a Paris-aligned net-zero target
• Develop a net-zero transition plan to achieve this target, ideally within two years, utilising a credible third-party framework and including a Paris-aligned 2030 interim target
• Demonstrate acceleration of decarbonization efforts, through capital expenditure and technology deployment plans
• Disclose on emissions and progress against targets, ideally within two years of joining, through key disclosure initiatives such as partners of Net Zero Data Public Utility (NZDPU) integrated with the UNFCCC Global Climate Action Portal (GCAP)

Hosted by MPP, the ITA Secretariat will actively facilitate collaboration, engagement, and implementation with partners in policy, finance, infrastructure, and technology. Founding partners include the Glasgow Financial Alliance for Net Zero (GFANZ), the Sustainable Markets Initiative (SMI), the World Business Council for Sustainable Development (WBCSD), and the World Economic Forum (WEF). MPP will lead the Secretariat and technical work alongside key industry-specific initiatives.  

The ITA builds on the ambitious work being done by MPP, which was founded in 2019 to trigger a net-zero transformation of seven industrial sectors, leveraging the convening power, talent, and expertise of world-leading climate action organizations. At COP26 in Glasgow, MPP and its partners put the decarbonization of heavy-emitting sectors firmly on the climate action agenda. They then published industry-backed Sector Transitions Strategies for reduction pathways?in the heaviest emitting sectors. At COP27 in Sharm el-Sheikh, MPP worked on turning pledges into action, galvanizing stakeholders on real economy milestones for 2030. Now, at COP28, the ITA will turbocharge this progress to unlock the investment needed in energy, industry, and heavy transportation to implement decarbonization solutions at scale to meet?these?ambitious 2030 objectives. 

“At a critical moment for the future of our planet, the IMO welcomes the timely announcement of the Industrial Transition Accelerator, which aligns closely with the net zero future of global shipping as defined in IMO’s 2023 Greenhouse Gas Strategy,” said Arsenio Dominguez, incoming Secretary General of the International Maritime Organization. “The maritime industry faces a confluence of challenges, opportunities, and changes ahead – the ITA can help bridge the gap by enhancing cross-sectoral cooperation and collaboration across the UN-family.”

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Footnotes:

¹ ITA Secretariat calculations. Scope 1 & 2 greenhouse gas emissions of steel (3.6Gt), aluminium (0.9Gt), cement (2.5Gt), chemicals (1.8Gt), aviation (0.8Gt), shipping (0.9Gt) and oil & gas (5.1Gt) totalling 15.6Gt

² IPCC Sixth Assessment Report, Chapter 2 (2023): CO2 emissions from industry increase by 30% in 2050 compared to 2010 in baseline scenarios

³ missionpossiblepartnership.org/sector-transition-strategies/

++

About Bloomberg Philanthropies:
Bloomberg Philanthropies invests in 700 cities and 150 countries around the world to ensure better, longer lives for the greatest number of people. The organization focuses on five key areas for creating lasting change: the Arts, Education, Environment, Government Innovation, and Public Health. Bloomberg Philanthropies encompasses all of Michael R. Bloomberg’s giving, including his foundation, corporate, and personal philanthropy as well as Bloomberg Associates, a pro bono consultancy that works in cities around the world. In 2022, Bloomberg Philanthropies distributed $1.7 billion. For more information, please visit bloomberg.org or follow us on Facebook, Instagram, YouTube, Twitter, and LinkedIn.

Media Contact: Daphne Wang, daphne@bloomberg.org 

About COP28 UAE:

• COP28 UAE is taking place at Expo City Dubai from November 30-December 12, 2023. The Conference is expected to convene over 70,000 participants, including heads of state, government officials, international industry leaders, private sector representatives, academics, experts, youth, and non-state actors.  
• As mandated by the Paris Climate Agreement, COP28 UAE is delivering the first ever Global Stocktake – a comprehensive evaluation of progress against climate goals.  
• The UAE is leading a process for all parties to agree upon a clear roadmap to accelerate progress through a pragmatic global energy transition and a “leave no one behind” approach to inclusive climate action.

About UNFCCC:
With 198 Parties, the United Nations Framework Convention on Climate Change (UNFCCC) has near universal membership and is the parent treaty of the 2015 Paris Climate Change Agreement. The main aim of the Paris Agreement is to keep a global average temperature rise this century well below 2 degrees Celsius and to drive efforts to limit the temperature increase even further to 1.5 degrees Celsius above pre-industrial levels. The UNFCCC is also the parent treaty of the 1997 Kyoto Protocol. The ultimate objective of all agreements under the UNFCCC is to stabilize greenhouse gas concentrations in the atmosphere at a level that will prevent dangerous human interference with the climate system, in a time frame which allows ecosystems to adapt naturally and enables sustainable development.

Above: Image via Shutterstock/Deemerwha studio

3 hot topics for 2024: regulations for ESG assurance; international agreements for transition finance; and new ways to measure investment in nature and biodiversity.

