Look Forward | Episode 8: Confronting Climate Challenges

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Andy Critchlow: [00:00:00] Hello, my name's Andy Critchlow. I'm head of news at S&P Global Commodity Insights, and welcome to the Look Forward Podcast from S&P Global. In today's rapidly shifting markets success depends on anticipating what's next. The professionals who excel are those who can spot emerging trends before they fully materialize.

Look Forward podcast delivers exactly that insights to help you prepare for tomorrow's opportunities and challenges. We bring you expert perspectives on macroeconomic trends, capital markets, energy transition, and global trade. With a sharp focus on what these developments mean for the decisions that will shape your tomorrow.

This podcast connects you with S&P global's Look Forward council bringing cutting edge research on long-term trends and transformative [00:01:00] market shifts. Together we are committed to providing the forward-looking intelligence you need to navigate uncertainty with confidence. Welcome to the Look Forward Podcast, where we explore the trends shaping tomorrow's world.

I'm your host, Andy Critchlow. I'm head of news at S&P Global Commodity Insights, and today we are diving into one of the most urgent and complex challenges of our time, climate change. And its growing impact on global weather systems. From intensifying heat waves and shifting rainfall patterns to the rising frequency of extreme weather events.

The climate story is no longer just about, the future. It's unfolding now, and understanding it requires both scientific, scientific depth, and strategic foresight. Joining us today are two guests who bring exactly that. So I'm delighted firstly [00:02:00] to welcome Lindsay Hall, Global Head of Thought leadership at S&P Global Sustainable1.

Lindsay's gonna be joining me as co-host today for the discussion. Lindsay leads, the charge in weaving together ESG data and sustainability insights into compelling narratives that help make sense a fast evolving landscapes like climate change for Sustainable1. Also with us, I'm delighted to say is Terence Thompson, Chief Science Officer at S&P Global ESG product.

Terence brings a wealth of research experience, in the science space. Helping, to translate complex environmental data into actionable intelligence for markets and policy makers. So, to kick us off today, first question, 2025 has been, you know, one of the hottest on record. I think we've seen it everywhere [00:03:00] globally, heat rising.

That's having a big impact in terms of these, you know, adverse weather events, which, you know, as a news journalist, the team that I manage, you know, reports regularly. I guess coming to you first, Lindsey, you know, what does all this mean for global efforts to cap, temperature increase and, and, you know, really the, the, the international campaign to avoid, you know, dramatic climate change.

Lindsey Hall: Well Andy, I'm also a former journalist, so I know that the thing that really gets people's attention is when you can quantify, when you can put a number on it. And earlier this year, one thing that the team at S&P Global Sustainable1 did was publish research that found that without adaptation, annual financial impact of climate physical risk is projected to total $1.2 trillion by the 2050s, and that's for the world's largest companies.

So a really striking number there.

Andy Critchlow: Yeah. I mean, when you look at that number, I mean it's, it's, it's staggering. You [00:04:00] know, 1.2 trillion, I think, you know, the UK where, you know, I'm, based, you know, it's a trillion, it's a trillion pound economy. So, you know, when you put that into context, you know, the, the, the, the amount of risk that corporations face from this, I think, you know, Terry, you know, from your position, looking at this from a more research angle, looking at the data.

Do you think that it's been taken seriously enough that that number, that 1.2 trillion number.

Terrence Thompson: Some elements of the business and financial communities are taking that very seriously and others are not. It's difficult to understand, quantitatively how much uptake of these, rather severe impacts is actually going on in the corporate and financial worlds.

So we know that some people are paying quite a lot of attention. We're not sure how many people are [00:05:00] actually taking people, meaning entities are actually taking action. The impacts are potentially enormous, although there is, a lot of uncertainty about overall GDP slowdown associated with climate change.

A reduction in our ability to grow economies, measured via GDP. That impact, could be 10 or 20%, by the end of the century, according to some estimates. Now, the problem here is that the econometric science behind estimating those impacts has a wide variation in the potential estimates at present. But it's extremely important,

that risk managers in the [00:06:00] corporate and financial worlds have an estimate of the higher end risks as well. So we shouldn't take this uncertainty as, an indicator that we should not be paying attention. Appropriate risk management really does pay attention to the tail risks and takes actions that can guard against the impacts of very substantial impacts.

