Navigating Carbon Markets

🌍 𝗖𝗘𝗢𝘀 𝗰𝗮𝗻 𝗻𝗼 𝗹𝗼𝗻𝗴𝗲𝗿 𝗮𝗳𝗳𝗼𝗿𝗱 𝘁𝗼 𝗶𝗴𝗻𝗼𝗿𝗲 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗰𝗵𝗮𝗻𝗴𝗲. The risks of a warming world and the transition to a low-carbon economy are no longer future threats—they’re here today. The question is, will your company adapt and thrive or fall behind? A great new report from the World Economic Forum and the Boston Consulting Group (BCG) explores the costs of climate change and the imperatives for leaders to succeed in a changing world. 📉 The cost of inaction is staggering: Businesses unprepared for climate impacts could lose up to 25% of EBITDA by 2050 due to physical risks. 💰 The opportunity is equally compelling: Companies that invest in adaptation and resilience now could see a return of up to $19 for every dollar spent (CDP data). 🔑 Four critical steps for climate risk readiness: 1️⃣ 𝗔𝘀𝘀𝗲𝘀𝘀 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗿𝗶𝘀𝗸𝘀 𝗮𝗰𝗿𝗼𝘀𝘀 𝘆𝗼𝘂𝗿 𝗼𝗽𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝘀 𝗮𝗻𝗱 𝘃𝗮𝗹𝘂𝗲 𝗰𝗵𝗮𝗶𝗻. 2️⃣ 𝗜𝗻𝘃𝗲𝘀𝘁 𝗶𝗻 𝗿𝗲𝘀𝗶𝗹𝗶𝗲𝗻𝗰𝗲 𝗮𝗻𝗱 𝗱𝗲𝗰𝗮𝗿𝗯𝗼𝗻𝗶𝘇𝗮𝘁𝗶𝗼𝗻 𝘁𝗼 𝗳𝘂𝘁𝘂𝗿𝗲-𝗽𝗿𝗼𝗼𝗳 𝘆𝗼𝘂𝗿 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀. 3️⃣ 𝗘𝘅𝗽𝗹𝗼𝗿𝗲 𝗴𝗿𝗲𝗲𝗻 𝗴𝗿𝗼𝘄𝘁𝗵 𝗼𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝗶𝗲𝘀 𝗯𝘆 𝗶𝗻𝗻𝗼𝘃𝗮𝘁𝗶𝗻𝗴 𝘀𝘂𝘀𝘁𝗮𝗶𝗻𝗮𝗯𝗹𝗲 𝗽𝗿𝗼𝗱𝘂𝗰𝘁𝘀 𝗮𝗻𝗱 𝗺𝗼𝗱𝗲𝗹𝘀. 4️⃣ 𝗖𝗼𝗺𝗺𝗶𝘁 𝘁𝗼 𝘁𝗿𝗮𝗻𝘀𝗽𝗮𝗿𝗲𝗻𝗰𝘆 𝘄𝗶𝘁𝗵 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗿𝗲𝗽𝗼𝗿𝘁𝗶𝗻𝗴 𝘁𝗼 𝘁𝗿𝗮𝗰𝗸 𝗽𝗿𝗼𝗴𝗿𝗲𝘀𝘀 𝗮𝗻𝗱 𝗯𝘂𝗶𝗹𝗱 𝘁𝗿𝘂𝘀𝘁. For leaders who understand the stakes—and the opportunities—this is your chance to lead the way and ensure your business is on the right side of history. 💡 What steps is your company taking to manage climate risks and embrace green growth? I’d love to hear your insights. 📖 Explore the full report here: https://lnkd.in/de3Nn3n5 #climate #climaterisk #physicalrisk #ceo #sustainability

