With rising investor demand and regulatory pressure in certain jurisdictions, company disclosure of their exposure to climate risks and their environmental impact has emerged as an expectation with tangible economic benefits. Increasingly, companies can improve their access to lower-cost capital by disclosing their exposure to climate risks and opportunities. Indeed currently over 23,000 companies now report through CDP, underscoring growing investor and customer demand for environmental data. In this episode, CDP CEO Sherry Madera joins hosts Chad Reed and Al Jacobs from the biodiversity-focused COP16 in Colombia, to explore the competitive advantages climate disclosures provide companies who proactively measure and manage their environmental impact and the role CDP plays in driving better carbon accounting practices.
With rising investor demand and regulatory pressure in certain jurisdictions, company disclosure of their exposure to climate risks and their environmental impact has emerged as an expectation with tangible economic benefits. Increasingly, companies can improve their access to lower-cost capital by disclosing their exposure to climate risks and opportunities. Indeed currently over 23,000 companies now report through CDP, underscoring growing investor and customer demand for environmental data.
In this episode, CDP CEO Sherry Madera joins hosts Chad Reed and Al Jacobs from the biodiversity-focused COP16 in Colombia, to explore the competitive advantages climate disclosures provide companies who proactively measure and manage their environmental impact and the role CDP plays in driving better carbon accounting practices.
Links
Corporate Climate Disclosure Has Passed a Tipping Point. Companies Need to Catch Up (World Resources Institute)
EPA on Climate-Related Disclosures
Episode recorded October 28, 2024
Chad Reed: I'm Chad Reed.
Hillary Langer: I'm Hillary Langer.
Gil Jenkins: I'm Gil Jenkins.
Guy Van Syckle: I’m Guy Van Syckle.
Chad: This is Climate Positive.
Sherry Madera: Transparency and disclosure lead to action. The reality is that it bears out in data. If a company discloses to CDP, within two years, their emissions go down by 7% to 10%. That's a fact.
Chad: With rising investor demand and regulatory pressure in certain jurisdictions, company disclosure of their exposure to climate risks and their environmental impact has emerged as an expectation with tangible economic benefits. Increasingly, companies can improve their access to lower-cost capital by disclosing their exposure to climate risks and opportunities. Indeed currently over 23,000 companies now report through CDP, underscoring growing investor and customer demand for environmental data.
In this episode, CDP CEO Sherry Madera joins Al Jacobs and myself from the biodiversity-focused COP16 in Colombia, to explore the competitive advantages climate disclosures provide companies who proactively measure and manage their environmental impact and the role CDP plays in driving better carbon accounting practices.
Chad: Sherry, thank you so much for joining us today. It's so great to have you.
Sherry: Thanks very much for inviting me. It's a real pleasure.
Al Jacobs: To get things started, we understand you have a varied career.
Sherry: Varied or eclectic.
AJ: Varied, eclectic, multiple different stops taking you around the world. If you wouldn't mind just walking us through the shape of your career that's gotten you to the CEO position at CDP.
Sherry: I joke, but I think that eclectic actually is something I'm really proud of. Especially landing at CDP, it's something I've drawn on for many, many different avenues. Where does it start? I started life as an investment banker, but even that was a twist. My background is I did a degree in chemistry which I found absolutely fascinating, but I could never see my life under a fume hood. Going into investment banking was a great step. I focused on technology and telecom. After a few years working at CIBC, I'm Canadian, it took me to London to continue my career with technology startup companies and growth companies in the tech and telecom field.
Moving forward, of course, anyone who advises companies and starts getting ideas and it's creative starts thinking about businesses that they could open themselves. That was part of my journey and starting a couple of businesses and selling them and merging them in with someone else. Which basically gave me a huge view on what it was that businesses were experiencing, especially from a blank sheet of paper as it was growing out. Does that mean that I got to sit on a island and sip margaritas for the rest of my career?