Andy Critchlow: So Terry, on that point, you know, I, you know, I talk to a lot of our colleagues all over the world, every day. And it's very interesting 'cause as a Brit most of my conversations start with, well, what's the weather like at the moment? You know, I spoke to some colleagues in, in, in Delhi the other day.

They've had record floods. You know, one of one, one of our colleagues, who is from North India said, you know, that they were quite embarrassed as a North Indian, you know, for the first time they were saying they hope it stops raining, 'cause normally it's [00:07:00] baking hot. This time of the year we've had a record, summer temperatures in the uk.

If I look at my team, you know, we're reporting all the time, you know, falling r either falling Rhine levels to points where barges can't navigate or surging Rhine levels 'cause of floods and the the barges can't go under the bridges. We see this all over the world. You've had, you know, dramatic, you know, fires, for example in California, which cause huge amounts of damage. You know, from the data.

What are we seeing in terms of the numbers of these, these very dramatic weather events linked to climate change that are affecting business? They, they, they're causing massive amounts of financial damage. You know, how is that increasing or is it staying level?

Terrence Thompson: It is increasing. It's a difficult,

Quantification problem to summarize the increases because they differ in time [00:08:00] and space. But some regions are now being a being, proactive in keeping track of certain measures of extreme events. Europe's, the leader in this and in general terms, the extreme events are increasing. This is fundamentally driven by the thermodynamics of climate change.

As the atmosphere is able to, is heating up, it's able to hold more moisture. And the presence of that moisture is one of the main contributing factors to what we call hydro climactic variability. Wider swings in climate conditions that can lead to droughts or very wet periods, can lead to wildfires.

If you have a wet period that, for a couple of years that is contributing to rapid growth of, trees and [00:09:00] shrubs, and then you have a drying period. Part of this variability, what you're doing is providing fuel for a wildfire, massive amounts of fuel. Then you're drying it out, so you're providing ideal conditions to have a massive wildfire.

This is actually what happened, in the Los Angeles wildfires, in January. That was that kind of event. Growth of fuels due to very good growing conditions for a couple of years, and then drying out rapidly and then high winds, and an ignition event, which led to a devastating fire. We can't say that climate change caused that event, but we can say that climate change exacerbated the severity of that event.

Lindsey Hall: And I had the chance to, I had the chance to talk to Terry right after those wildfires that he just referenced. And what I think is so [00:10:00] valuable about the work that he's doing and the work that the Climate Center of Excellence is doing is how they take these very complex topics like Terry's just been describing, which require a lot of nuance and translating them into plain English.

That's what I'm hearing a lot from the market and in my conversations, for the all things sustainable podcast, I'm hearing this appetite from financial decision makers. You know, they're saying, we understand that climate change impacts our business, but we need help translating. So how do you translate that into, into, like actionable information.

I know Terry, if, if I think that's a lot of the work that you're doing, if I understand correctly.

Terrence Thompson: Yes.

That that's the core of the work. I was trying to give a description of how climate change factors can lead to exacerbation of extreme events. In response to the question about are these increasing?

But the core of our work is exactly this translation of very [00:11:00] complex and diverse forms of climate related information into actionable information that decision makers can use. In a nutshell, that boils down to taking hundreds, if not thousands of scientific papers, dozens of different data sets and integrating those into a hazard metric.

It might be, counting the number of very hot days. It can be much more subtle than that can have to do with, heat stress and heat waves and so on. But think of a dozen or so, or two dozen hazard metrics translated from this enormous amount of information into information that can be shared with, with our clients through a, user interface that gives them a plot of not only hazard, but also a risk associated with that hazard through time, decade by decade, so that fundamentally they can decide.

[00:12:00] For the assets that they care about. Do I face a sea level rise problem? Do I face a wildfire problem? When do I face those problems, and where? I may face a sea level rise problem in a certain location, but I won't face that until the 2050s. Whereas for wildfire in other locations, I'm facing that this decade.

That's what I mean by actionable information. What, when, where, how much, so that one can allocate resources, adaptation resources, or other types of, of, corporate decisions that would be influenced by this kind of information.

Andy Critchlow: I guess on that point, corporate decisions and, and you know, you speak Lindsay to a lot of different businesses looking at this.

We are advising a lot of different businesses looking at this and, and coming up with plans long term. I, you know, I kind of think sometimes [00:13:00] around climate change, you know, it, it, is it, is it their horse leading the cart? Is it the, you know, the CEO in the boardroom? Are they kind of making decisions about how they want to alter their business practices in terms of their own emissions or their products and services that they provide to be more, sort of net zero focused.