How to establish effective climate transition strategies 🌎 Designing a successful climate-transition strategy requires addressing five interconnected challenges: behaviors, time, emotions, interdependencies, and focus. These factors shape how businesses adapt their operations and products to meet climate goals without compromising financial performance or customer expectations. Understanding customer behaviors is essential when introducing climate solutions. Solutions must address affordability, convenience, and reliability to drive adoption. Without aligning new products to established customer preferences, businesses risk launching innovations that fail to gain traction in the market. Adapting to evolving market conditions requires ongoing scenario planning. Instead of relying on rigid long-term forecasts, businesses should monitor key variables—such as regulatory changes and technological advancements—and adjust their strategies accordingly. This approach reduces risk and ensures readiness for shifts in demand for climate solutions. Decision-making in climate strategies can be influenced by emotions, particularly around the urgency of the climate crisis. However, data-driven insights must take precedence to ensure rational planning. Equipping employees with relevant data and aligning teams on the strategy's rationale improves internal alignment and execution. Lastly, businesses must manage interdependencies across their value chains while maintaining a clear focus. Securing critical resources and fostering partnerships are essential to sustaining climate initiatives. Simultaneously, balancing investments between legacy operations and new climate solutions ensures continued profitability and long-term resilience. Source: strategy+business #sustainability #sustainable #business #esg #climatechange

I'm excited to share the launch of "Bold Measures to Close the Climate Action Gap," the latest report from Boston Consulting Group (BCG) and the World Economic Forum Alliance of CEO Climate Leaders. https://lnkd.in/e8MCFKAm    We see businesses doing more to tackle climate change, but collectively, the world is moving way too slowly. This new report focused on opportunities for companies and governments to translate their individual actions into more substantial global progress. The bottom line is that our individual efforts must be more geared to driving systemic change. The report highlights five ways for companies to do this, including: 1. Accelerate supplier decarbonization. In many companies, suppliers’ emissions are 3x to 8x their own Scope 1&2. Cutting the first 50% of many products’ supply chain emissions can be achieved with an end-price impact under 1% 2. Enable customers to make greener choices. Product redesign, circularity, reducing customers’ energy consumption can substantially lower the emissions footprint of many products. 3. Drive change with peers in your sector, especially in supply chain ‘pinch points’: Ten players or less control more than 40% of many key markets; clearer product labeling is another great area of opportunity 4. Engage in cross-industry partnerships, especially large-scale buying groups, to mobilize capital and accelerate development and scaling of advanced technologies 5. Advocate and support bolder policies. First, make sure you and your lobbying partners are not harming climate progress in your government engagements. Then, look for opportunities to go further to be an effective partner to governments to encourage bold and pragmatic changes in incentives, policies, and reporting. The report is filled with real life examples of what companies are doing today in each of these areas. Thanks to Pim Valdre and Pedro G Gomez Pensado from WEF and my colleagues Dr. Patrick Herhold, Jens Burchardt, Cornelius Pieper, Edmond Rhys Jones, Trine Filtenborg de Nully, Galaad Préau and Natalia Mrówczyńska for leading the work on this important report. And to my Alliance co-chairs, Jesper Brodin, Christian Mumenthaler, Ester Baiget, and Feike Sijbesma for your continued leadership.

Rethinking #ClimatePolicy: The Power of Tailored Approaches 🌍🏭🧩 Climate policy effectiveness isn't a simple yes or no question. The real challenge lies in understanding which policies work under specific conditions. 🔍 A recent study in Science offers crucial insights into this complex issue, analysing approximately 1,500 climate policies across 41 countries from 1998 to 2022. The research, led by Annika Stechemesser and colleagues, identified 63 successful policy interventions that significantly reduced emissions. Their findings reveal that tailored policy mixes often outperform single-instrument approaches. In the transport sector of developed economies, combining pricing with subsidies was highly effective, while in developing economies, regulation was most powerful, both alone and in combination with other policies. 🚗💨 In the electricity sector of developed economies, pricing was key in 50% of effective interventions, while in developing economies, standalone subsidies were most effective. These findings underscore the importance of context-specific policy design in driving meaningful emission reductions. 🏙️🏭 The study's nuanced approach provides a solid foundation for more effective climate action. However, I believe its implications extend beyond environmental outcomes to the realm of political feasibility. 🏛️🤝 In my view, these tailored policy mixes may offer a promising path through the political gridlock that often impedes climate action. By incorporating diverse policy instruments - from market-based mechanisms to regulations and incentives - these mixes provide multiple points for negotiation between differing ideological positions. 🔧🎯 Consider how this approach might bridge the gap between left and right. Conservatives might favour pricing mechanisms for their market-based approach, while progressives could support strong regulatory measures. A well-designed mix that includes both could potentially satisfy both camps, leading to a more politically viable solution. 🌈🤝 Furthermore, the sector-specific nature of effective policy mixes aligns well with the diverse interests represented in most political systems. Policies tailored to the buildings sector might appeal to urban representatives, while measures targeting industry could gain support from legislators in manufacturing-heavy districts. This granularity allows for more precise addressing of constituent concerns, potentially reducing overall opposition and fostering compromise. 🏙️🏭🤔 In a world grappling with polarization, could this approach offer a pragmatic way forward on climate action? By providing a framework for compromise without sacrificing effectiveness, tailored policy mixes might be key to unlocking sustained, impactful climate policy. 🔑🌱 What's your perspective on this? How might we leverage these insights to overcome political barriers to climate action? Link to study: https://lnkd.in/ehH8tHxf