Absolutely not. It's one of those real learning points that started to propel me into watch out for the left turn, government. I was picked up by the UK government. Someone called and recommended me to join the UK trade and investment team leading trade between the UK and China. Along the way, I picked up a husband and daughter and a UK passport. That is a little more logical than you would think. Once I agreed to join them, it was an absolutely fascinating journey that really started on my path for green finance and thinking about sustainable finance and thinking about how environment was also something that needed to be funded through the likes of green bonds, through how it is that capital was being tilted and moved.
Of course, this is a huge benefit to London and the UK as being a huge capital center. After spending three years in Beijing as a diplomat, I returned to London and was the ambassador for the City of London to Asia which had its own scope creep because essentially, Asia kind of started just the other side of the channel in Brussels and moved forward. That really allowed me to have a real perspective, especially on capital markets, products, technology, innovation, and being able to really think about how that affected climate, how it affected nature.
I decided after that stint to move back into the capitalist world, the commercial world, and joined Refinitiv when it was born out of Thomson Reuters. That spin, it was backed by Blackstone. Really honored to take the role of chief industry and government affairs officer there and worked with the team to be able to sell that fellow Refinitiv into the London Stock Exchange Group, now LSEG. After that, I joined MasterCard and thought I was going to be there for a few years, gentlemen. I settled in and I thought this is going to be great to be able to be the rest of world public affairs lead.
Then someone sent me a really interesting job description for the CEO of CDP. I said, "No, no, I'm good. I'm really happy, amazing place that I am." Once I got that same job description forwarded to me by four other people who didn't know each other, I thought, "Hmm, maybe I should check this out." That's really what landed me at CDP. I'm really pleased to be here. It's a real honor and pleasure.
Chad: Thank you, Sherry. We at HASI, obviously very well acquainted with CDP, formerly the Carbon Disclosure Project, and we actually-- I think we're a very early subscriber and supporter as a corporate that disclosed in accordance with the CDP standards. I'm sure many of our listeners are not quite as familiar with CDP. You can just tell us just a little bit about what CDP is. Why does it matter?
Sherry: Thank you for the opportunity to talk about my favorite subject. CDP is the world's global and neutral disclosure platform for climate and nature data. We're really proud to represent over two-thirds of the world's market cap that report to CDP from over 130 countries around the world. We're also increasingly becoming dense in the areas of private companies. We have over 23,000 companies that report to CDP from across industries and sectors. Why does that matter? Why it matters is disclosure and transparency drives action. That is really absolutely at the heart of what CDP does. It should never be disclosure for disclosure's sake. We have to really keep in mind that that data that's being surfaced is always for others other than CDP to take action. We need to be really precious stewards of the information that comes into us and make sure that that effort that's being made to give and disclose that data, make sure that it's really well used for action.
Chad: Can you give us an example of some of the data that is disclosed to you, just so folks have a sense of it?
Sherry: Yes. Absolutely. Some of it is very, very core data to those that want to take decisions with climate in mind. Example is emissions data, your energy mix. When you think about emissions data, it's scope 1 data, scope 2 data, scope 3 data. Of course, all these scope have their definition about what is within the grasp of the company or actually is part of the company's supply chain and is increasingly becoming more granular and more detailed. It's data about governance. Where is it the decisions are being taken?
Increasingly about targets, how they're being set, what is it that actually the company is considering year-on-year location-based data, your factories, your activities, your offices. Again, geography matters. Of course, increasingly, as I would say since I'm sitting here in Cali, Colombia at COP16, nature and biodiversity data is also included in the mix, not recently. We've been around for 24 years, and that nature data has been part of what we've been asking for 15 years.
Data on water, thinking about water usage, water scarcity, forestry, deforestation, actions on protection of land use, biodiversity data writ large. Plastics data came into the realm last year. Actually, we are really delighted that over a thousand companies are disclosing to that in year one. Again, these questions that we're asking are science-led, they are also market-led. We do know that they're being used and demanded.
Chad: Companies disclose these emissions, nature, water, other sorts of data to you all. Then who are the primary audiences for this data and what are they actually doing with it?