Is it that they're responding to changes that we're already seeing in customer behavior. You know, it's the kind of Noam Chomsky, sort of manufacturing consent argument that, that, you know, change come, it's the bottom up, right? And if enough people at the bottom change their behavior, then the people at the top, the corporations, the governments, et cetera, they have to change.

Right? Which one is it?

Lindsey Hall: That's a good question from my perspective. I mean, you're seeing this push towards sustainability broadly and climate action more specifically coming from a lot of different [00:14:00] kinds of stakeholder groups from, you know, the citizens who are experiencing it, like your, your colleagues who you're mentioning, Andy, in their day-to-day lives more frequently.

We have colleagues in Asheville who lived through the recent hurricane and the fallout from that, And Terry, I know you, you work really closely with a lot of people who are also impacted by those LA wildfires. So, so it's people who are living this in their daily lives. but then it's also investors who are seeing how this impacts their, their bottom line.

And I think that's the big question that we're increasingly hearing from people. If I had to summarize like all the many conversations I have for the podcast, I'm hearing that. Investors, businesses, many stakeholders, regulators, policy makers, they're paying attention to climate change. They know that it impacts, their bottom line, but they need to be able to tie it back to the financial decision [00:15:00] making.

Like how do you clearly articulate why this matters for your bottom line? Because a lot of these stakeholders have a fiduciary duty, right? That they have two, two stakeholders. And

Andy Critchlow: I guess wrapped into that, it's, it's this inflection point between electro dollar states and petrodollar states. Right? And you know, corporations that feed into that, you know, you look at, stock valuations.

I mean, Nvidia, I mean, how much is it worth? It's just this huge company. It's all based on the development of AI data centers. And, and, and of course energy is a key part of that. and, and you know, the, the, the, if you look at the, the, the companies that are tied to that, you know, they have. You know, their, their, their market value is bigger.

Their, you know, earnings per share is, is is bigger than, you know, the traditional fossil fuel companies. You could argue. That are dependent on the world kind of staying the same, arguably. You know, what, what's your take on that, Terry? [00:16:00]

Terrence Thompson: Well, I, I would like to react to, something that Lindsay said before we go to that, that topic.

 We sometimes think of corporations as entities that need to be corralled and need to be told what to do. In other words, be sustainable regulations and so on and so forth. And I just wanna emphasize that in our interaction with clients, we, we are seeing companies that have on staff sustainability experts, and so they're attempting to do,

the right thing with regard to sustainability. And they also need help. They need data. They need the ability to quantify the effects of being more sustainable, but they have built into their organization a sustainability awareness. And that's a positive aspect that I'd like to emphasize something that I was not quite aware of myself, when I [00:17:00] started in this area.

Lindsey Hall: That's very true, and that's a very good point. And even the companies. We are seeing, you know, with some of the backlash around sustainability climate in the US we're seeing some companies change some of the language they use internally to talk about their efforts. But I'm hearing from a lot of these companies that those efforts can continue. To give you one example, like the biggest bank in the us, JP Morgan, they exited the net-zero banking alliance. But at the same time, they said that their commitment to sustainability and climate action remains steadfast, was the word that they used. I'm hearing versions of that across a lot of different conversations, but please go ahead, Terry.

Terrence Thompson: Well, coming back to, to Andrew's, question about, I take it to be the huge demand for electricity associated with, what we generally call, AI, [00:18:00] or large language models, to be more specific, thinking of Chat GPT and other capabilities. So yes, those do take significantly more energy. And there's a,

There's an emerging, question at, at a personal level if I know that in a, sorry, I don't have a precise number in front of me, but let's just say that an ordinary Google search costs one unit of energy and a chat GPT or a large language model based search takes 10 units of energy, one might ask, not unlike the efficiency, rating on your refrigerator.

What's your personal responsibility associated with using or moderating the use of this high energy consuming, very attractive technology? [00:19:00] So I think I'm augmenting perhaps, or, or, altering the terrain a little bit here from the responsibility of the corporation to something about the responsibility of, of all of us as consumers.

To moderate our energy usage.

Andy Critchlow: Yeah, that it's a very interesting point that the, that, that, that, you know, where does the responsibility lie? And, and, and you know, I think, you know, if you, if we were to like skip forward 50 years, you know, will our counterparts in 50 years, will it be a case? Every individual will have a, their own carbon allowance.