In the quest to reduce carbon emissions, companies are exploring growth opportunities in electric vehicles, energy storage, heat pumps, recycling solutions, and plant-based products. However, achieving success in these markets poses challenges, with some companies struggling to find the right balance between supply and demand. In a recent article published in strategy+business titled "Ten Questions for a Winning Climate-Transition Business Strategy," I present an analytical framework to aid senior leaders in executing strategic initiatives. The focus is on how businesses can effectively transform to align with climate objectives while meeting customer demands with innovative products. Key insights from the article include: - Companies enhancing their product portfolios with climate solutions typically see a 2–3% revenue growth premium, despite facing initial cost hurdles. - Success hinges on addressing five critical challenges: understanding customer behaviors, timing product adoption, utilizing data-driven decision-making, managing value chain complexities, and balancing legacy and new business priorities. - By utilizing data effectively, engaging employees, and forming strategic partnerships, organizations can overcome obstacles and capitalize on opportunities in the low-carbon economy. What strategies have you discovered to effectively integrate climate innovation with financial returns? Read the full article here: https://lnkd.in/eFJXbE_4 #ClimateStrategy #Sustainability #Innovation #BusinessGrowth #EnergyTransition #Technology

Even the world’s largest, most sophisticated investors—those that understand financial climate risk deeply—are structurally constrained from financing the transformations needed to reduce that risk at its source. Simon Mundy's recent Financial Times article on Norway’s $1.8 trillion sovereign wealth fund (Norges Bank Investment Management) is a powerful illustration. NBIM’s own modeling suggests that climate change could wipe out 19% of the value of its U.S. equity holdings. Yet its mandate—to maximize returns with reasonable risk—limits its ability to “more aggressively support climate change mitigation.” This isn’t a critique of NBIM. It’s a reminder that asset owners, no matter how committed or informed, cannot - on their own - deliver the systemic transformations that meaningful climate action requires. There is a better approach: coordinated, multi-actor strategies that are both more effective and entirely doable. Systemic transformations—redesigning energy systems, electrifying transport, decarbonizing industry—require multi-actor coordination, institutional arrangements, and financing tools that go far beyond conventional portfolio strategies. Moreover, two-thirds of future emissions are projected to come from emerging and developing economies. But most institutional capital is not flowing there, constrained by high perceived risk and low credit ratings. Mitigating climate risk requires unlocking affordable finance in EMDEs. Financial institutions can and should be core partners in confronting planetary and financial climate risk. But today’s dominant approaches—corporate target-setting, exclusions, portfolio realignment, etc.—are not enough. The more effective strategy for large asset owners who understand climate risk is to work with governments, MDBs, utilities, and real-economy actors to co-design and co-finance system-wide transition pathways. Another basic reminder is that finance follows markets, not the other way around. When coordinated transition strategies reduce fossil fuel demand, improve the risk-adjusted returns of low-carbon alternatives, and de-risk investments through mechanisms like long-term offtake agreements or expanded credit enhancements, capital will follow. Pressure on financial institutions alone will yield, at best, inherently modest and limited results. Some argue that in the absence of stronger political leadership, incremental steps by financial institutions are better than nothing. But in many parts of the world, the real bottleneck isn’t political will—it’s the structural constraints of the financial system and the lack of coordinated engagement among economic actors. In developed economies, much can be done through subnational governments, public utilities, regulators, and public procurement, even without federal action. What’s missing is not intent but practical, multi-actor coordination—and that is entirely within reach. https://lnkd.in/eueSRXqt

