An estimated 90% of US businesses will face physical risk within the next 20 years.
Douglas Peterson, president and CEO of S&P Global, issued a dire warning, saying, “Most of our economy will have weather-related impacts.” luckCEO Roundtable will be held on Thursday. He said the U.S. is greatly exposed to physical risks because much of the U.S. economy is coastal.
Data show that the 2015 Paris Agreement pledges to cut greenhouse gas emissions are off track, but governments are starting to move and developing frameworks to determine regulations, financial incentives and taxation. making changes to. All of these changes are not enough to turn the tide and save the Paris Agreement, but they are prompting companies to rethink their investments and pace related to the energy transition.
CEO speaking at luck Decarbonization-focused discussions have been particularly bullish about the tailwinds from the Inflation Reduction Act, which includes about $400 billion in federal funding for clean energy. Europe’s Green Deal industrial plan to strengthen the competitiveness of net-zero industries is also a step in the right direction, though not immediately effective.
“We are investing in the US,” said Ilham Kadri, CEO of Solvay, a Belgian-French multinational chemical company. Solvay last year announced plans to build an $850 million plant in Georgia to make battery components for electric vehicles.
And while companies continue to face pressure from inflation, job cuts in once-hot industries such as technology, and the banking sector crisis after the failure of Silicon Valley Bank, executives say decarbonization is still a challenge. said to be an issue.
Christoph Schweitzer, CEO of The Boston Consulting Group, said: Genpact CEO Tiger Tyagarajan agrees. “Even in this environment, people are protecting their long-term investments,” he said. “And I like to call this energy transition a long-term investment that people are trying to protect.”
Lorenzo Simonelli, Chairman and CEO of Baker Hughes, a leading oilfield services company, said: “But I think it has to be practical.”
Simonelli said LNG, in particular, is undergoing a multi-year upcycling that should be supported, as it is the easiest way to drive immediate reductions in carbon emissions. However, he said the elements of accounting related to scope 1, scope 2 and scope 3 need to be considered as they are relevant for regulation.
At Entergy, which supplies electricity to 3 million utility customers in Arkansas, Louisiana, Mississippi and Texas, the incentives created by the Inflation Reduction Act have pushed electricity sales to levels not seen since the 1970s. leading to strong growth opportunities for .
Drew Marsh, Chairman and CEO of Entergy, said: “They are looking at how they can get a first-mover advantage and how they can take advantage of the clean energy infrastructure that is already on the coast.” He said he expected sales growth to increase by 6%. But legislation will likely push it further.
George Oliver, chairman and CEO of Johnson Controls, which helps manufacture more sustainable buildings, says he is educating the public and private sectors on the importance of transforming the way construction is done. Buildings account for about 40% of the world’s carbon.
“Buildings have become less strategic over time and have significantly less capital to upgrade,” says Oliver. “You can’t get to net zero without dealing with buildings.”
Despite the focus on revisiting key investment decisions following the inflation control law, leaders said there are still many gaps that must be addressed before funds are deployed. I’m here. “We believe the talent is huge,” says Schweizer. Limitations include not having enough workers who know how to create the billions of dollars the government plans to spend on clean energy. There are also questions about who will plan, install and operate all new clean energy technologies.
Tom Baker, Managing Director and Partner, Boston Consulting Group, said: “But the problem will be the pace.” He cites the solar manufacturing industry as an example. The industry has incentives to be developed in the US, but the first step, silicon production, takes him two to four years to ramp up and almost a decade to payback.
Banks are also sorting out what this means for their balance sheets. RBC President and CEO Dave McKay said: “As the technology matures, we will be able to add medium-term risk-taking to the balance sheet.”
State Street Chairman and CEO Ron O’Hanley is advocating accounting changes for decarbonizing portfolios. He gives the example of a US company choosing to invest in his LNG plant in Germany to replace coal. While replacing coal is ultimately good for the environment, this type of investment is actually against scope 1 and scope 2 and is a regulatory disincentive.
McKay notes some signs of investor concern about the risks of the energy transition, pointing to recent “significant” outflows from ESG ETFs underperforming against non-ESG benchmarks. doing. Investors aren’t showing particularly calm today, but McKay said he’s seeing “a lot of momentum and energy.” He said unproven technology could be risky, but could be successfully integrated into the economy.
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