And you'll have a certain number of carbon credits as a citizen of wherever you live that you'll have, that you'd be able to spend every, every year. Um and then once that is gone, you either have to buy more, which will be very expensive, or you just can't. You have to change your behavior. Do you think that, that that's what the future holds really, [00:20:00] as opposed to it actually all being controlled by big governments and corporations?

Terrence Thompson: Well, I think

it's a fairly deep philosophical economic and sociological, question. I imagine that different societies will react, differently. To engage into in some popular psychology. I'm not so sure, how qualified I am to engage in this, but we might say in, in a more centrally controlled society, we would see a certain type of behavior in a less centrally controlled society, we'd see a different behavior.

I'm thinking here of, the COVID, epidemic, pandemic. We saw different social responses. China differed very, very much from what we saw in the US. Europe differed to a certain degree, from the US as well. I think we will probably see [00:21:00] these kinds of sociocultural differences emerge, in future.

Andy Critchlow: Where do, where do you see that, Lindsay, in terms of the balance between you, you tax the individual for the, for the, for the emissions as opposed to taxing the corporations? I mean, we're seeing elements of this already, you know, coming into effect globally. You have CBAM, you have, you know, prices on carbon. And you, you, you know, I think it is poss, you know, realistic to think, you know, 20, 30 years down the line, maybe even sooner. You have more direct taxes on the individual because, you know, ultimately I think all governments around the world will certainly, in, in, in the west, the US, Europe, every, all these governments are struggling with massive debt deficits and, and, and having to finance those.

So everyone's kind of faced ultimately with having to raise more revenue. So here you kind of think, well, there's a scenario [00:22:00] where we can, we can raise revenue by more direct, I won't say syntax, but you could frame it that way, on, on, on, you know, higher emissions activities. And that will bring in more income versus, you know, the alternative.

Lindsey Hall: Yeah. I'd like to pick up on the word you used there, Andy, you said balancing and I think that's really, at the crux of a lot of the conversations I've been having in the sustainability space, we're seeing amid the pushback on sustainability and ESG in parts of the world. We're seeing this rising conversation around the need for a balancing act and sometimes trade-offs, and there's a lot of active debate.

I don't think I have the answer. But it, it is one of the most probably hotly debated topics that I'm hearing is how, what is the balancing act when it comes to how do you prioritize long-term sustainability with the very real threat of climate change? how do you [00:23:00] balance that with the very real and immediate concerns of things like energy security?

The Russia-Ukraine War showed us the importance of, of having energy security and then energy affordability. How do you make sure that energy is affordable at the same time that you're thinking about, you know, net zero? So not really an answer, but I guess just, just posing, another question.

Andy Critchlow: It's, it's, but though, when you raised the war in Ukraine, it, it reminds me of, of, I, I, back in 2005, I was covering, an OPEC meeting in Doha.

And, it was quite a tense OPEC meeting I remember. And, a colleague of mine, at the time, who, who, who's still a journalist, said to me, you know, we, we've spent the last five years, and I was based in Iraq as a journalist, 2003, 2004. We spent the last five years covering, you know, [00:24:00] wars, mainly around getting oil out of the ground, controlling oil. And you could argue that, you know, in the post World War II era, all the most of the conflicts have been around control of resources, oil. And he said that actually the next 20, 30 years, the wars of the future are all, are gonna all, will all be about keeping the oil in the ground. To stop the emissions because the issue of climate change is gonna become so serious for governments that, and on the other side, you know, for the oil producers, again, you know, it's f of nations, they, they, they depend on, on, on petroleum to, for their foreign export earnings.

So, you know, you're talking. Systematic, you know, really important change that would have to happen. Do, do, you, would you agree? What with, with my old colleague in, in that sort of future outlook for the world?

Lindsey Hall: I mean, I'd be curious to know [00:25:00] Terry's take on this as well, but I, I certainly think it is an area that's creating a lot of conflict. In the policy space and then in the corporate space.

Andy Critchlow: There's been a dramatic change, hasn't there? You know, from five years ago it was, you know, oil companies didn't want to talk about oil anymore.

Really. They would do everything to not talk about it. You had much more activism around this subject and now it's flipped. Now it's, it's, yeah, oil's good. We need energy for the future. Energy security, I get it. But there's so much less talk around. Climate and climate mitigation.

Lindsey Hall: What I would like to reiterate to the audience today is just that these climate conversations, this momentum continues.