Sherry: I like to try and keep things simple. Life is too complicated. Certainly, when we talk about saving the planet and being able to have a really strong future, it can get complicated, so let's keep it simple. There are really three primary uses for data. First one is access to capital. That means the investors in the investor community. Certainly, you'll know this. I know who I'm speaking to now, use this data in order to be able to take decisions on allocating capital. Access to capital is certainly one of the use cases for investors.
The second is business efficiencies. This comes in two forms. One is the companies themselves who use the data to be really almost like a mirror for themselves to look into it and understand where is it that they actually have the emissions coming from the business that they do. How is it that they're making impact on the natural world? How is it that they can reveal to themselves sometimes where their governance is not as strong as it should be? They can take their own actions on that part. It also is that the customer is asking for this more increasingly.
This is really compelling because when your customer asks for data, you give it. That is a really important part. We've got access to capitals, business efficiency for your customers and yourself, and finally compliance. Of course, this is really pushing forward which is that mandatory disclosures are available. Also when we think about compliance, many industries and sectors already have either sort of self-regulated or governmental or local requirements as to what good looks like. Those data points are being used for that compliance. I told you it was going to be simple.
It's the ABCs. Access to capital, Business efficiencies, and Compliance.
AJ: Among the other ABCs, there are a number of different disclosure regimes, SASB, ISSB, CSRD, et cetera, talk about how CDP fits into these myriad other disclosure frameworks and the value it adds for the entire ecosystem.
Sherry: Thank you for using the word framework because that sets it off nicely in terms of an answer. What CDP is here to do is to surface information in order for actors to take action on it, in order for us all to protect our future generations. That's our mission statement. That's what we're here to do. Which means that we're not a standard setter and we're not a framework. How I look at it is we're all aligned on principles. We want to have a healthy planet, we want to have a healthy natural world so that actually we can all continue to live and prosper. We're all aligned on the principles.
Below that you've got frameworks and we're all very familiar in this world with TCFD, the Task Force on Climate-Related to National Disclosures. Increasingly now the TNFD just changed the word "climate” for “nature". Those are frameworks to really get a feel for, what do we mean by upholding those principles? How can we act in a certain way? What comes below frameworks is standards. ISSB as an example of the International Sustainability Standards Board, which sits under the IFRS Institute, they are implementing standards which are going to be increasingly picked up in our view by regulators around the world.
27 countries already have committed to ISSB as the standard that they will implement through their regulations. If we look at how that all flows, what's beneath all of it, it's the data. That's where CDP fits. When you talk about CSRD, obviously a European directive, ISSB 27 of the jurisdictions. When you think about Walmart, Carrefour, Lenovo, all supply chain customers and partners of CDP who are asking questions in order to be able to allocate their procurement dollars. CDP is able to take that data, hopefully, written one time, and be able to use it many times in those different varieties.
What we do need to do is work really closely with those standards and those frameworks in order to be able to share the 24 years of experience we have so that we are not remaking the wheel as a society, as an ecosystem. So that we can reuse and not be able to over-engineer questions that are largely the same and be able to continue to drive down the burden that companies experience on reporting so that they can focus on action.
Chad: Yes, I can say from our firsthand experience, since we've been disclosing through CDP through your platform for several years now, the data that we have been disclosing and that we've developed, has been very helpful as we try to then apply ISSB and other standards out there. We have a lot of the data already in place because we've been disclosing through CDP for quite some time. I think that's a great way of thinking about it as well. As you lightly know, the Greenhouse Gas Protocol, which sets the rules for scope 1, scope 2, scope 3 emissions disclosures, is in the process of being updated.
There's a several-year-long process. There are governance bodies, technical working groups. Everyone's now getting started on updating this protocol. Is CDP involved in this process? Is it taking any view on how the protocol should be updated? It is an important component of the CDP disclosure regime.
Sherry: Yes, absolutely. We're not a standard setter but we definitely believe in using standards and being able to create a harmonious standard network, as possible out there. It just simplifies the world. In fact with GHGP, 51% of disclosing companies use the GHGP for carbon accounting in our system. It is absolutely a bedrock of what's happening already today. We work closely with the GHGP. As you know, it's an entity that's formed from a couple of other NGOs that are putting efforts in as a lead as a secretary out there.
