Climate researchers and practitioners convened in Berkeley, California on March 11 for the Berkeley Corporate and Climate Summit, to examine the future of climate governance and reporting across industries and the challenges companies face.
The conference, hosted by the University of California Berkeley Law School, included perspectives from business, law, finance and technology firms, as panelists explored topics that included artificial intelligence and climate impact, measurement and reporting challenges, the impact of anti-ESG pushback; and what asset managers see as their priorities for the year.
Here’s a quick rundown of some key points discussed.
AI will continue to be useful for monitoring climate impact.
As the adoption of AI continues, one panel’s participants described a range of use cases for AI to advance climate impact. Over the past year, companies have increasingly turned to AI and generative AI for ESG use cases.
Will Kletter, vice president of operations and strategy at ClimateAi, a firm that offers climate risk modeling offerings for companies, highlighted AI’s role as an “enabler of human decision making.”
Kletter’s company uses AI to forecast the impacts of extreme weather and climate change for industries and their supply chains. While some of the regulatory-driven use cases might be going away — as both the United States and European Union are undergoing some degree of deregulation — the technology can be used to drive societal and business value, he said.
“The types of human decisions that we're trying to support are, we see [AI] as a time multiplier — so helping things go faster — or an effectiveness multiplier — helping things go better,” he said.
AI also has potential to transform corporate reporting efforts, according to Catherine Atkin, a climate attorney and co-chair of the climate data policy initiative at CodeX, which is part of the Stanford Center for Legal Informatics.
“AI is a very powerful tool for companies to think about not only how to report and be in compliance but also the next step,” Atkin said. “Once we measure this carbon footprint, it's kind of massive, especially if you include scope 3 — what are we going to do about it?”
Companies have both structured and unstructured data in many different places, and are often using spreadsheets, she noted. The potential for AI to collect data from enterprise resource planning systems and combine it with data from other places to pull out relevant greenhouse gas emissions or climate risk data is a tremendous opportunity, Atkin added.
Panelists said issues like data scarcity and data quality create challenges with using AI for such use cases. Decision makers may need to change their approaches to account for the limitations in the data, Kletter said.
If historical datasets are not available, organizations will need to look to other data sources, including synthetic data, said Daphne de Jong, founder and CEO of Ven, an AI-automated risk analytics platform.
“[Ven looks] at adjacent industries [and] analog data, and we'll add more information to that over time,” she said.
Companies prioritizing sustainability reporting are facing hurdles.
Another panel highlighted several key challenges companies currently face with climate reporting. Among those include the risks of climate reporting being too closely linked to a compliance function.
“Not only is climate becoming a compliance function — with something greater than 50% of investment in sustainability is going into reporting and compliance, not into innovation and climate solutions — you don't necessarily have decision-useful information for allocating capital over time and under uncertainty.” said Alicia Seiger, a visiting scholar at the Stanford’s Doerr School of Sustainability.
“For that, you need accounting, which is a different exercise than disclosure,” Seiger said. “The difference between disclosure and accounting is accounting is a tool where you add everything up — and only once — so you account for all emissions in global supply chains.”
Panelists also noted hurdles with connecting sustainability to financial performance. Mark Kramer, a partner at Congruence Capital and Maternal Newborn Health Innovations, argued that even with the capability to measure sustainability performance, companies “don't have good mechanisms to connect that to the financial implications,” which leads to business decisions being made “without regard to sustainability in most cases.”“Sustainability is simply this after-the-fact reporting, and perhaps some degree of amelioration, but it doesn't become part of the core business strategy or decision making,” Kramer said.
Additionally, many companies are being very conservative about reporting “until the norms are set by the sector about what to disclose,” according to Tripp Borstel, managing director for climate change and sustainability services at Ernst & Young. Greenhushing, or the effort to underreport sustainability achievements, has sprung up in response to greenwashing lawsuits, Borstel said.
Amid anti-ESG backlash, companies should focus on building public trust.
Anti-ESG backlash is currently putting companies’ sustainability efforts into a “storm of crosswinds,” in which companies are staying quiet and scaling back on commitments, Business for Social Responsibility CEO Aron Cramer said later in the day. Meanwhile, litigation risks are coming from both sides of the spectrum, according to Christin Hill, a partner at law firm Morrison Foerster.
Hill said companies are facing risks in response to claims companies have not met sustainability commitments, as well as allegations that firms are overinvesting in sustainability and hurting the bottom line. She said diversity, equity and inclusion “is a really significant risk area” with how the Trump administration has looked to target corporate and federal DEI practices.
“Most companies have DEI practices,” Hill said. “Some are abandoning them. But the legality of those practices is on the table, and whenever the legality of your practices is being publicly questioned, you will have shareholders on different sides of the spectrum.”
In response to such pressures, companies should take stock that the anti-ESG backlash is not happening everywhere, and to continue to pursue longer-term goals, Cramer said. Companies should also consider what their “red lines” are — things they will not go back on — and a clear sense of longer-term purpose, or a north star.
Companies should also communicate in a more accessible way about how they’re meeting ESG goals, to help build public trust, he said, noting that sustainability language is often seen as abstract or disconnected from the lives of regular people.
“Make it more practical, make it more real, make it resonate for the average person,” Cramer said.
Amid headwinds related to climate regulation, one positive result could be greater scrutiny on companies’ ability to meet their stated climate goals, Atkin suggested on a prior panel.
“If there's anything that good [that] comes out of adversity, it’s that there needs to be more scrutiny and more accountability,” Atkin said. “And so companies need to step back and decide … figure out what the data is telling them, and then make commitments that they can actually achieve.”
Investors’ focus on climate will continue despite ongoing political uncertainty.
Amid political pushback on sustainability, investors have retained their interest in climate solutions, said Kirsten Spalding, vice president of the investor network for climate nonprofit Ceres.
“I’m hearing a lot about demand,” Spalding said. “The investors are saying, because of AI and big data centers, those big tech companies have made commitments to try and source green energy, clean energy, renewables, and as a result, there's investment opportunity there.” .
Despite investor interest, the transition to a net-zero economy will continue to be somewhat unpredictable, suggested Ilmi Granoff, senior fellow at Columbia University’s Sabin Center for Climate Change Law. However, he was optimistic about the continued resilience of the Inflation Reduction Act’s tax credits for sustainable investments, despite calls to repeal or alter them as part of Congressional Republicans’ budget reconciliation bill. A coalition of 21 House Republicans recently went public with their opposition to a wholesale repeal of the credits as a part of that process.
“Anyone who thought the transition to a net-zero economy could be orderly was gravely confused,” Granoff said. “We have to update our mental model [to recognize] that disorder is part of the transition.”