Is it officially too late to wish you a Happy New Year? As we return to work, here are three sustainable finance trends that are top of mind for me, along with three themes that sustainable finance and ESG community members say they would like prioritized in 2024. 

My hot topics for 2024 build on progress made in 2023: regulations for ESG assurance; international agreements for transition finance; and the development of standards and instruments to monitor investment in nature and biodiversity. Here’s where I see things headed.

Corporations are prepping for ESG assurance mandates 

What was once a voluntary exercise for disclosing climate and social goals has evolved into a full-fledged industry of ESG reporting. Up next: the introduction of third-party assurance requirements for certain ESG disclosures. 

California and the European Union are leading the way with the Golden State’s Climate Corporate Data Accountability Act, which requires large companies doing business in the state to get third-party assurance for Scope 1 and 2 emissions starting in 2026. (Companies will need to collect 2025 metrics, and file them in 2026). 

That means 2024 will be a big prep year: Companies will need systems to collect and manage data to meet those assurance requirements, and that means businesses must establish and test their ESG controllership strategy this year. 

How? Some companies are building internal teams to oversee ESG data collection and management for regulatory reporting. That includes hiring for the newly created position of ESG controller. Many large banks have added this role. Expect to see more companies hiring an ESG controller this year to manage regulatory demands. 

Transition finance will take the wheel 

An estimated $4 trillion in clean energy investment will be needed each year between now and 2030 to reach net-zero emissions by 2050, according to the International Energy Agency. 

That’s why climate finance was a key agenda item at COP28. More than $85 billion in new commitments were made, with the host country, the United Arab Emirates, launching a $30 billion global finance solutions fund that will allocate $5 billion to spur additional investment in the Global South. 

This year, we can expect the Inflation Reduction Act and Bipartisan Infrastructure Law to continue providing funding opportunities. An example is the $97 billion available through the Department of Energy for clean energy projects. The IRA has also contributed to an increase in cleantech investments, which totaled $176 billion in the first three quarters of 2023, or $50 billion more than the same period in 2022. 

Another key IRA provision to watch this year is for transferable clean energy tax credits. Through this facility, developers can monetize credits they receive for clean energy projects by selling them at a slight discount to companies that face large tax bills. This provides a much-needed source of capital for financing clean energy project development. 

Finally, better data for navigating natural capital 

The EU’s Corporate Sustainability Reporting Directive took effect Jan. 1. It requires large and publicly traded companies to disclose environmental and social risks. The Taskforce on Nature-related Financial Disclosures released its recommendations for doing so in September, guiding how companies should discuss nature-related dependencies, impacts, risks and opportunities. 

As companies embrace digital technologies to collect these nature-related metrics, we’ll see the development of the “planet economy,” predicts Lucas Joppa, the former Microsoft chief environmental officer turned private equity investor. Those insights and data pools will give investors more of the tools and infrastructure needed to invest in nature at scale, he said. 

What 3 sustainable finance leaders see on the horizon 

What ESG accounting or sustainable finance challenge would sustainable finance and ESG experts like to see prioritized in 2024? Why? I put that question to subject matter experts late last year. Here are three of their responses. 

Marina Severinovsky; Head of Sustainability, North America, Schroders 

“The future of fossil fuels, which was a focus of COP 28, should remain a priority in 2024, as reaching net zero will require a wholesale transformation of energy systems. Energy is an important part of many portfolios, and investors need to assess whether companies can adapt and transition their business models at a pace that can be profitable on their path to lower emissions. Given the demands on the energy system over the next 10-30 years, without significant investment, we will be short energy. Conventional energy companies are an important part of the investment in the energy transition sector and are needed to provide the transition fuels for the global clean energy transition. We expect that they will adapt their business model to capitalize on the growth in new energy transition technologies. Many of the major oil companies are already starting to change where they allocate capital and are already invested in hydrogen, carbon capture, biofuels, and wind and solar. Sustainable finance investment and engagement should focus on encouraging and accelerating this transition.” 

Andrew Behar; CEO, As You Sow 

“There are 100 million people with $10 trillion in retirement accounts invested in an unlivable planet they can’t retire on. This is the year for every individual to realize that the person who earns the money has the right to invest it aligned with their values and to vote their proxies to shape a company’s trajectory toward justice, sustainability and financial outperformance. Click your heels together, Dorothy, it’s your money — use your power wisely.” 

Jeff Mindlin; Chief Investment Officer, ASU Foundation 

“At the ASU Foundation, our viewpoint has always been that we are fiduciaries first and want to avoid politicizing the endowment. To that end, in 2024, my hope is that we will have passed the greenwashing and greenhushing phases to make actual progress on the matter at hand. I also would want to see standardization of reporting at the company and fund level become a priority.” 

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Nico McCrossan is Manager of Sustainable Finance & ESG at GreenBiz Group

As ESG breaks through into the mainstream despite the challenges it faces, here are some predictions for 2024 on what we’re likely to see in this area

This year, 2024, will be the one in which companies will begin to take environmental, social & governance (ESG) activities seriously, proving once and for all that ESG is here to stay. While it is true that this trend started as the result of the need to comply with regulations and risk management, by this year, companies will fundamentally overhaul their business structures. ESG issues will transition from being optional extras to integral elements of corporate strategy, essential for generating sustained value.

