Highlights

The top global risks over the next decade are all environmental, according to the World Economic Forum’s Global Risks report.

AI was the buzzword at Davos as attendees highlighted the opportunities and risks the technology presents.

Companies and policymakers face the difficulty of navigating the tension between climate ambition and the reality of energy security and affordability.

The carbon credit market could be a model for the nascent nature or biodiversity credit market, but transparency and credibility will be paramount.

Author
Lindsey Hall | Head of ESG Thought Leadership, S&P Global Sustainable1

The World Economic Forum (WEF) last week convened leaders from business, government and academia in Davos, Switzerland to discuss solutions to society’s biggest challenges. This annual meeting matters because it provides insight into some of the big ideas that will shape the year ahead for companies like S&P Global and our clients. Davos is not billed as a sustainability-focused gathering — but the topics that filled the 2024 agenda are inseparable from the sustainability challenges the world must tackle for society and businesses to thrive over the long term. 

This overlap is loud and clear in WEF’s Global Risks Report, released right before Davos: It found that over the next two years, the top risk facing the world is misinformation and disinformation, followed by extreme weather events. Over the next decade, all four of the top risks are environmental: extreme weather events, critical change to earth systems, biodiversity loss plus ecosystem collapse, and natural resource shortages.

S&P Global executives and thought leaders attended Davos to contribute to the expanding dialogue around sustainability. Below, we outline four key sustainability takeaways from the week, drawn from panels we attended, the roundtables and reception we hosted, and the countless conversations we had on the sidelines of the gathering.

Steering the sustainability ship through the geopolitical storm 

Davos 2024 took place under the umbrella theme of “rebuilding trust,” against a backdrop of severe geopolitical unrest and during a year when approximately half the world’s population is set to vote in elections. Throughout the week we heard that the fraught geopolitical situation could impede progress toward sustainability goals.

This is in line with the sustainability trends S&P Global identified for 2024: As the year begins, we find many stakeholders sitting on the sidelines as they face geopolitical strife, evolving attitudes toward the environmental, social and governance (ESG) movement, and continued fear of potential litigation. This collective breath-holding stands at odds with companies’ growing understanding of the risks and opportunities that sustainability issues pose — especially the interlinked crises of climate change and biodiversity loss — and how to approach them in a just and equitable manner.   

Tension between energy transition goals and energy reality

We heard similar tension in discussions of the energy transition. The world is not currently on track to meet the Paris Agreement goal of limiting global warming to “well below” 2 degrees C, and ideally 1.5 degrees C, relative to preindustrial levels. Meeting that goal would require rapid change, but that’s not the reality of what is unfolding globally. Instead, we find coal usage continues to rise, and the world continues to need affordable, reliable energy supplies — creating tension between climate ambitions and the current energy reality. This situation is becoming increasingly difficult for companies to navigate. 

As investors weigh these tradeoffs, they are seeking robust, detailed and transparent transition plans from companies. Research by S&P Global Sustainable1 finds that about one in four of more than 6,000 companies assessed on their climate ambitions in the 2022 S&P Global Corporate Sustainability Assessment (CSA) have set net-zero targets. The vast majority (96%) of companies with a net-zero target have implemented a strategy to reduce their Scope 1 and/or Scope 2 emissions, but only about half have defined a strategy for Scope 3 emissions, or those that extend up and down a company’s value chain. That indicates that companies have a long way to go. 

Nature is increasingly on the agenda — and we can learn from carbon markets

Companies, investors and governments also increasingly understand that the climate crisis is inextricably linked to the crisis of biodiversity loss. This was a takeaway from Climate Week NYC in September 2023; it was clear at the UN’s recent COP28 climate change conference; and it was evident in the prominent role that nature had on the 2024 Davos agenda: “Long-term strategy for climate, nature and energy” was one of four main themes of the week’s program.

We see companies increasingly taking steps to assess and disclose their dependencies and impacts on nature, and to identify nature-related risks and opportunities. For example, the Taskforce on Nature-related Financial Disclosures (TNFD) announced during Davos that 320 companies and financial institutions adopted its recommendations and will start nature-related corporate reporting.

It is clear that many investors and companies see an opportunity in nature. During a roundtable S&P Global Sustainable1 hosted on Jan. 17, we asked participants “who sees nature as an investment opportunity?” Nearly everyone present raised their hand. But when it comes to connecting this interested money to the opportunities, the path forward becomes less clear. We heard repeated calls for innovative mechanisms to bridge the huge financing gap for nature, and the topic of biodiversity credits received ample attention. There was general consensus that making this controversial market a reality would require transparency, credibility and engagement with Indigenous peoples and local communities as partners from the outset.

We also heard general consensus that the market for biodiversity credits can learn lessons from carbon markets. Voluntary carbon markets experienced a tumultuous 2023 as the quality of many projects and buyers faced criticism. S&P Global views 2024 as a potential inflection point for the VCM. With new integrity guidelines in place, we will be watching how project developers respond and how buyers drive demand for higher-quality carbon credits, both of which will be critical to the market's viability.  

At Davos there was discussion of the role that digital technologies like blockchain can play as a catalyst for carbon credits and biodiversity credits by helping reduce fragmentation between markets and boosting implementation. 

AI presents sustainability opportunities and governance risks

“Artificial Intelligence as a Driving Force for the Economy and Society” was another theme on the Davos agenda, and indeed, AI was the buzzword all week. It was plastered on nearly every storefront on the town’s main promenade and was a throughline in almost every discussion. 

As reliance on newer technologies like AI grows, so does the pressure to ensure robust AI governance and ethical practices. The topic picked up steam ahead of Davos with WEF’s June 2023 launch of the AI Governance Alliance, a collaboration between the public and private sectors with the goal of advancing thoughtful solutions and approaches to AI governance. 

Many of the discussions last week centered around the opportunities that AI presents in the sustainability space. For example, as we wrote in our research on 2024 sustainability trends, it could unlock new ways of tracking and understanding environmental and social issues, by processing enormous amounts of data, and it could lower the cost hurdle for companies to track and report on sustainability issues. However, in recent years the rapid adoption of AI has laid bare the associated risks, such as labor disruptions, privacy breaches or copyright infringements. To manage these risks, ensuring effective governance and ethical practices is crucial.

Read more about the key 2024 sustainability trends driving the year ahead

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