We're on multiple working groups across where they're trying to make changes, update, and be able to keep up with the ecosystem. I think that scope 2 is of particular interest. Often we're snowed under with talk about scope 3 that emissions from your supply chain but when you talk about GHGP, scope 2 is important because it's all about the use of energy. With energy use being the lion's share of emissions globally, while infrastructure to change it requires huge investment, huge political will, and incentive.
The risk of locking it in we welcome any honing of this vital standard. I think that that is one that we should really take account of and not be perhaps swayed by the sexier newer versions of how it is so we look at scopes.
Gil: Climate Positive is produced by HASI, a leading climate investment firm that actively partners with clients to deploy real assets that facilitate the energy transition. To learn more, please visit HASI.com
AJ: The CDP questionnaire has over 400 questions that yield between two and 3000 data points. How much time are organizations expected to spend on completing this questionnaire and what do you say to folks who might contend that devoting the resources and time to completing this questionnaire is too onerous or not feasible for their particular organization?
Sherry: I think that companies should spend zero time filling in the CDP questionnaire because it's not the point. The point is actually surfacing that data should be business critical. Being able to answer the questions that are tried and true from CDP alongside their peers in various places around the world to create that comparability is going to be an essential tool for their business, not for a tick box exercise to go through CDP. Of course, there's an element that does hopefully encourage companies to be as complete as possible, which is our scoring methodology.
Again, really important to emphasize that CDP scores are a reflection of transparency and disclosure. We believe that transparency and disclosure lead to action, both by those actors I talked about, but by the company itself. The reality is that it bears out in data. You'd expect me to throw some data in here. Actually, if a company discloses to CDP, within two years, their emissions go down by 7% to 10%. That's a fact. I guess the better question to ask, if you don't mind, is to say, how can companies really make sure that the time that they're spending filling in the CDP questionnaire is cycled back into their business?
So that all of those data points are business critical, and that at the board level, at the C-suite level, at the leadership level, they are a must-have in order to take business decisions, as opposed to something that the sustainability department does in a silo.
Chad: Well stated. I think we definitely agree with you there. I know you are right now at COP16 in Colombia, focusing on nature-based disclosures and biodiversity. Tell us a little bit more about CDP's leading role in those sorts of data collection and disclosures.
Sherry: I think that in some ways, nature is having a moment. There's a lot of talk about nature and biodiversity having a moment. Actually, we don't need it to have a moment. We need it to have momentum. The reality is that CDP has been working with nature-based data, biodiversity data, for 15 years. Our role at COP16 is to help bring more light, more trends to the world, and be able to understand how it is that we can create metrics from what we've got, which is not a standing start. Here at COP16, there's a real push that this is the implementation COP.
Last COP, on COP15 in Montreal, was a huge breakthrough. It was considered the Paris moment for nature and biodiversity. That's because the Global Biodiversity Framework was agreed. If I can be myopic for a minute, CDP believes that actually its role has just become ratified in this space, because Target 15, within the Global Biodiversity Framework, talks about the data and the metrics that are absolutely necessary in order for us to be able to make progress. Again, I think that we have no time to lose. Climate has moved, and CDP's been here for 24 years.
The Global Biodiversity Framework is requiring a big change in five years. 2030 is the target for this. Being able to leverage what we've got and being able to make sure that the perfect is not the enemy of the good when it comes to data is a really important message.
Chad: Absolutely. While we're on the topic of really policy, CDP is obviously a voluntary disclosure data platform. Let's call it that for this purpose. What is the role in policy, and not just developing standards or frameworks, but in mandating certain disclosures as it relates to emissions or nature or biodiversity, et cetera? Should some of these disclosures actually be mandated by government institutions as is currently the case, especially in the EU?