New Publication Alert! Excited to share my latest commentary, Towards a Robust Voluntary Carbon Market for Agriculture in India, published in Economic & Political Weekly (EPW). With India's launch of a framework for voluntary carbon market (VCM) in agriculture, the potential to incentivize sustainable farming practices has never been greater. However, ensuring the credibility and quality of carbon credits is critical to gaining market confidence and maximizing benefits for farmers. Drawing insights from field research and carbon farming projects across multiple states, this article highlights key challenges and recommendations for a stronger VCM, including: ✅ Transparency in project documentation and credit tracking ✅ Strengthening additionality criteria to reflect ground realities ✅ Enhancing Measurement, Reporting & Verification (MRV) with digital tools ✅ Addressing conflicts of interest in third-party auditing ✅ Ensuring inclusivity for smallholders and marginalized communities ✅ Establishing fair pricing and revenue-sharing for farmers As India moves forward in scaling agricultural carbon markets, robust governance and scientifically sound methodologies will be crucial for ensuring environmental and social impact. Read it here: https://lnkd.in/gYyCcSX2 Would love to hear your thoughts—how can we make carbon markets truly work for farmers? #CarbonMarkets #SustainableAgriculture #ClimateAction #VCM #EPW #Agriculture #CarbonCredits International Maize and Wheat Improvement Center (CIMMYT)

🚀 New Research 🌳🌡️ Our new paper "Nature and Climate Risk in Asset Prices," co-authored with Chiara Colesanti Senni from UZH Department of Finance and Skand Goel from S&P Global, deep dives into a critical question: How do financial markets grapple with the intertwined, yet distinct, risks of climate change AND nature degradation? 🤔 Our paper makes two key contributions: 1. A Guiding Theoretical Framework: We first develop an explicit (though stylized) theoretical model to distinguish how firms' DEPENDENCE on nature/climate (physical risk) and their IMPACT on nature/climate (transition risk) should be priced. This "double materiality" lens is crucial for generating testable predictions. 2. Surprising Empirical Findings from Comprehensive Data: We then test our model's predictions using extensive firm-level environmental data from S&P Global (including their Nature & Biodiversity Risk, Sustainable1, and Trucost datasets) and financial news shocks. Our analysis reveals markets HAVE shifted post-2015: ✅ Climate IMPACT (like emissions) is increasingly priced, as predicted. 🤝 Climate risk perception is now linked to firms' NATURE DEPENDENCE, especially on water resources! Markets see the connection. ❓ BUT... the pricing of pure NATURE RISK (dependence on biodiversity, other ecosystem services) remains a PUZZLE. Firms most dependent on nature became less sensitive to bad biodiversity news post-2015. Why? Why does our research matter? Our theoretically-grounded and empirically-supported insights are vital for investors navigating ESG risks, policymakers designing effective green regulations, and anyone serious about sustainable finance. Markets are evolving, but maybe not pricing all environmental risks efficiently... yet. 🔗 Read the full paper here: https://lnkd.in/eWajAht4 What are your thoughts on the nature risk puzzle, the role of theoretical models in this space, and the power of comprehensive data? 👇 #SustainableFinance #ClimateRisk #NatureRisk #BiodiversityFinance #AssetPricing #ESG #TheoreticalModeling #EmpiricalFinance #RiskManagement #FinanceResearch #Economics #SPGlobal #BigData #UZH #SFI #ClimateChange #Nature SFI Swiss Finance Institute UZH Department of Finance Taskforce on Nature-related Financial Disclosures (TNFD) Marcin Kacperczyk Oliver Schelske Owen Grafham Cedric Pacheco Maud ABDELLI André Hoffmann Patrick Odier Zeno Staub Krista M. Gnau Tony Goldner Florian Esterer