Here are six of the most important ways that ESG will play an impactful role in 2024:

1. ESG gets f(in)ancy
In 2024, sustainability will become deeply embedded in the financial foundations of companies. Already, nearly one-third of CFOs are examining the potential effects of climate change scenarios on financial outcomes in 2023, according to PwC. Indeed, finance professionals’ consideration of sustainability on the valuation of tangible assets and the valuation of goodwill and other intangible assets were some of the ways that the integration of ESG was already occurring. In addition, more organizations are creating ESG controller positions, a role that oversees and manages the integration of ESG issues into an organization’s operations and financial reporting protocols.

The amalgamation of sustainability, finance, and business strategy reflects growing recognition that sustainability and financial stability are not opposing goals but are fundamentally intertwined. As a result, closer integration of finances and sustainability will grow as a priority in the domain of CFOs, financial controllers, and corporate finance and accounting professionals.

2. ESG goes private
Sustainability reporting will expand to include private firms because of Scope 3 rules, which require reporting companies to monitor all indirect emissions that occur throughout the supply chain and among third-party vendors, particularly as the result of California and European Union regulations. This means that regardless of public disclosure, private firms of all sizes that supply to major public or private corporations will probably need to initiate or improve their greenhouse gas accounting methods.

Scope 3 requirements will drive significant transformations across all sectors, as every company in a field strives to meet the standards set by the largest players in their industry. For example, managing partners of law firms have begun mentioning for the first time their need to calculate their carbon footprint.

3. Politicized environment around ESG will remain
Like throughout much of 2023, ESG will remain a partisan topic this coming year. Companies will need to remain cautious about how they discuss sustainability externally amid presidential and congressional elections and expectations for an increase in pro- and anti-ESG legislation in the United States, and in the wake of 50 countries and regional bodies experiencing elections in 2024. There are several potential solutions available for companies on how to approach those officials with polarized pro- and anti-ESG viewpoints, which include using stakeholder mapping on divisive issues and focusing on (or even rebranding) individual initiatives that fall underneath the ESG umbrella that may be less polarizing than the term ESG.

4. Biodiversity will emerge as a mainstream ESG topic
While the topic of biodiversity loss was gaining steam last year, that trend continues. Indeed, nature and land use were included as a 2030 global deforestation goal at the global environmental conference Cop28 in December. In addition, investment funds that focus on biodiversity and nature are rapidly increasing in number and assets, as evidenced by a four-fold growth in assets under management in European funds dedicated to biodiversity.

Further, the Task Force on Nature-related Financial Disclosures (TNFD), which finalized its disclosure recommendations in September, has highlighted evolving nature-related dependencies, impacts, risks, and opportunities that are aligned around four pillars. Now, many governments are considering the adoption of these standards, which are consistent with other frameworks and standards to enable corporate reporting. In 2024, many more governments are likely to follow.

5. Supply chains at the center of the “E” and “S”
Several recent laws mandating Scope 3 reporting — including new laws in California and the EU’s Corporate Sustainability Reporting Directive, combined with evolving expectations of stakeholders — are driving companies to prioritize ethical material sourcing, adherence to fair labor standards, and initiatives aimed at reducing environmental damage across the entire supply chain.

In fact, supply chains are where the intersection of environmental and social concerns are taking shape, a development that is likely to accelerate in 2024. Indeed, another pending EU regulation — the Corporate Sustainability Due Diligence Directive — if passed, would require EU and non-EU companies to conduct environmental and human rights due diligence across their operations, subsidiaries, and supply chains.

In the coming year, we are likely to see the integration of environmental and social parts of ESG — the E and the S — converge on how company supply chains can impact both water and nature because of TNFD’s inclusion of nature-related reporting in relation to both upstream and downstream supply chains.

6. Increase sophistication of greenwashing claims
Moving forward into 2024 and beyond, the notion of greenwashing — a term frequently employed to call out insufficient or misleading sustainability efforts and disclosures by corporations — is expected to be more clearly defined legally and carry weightier repercussions.

Greenwashing carries with it reputational, regulatory, and litigation risks; and with no consistent legal definition, the concept of greenwashing will vary by product, service, regulator, and jurisdiction. The EU, meanwhile, is making considerable progress in eradicating greenwashing, encompassing the development of new rules designed to limit false advertising and to offer consumers enhanced information about products.

In 2024, businesses are expected to embrace ESG criteria not just for compliance or risk management, but as a chance to fundamentally transform their business models with the full understanding and acceptance of the need to account for increasingly complex external risks that may be occurring simultaneously.

This shift will make mainstream a thorough revision of design processes, procurement strategies, financial management, and marketing and communication practices across a number of ESG-related issues, but opponents will remain vocal. While at the same time, ESG will transition from being a peripheral element to a central component of overall corporate business strategies.