Sherry: CDP applauds mandatory disclosures. It just gives more opportunity for companies to reveal these data sets that are going to be important for their future. I'm saying that's important for their future, not because each company's mission is to save the planet. God, we would love that, wouldn't we? We would love for a company's missions to include that, but that's not realistic. What is realistic is that companies, as they are revealing the data, they're starting to understand that actually it is a competitive advantage.
Increasingly, when you look at mandatory disclosures, and I understand that the two of you are sitting in North America thinking, "Oh, at least there is a mandatory disclosure here yet." Think again. The ESRS or the CSRD, whichever acronym soup you would like, which is the disclosures in Europe, have a long tail. They have an extraterritorial reach, which means that if you export to Europe, you are going to need to take heed of this. That actually extends into many other policy areas and policy thinking, which is above and beyond just disclosure.
I'll give you an example. CBAM, again, coming from the Europeans, the Carbon Border Adjustment Mechanism. This is being phased in, in order to be able to any exports that are coming into the EU. Obviously, it's going to start with big things like steel and cement, but it's not too hard to think about it might end up being your shirt, or your tie, or your sweater, as it goes into the EU. If you do not have data in order to be able to submit, you are not going to be able to export there.
That is a competitive disadvantage, and I think that that's the way we need to start thinking about disclosures. Which is how does this affect your core business? I think there's great examples as to why you really need to make sure that you're measuring now even before mandatory disclosures come to a hometown near you.
AJ: Moving forward, I'm curious how you see the future of corporate climate action evolving in the next 5 to 10 years, and what role you think CDP has to play in that evolution.
Sherry: I think there's been a big evolution over the course of the last 24 years, which is the time that CDP has been here in the marketplace. All the stakeholders I mentioned before, investors, customers, your internal stakeholders, regulators, government, they're becoming more and more conscious of the effects of climate and nature on the world we live in, and actually the economics that are playing out around us. I think that what CDP's role is just to continue to surface the information for the entire ecosystem.
Be that you and me as humans, be that companies, be that investors, in order to use that data to make decisions, to take opinions, to create a point of view. Our job at CDP is not to judge, our job is to be able to get data in the hands of those who are going to be able to use it to take action. Some of that action is voicing views and advocating, and some of that action is deploying capital or making economic changes.
Chad: Absolutely. Sherry, this has been great, thank you. We're almost done but first, we have what we call the hot seat. We're going to ask for your immediate reactions to the following statements and questions. Something I thought was true that I no longer believe?
Sherry: That I was impervious to jet lag.
Chad: [laughs] It's caught up with you?
Sherry: Yes, this is a global role and it's really, really urgent to be able to get out there, and sometimes that's a bit punishing, gentlemen.
AJ: When I'm not leading the evolution of actionable climate reporting, I can be found?
Sherry: With a good book, a cup of tea, and my dog.
Chad: On the book question, the book or article that has most influenced me is?
Sherry: I'd say it's-- oh this is a good one. The Alchemist. It is the book that allowed me to start thinking about life in a different country. 26 years ago, I moved from Canada to London and I've never looked back.
Chad: Perfect. I'm most proud of?
Sherry: I'm most proud of my CDP team. They're working really hard. This is not easy. They're doing a brilliant job of making sure that we're staying true to our mission.
AJ: To recharge, I?
Sherry: I drink a glass of wine, talk to my husband.
Chad: Perfect. Finally, to me climate positive means?
Sherry: Climate positive to me, means that we're all thinking about the impacts that we make in everything that we do because the economy is not just one thing. It's what we drink, it's what we eat, it's what we buy, it's what we invest in. Actually, if we're talking about climate positive we need to bring it back down to that level so that we all have agency in it.
Chad: Excellent. Thank you so much, Sherry. Great discussion. Really applaud the work of you and CDP, and look forward to engaging again.
Sherry: Absolutely. Really, really appreciate your time.
Chad: If you enjoyed this week’s episode, please leave us a leave a rating and review on Apple and Spotify. This really helps us reach more listeners.
You can also let us know what you thought via Twitter @ClimatePosiPod or email us at climatepositive@hasi.com
I'm Chad Reed.
And this is Climate Positive.