We heard at London Climate Action Week this year, where, you know, in your hometown, attendance doubled. Compared to 2024, at this week, and we're just on the cusp of, climate Week NYC in New York City in September here in the us [00:26:00] And from what I've been hearing, there's going to be, one big bank told me unprecedented level of engagement.

So. I think it's hard to get just one simple, clear picture of, and I think it depends a lot where you are and who you're talking to.

Andy Critchlow: It's funny, another colleague said, actually, interestingly, that, that although a lot of the old companies externally message that, you know, they want to get more oily actually behind the scenes, they're actually doubling down on investment into electrification, clean energy, decarbonization, CCS, all of this stuff.

Yeah, it's actually the narrative is slightly different.

Lindsey Hall: And they're doing those things because it makes economic sense. Like that's why I'm so interested in what do the numbers show us? What does the data show us? And that's why I think the work that Terry is doing with the Climate Center of Excellence is so valuable, because you can strip out some of the noise and really focus on what the [00:27:00] data shows us.

And, so that's sort of a, a north star for me. I had a recent interview on the podcast, with someone named Annikit Shah, managing director at Jeffries Group. And I love this quote from him. He said that, we really need to really focus on data, not vibes. So forget all the vibes, forget all the things you're reading in the headlines, and just really focus in on what the data shows us.

And actually a lot of it is quite. Encouraging when it comes to, energy transition.

Andy Critchlow: Well, I mean, that's good. Yeah. I mean, that's a good point. You know, Lindsay, and, you know, to kind of come to you, Terry around, you know, a lot of, you know, maybe what I've talked about here is a bit doomsday actually, but you know, what, what, what data is there that gives us a more optimistic picture?

 

Terrence Thompson: Yes.

Well, well, I think Lindsay has, has mentioned the data, that is more optimistic. The shift, apparently underway towards renewable energy [00:28:00] driven essentially by cost considerations, cost reductions, and the momentum is shifting. That's a very positive development and something that we should focus upon and embrace.

But at the same time, that shift is at a minimum influenced. By the, rhetoric associated with criticizing the climate science that tells us what is going to happen with pretty high accuracy. And when the rhetoric is shifting towards don't believe the climate science, it's alarmist. It's, too uncertain to make decisions. Then the momentum that's leading to this positive development that Lindsay mentioned, that [00:29:00] momentum could itself face headwinds. So that to me is a, a continuing worry. I don't want to lose sight of the positive developments, but I want them to continue, and when the critique of the underlying basic science might create a reduction in the momentum that's very worrisome.

Andy Critchlow: We flipped back to doomsday there. Terry, yeah.

Terrence Thompson: Yes. Sorry. I don't mean to to make it doomsday, but we, we want that momentum to continue and part of that momentum is, supported by, the underlying science. So just want to keep that momentum up.

Andy Critchlow: What does the underlying science though, say in terms of if we continue on the current trajectory?

What's the world's gonna look like in 2050?

Terrence Thompson: The science tells [00:30:00] us if we don't change behavior, if we don't turn the total emissions curve from still increasing and turn that, that curve in the opposite direction. If we don't do that, then we are going to face a world that, we're not prepared to live in.

And in particular, the less developed economies. The poor of the world are extremely poorly prepared to live in that world, and that's gonna create additional problems. It's gonna create misery for individuals. It's going to create possibly migration patterns that more developed countries are not prepared to deal with.

So the, the science tells us we must turn that curve downward. There's just [00:31:00] no doubt about that whatsoever. The policy discussion is how fast and to what degree do you turn that curve downward. How do you maintain energy affordability? Energy security is partially related to how fast you turn that curve downward, but the science tells us there's just no doubt about it.

You must turn the curve.

Andy Critchlow: And I, I think that that is a great point to, close our discussion. I think that we're all in agreement, that it, it's a combination of factors, that is vital. For, mitigating climate change, but also planning for the future. So, Lindsay Hall, Global Head of Thought Leadership at S&P Global, Sustainable1.

And, Terry Thompson, Chief Science Officer at S&P Global ESG product. Thank you so [00:32:00] much for joining us. For our listeners, if you wanna find out more about the work that, either, Terry does, on the ESG side or Lindsay and Sustainable1, please go to our website at spglobal.com. There's lots of information there. You can download our future episodes of the Look Forward Podcast on Spotify. The Apple Podcast store or if you would like via YouTube. Thanks very much.