The discussion about quality and integrity in the voluntary carbon market (VCM) involves so many different topics and such a bewildering array of actors, each with their own (usually highly technical) perspective, it is easy to get lost in the weeds and lose sight of the big picture. Here's an attempt to sum up, at a high-level, the three biggest and most important improvements within the VCM that will, if successful, transform the legacy market into a market fit-for-purpose in the struggle to mitigate climate change: FIRST, we have to improve the integrity of issued credits in terms of their atmospheric impact. This means, in short, that the atmosphere really does feel a difference from the issuance of a carbon credit. Discussions about additionality, baselines, over crediting, permanence and leakage fit in this bucket. SECOND, we have to change the financial and programmatic design of carbon projects so that they provide more sustainable and more substantial benefits to the communities that own and / or manage the resource impacted by the project. We need to shift away from the notion of paying people NOT to do something (because under this model, when they payments stop, the behavior stops as well), and to the use of carbon finance to transition communities to new practices that are more profitable and sustainable in their own right. THIRD, we need to improve the "buy-side" of the market by clarifying the appropriate use of carbon credits, improving existing frameworks for voluntary corporate action (like the Science Based Targets Initiative), and making the purchase and retirement of carbon credits easier and much, much more transparent. If we do those three things, companies will confidently buy and retire carbon credits as an means to accelerate internal decarbonization on the road to net-zero, communities and landowners will benefit from the climate transition, and we really will keep carbon dioxide and other GHGs out of (or remove them from) the atmosphere at a pace and scale that gives the political, social, and technological transformations we need to happen they time they need to come to fruition. That's the road map, and in this first post of 2025 I encourage everyone involved in the VCM (including its critics) to make sure their efforts are aligned to the map. If you want to hear a lot more about each of these aspects from my colleagues who work in these areas, I highly recommend the upcoming American Forest Foundation webinar, "A Higher Integrity Way to Buy Carbon Credits," this Thursday, January 9 at 1 EST (link in the comments) Happy New Year! We have a lot to get done in 2025!

It’s remarkable that Apple has slashed emissions in half — especially because there was no playbook for decarbonizing a global consumer electronics company. True to Apple’s ethos, Lisa Jackson and her team didn’t wait for someone else to blaze the trail. They rolled up their sleeves, set ambitious targets, developed a whole-business strategy, and delivered results quickly. That’s why Conservation International is proud to call them a partner. A few key takeaways for other business leaders: 1. You don’t need to radically reinvent your entire business model. Apple proves that most companies can decouple their financial growth from emissions growth. How? Start by identifying your largest emissions sources so that you know where to focus. Across the business, incremental changes on the big stuff starts to add up: In just nine years, Apple decreased emissions by 55 percent; meanwhile, their market cap increased more than 500 percent. 2. Supply chains evolve through close collaboration. It’s not always easy for suppliers to find renewable energy and make the net-zero/nature-positive transition. Apple realized that its largest emissions driver was within its supply chain, so worked with its suppliers to share best practices and engage on policy, especially in regions where renewable energy was harder to source. Through the Supplier Clean Energy Program, Apple now supports over 16.5 gigawatts of renewable energy around the world — enough energy to power over 2.5 million American homes. 3. High-quality carbon projects can (and should!) be used to address residual emissions. Direct emissions reductions should always be priority number-one. But there are still emissions sources that can’t yet be mitigated. Through its Restore Fund and other efforts, Apple is funding high-quality, nature-based carbon removal projects, including our work in Kenya. These investments have a cascading effect — not only do they remove and reduce emissions, but they improve livelihoods and secure biodiversity. 4. Don’t forget about the role recycled material can play. Reducing your need for new materials will lower your carbon footprint. Apple used 22% recycled content across its products last year, including 52% recycled cobalt in its batteries. These efforts are helping to lower its carbon footprint even further, product by product.