Physical climate risks are getting more attention…

A typical company’s capital structure consisting of revolving credit, short-term debt, long-term debt, and equity appears to be increasingly likely to face a physical risk evaluation around each of these sources of capital.

Banks are expanding their capabilities to evaluate their overall portfolios and specific counterparty risk revolving credit and short-term debt. They may also have in-house advisory capabilities to help both sides of the transaction lower risk. For long-term debt, fixed income investors are increasingly likely to have a view of the risk associated with companies’ specific physical assets that matches their longer investment time horizon. The equity investment universe is catching up, and analysis varies more by sector while requiring a deeper understanding of the suppliers and customers of each type of company to prepare for acute hazards.

…and perception of physical risk may matter as much as actual risk

While massive amounts of geospatial data on asset locations are available, some financials lack either the ability to isolate signal from noise, the expertise to understand how to use information that comes with some amount of uncertainty, or both.

Even at less sophisticated investors without the above data sets, events like Hurricanes Milton and Helene that have cut across valuations in portfolios of every asset class. This may provoke concern around investments in businesses in regions that face high hurricane / flooding / wildfire risks. Companies that have thought deeply about these risks, including both upstream and downstream in their value chains, may want to describe their thought processes publicly, even if not providing building-level specifics.

More regulation is very likely coming, like it or not…

The pause on new climate regulation in the U.S. and Canada looks like an outlier when viewed from a global perspective - no less than 40 countries are underway with ISSB adoption in some form, and additional state and local laws are in various stages of development in North America and globally. Forthcoming regulations in the U.K. and Japan, and other markets may have an impact on companies far beyond their borders. This puts the onus on companies to keep an eye on changes globally, and be aware of the available consult opportunities where their feedback matters.

Regulators and legislators don’t always hear enough from practitioners (compared with consultants that may have different motivations, or those using disclosures without bearing any associated costs). Harmonization (“identical rules”) or substitute compliance (“interchangeable rules”) are different approaches for companies to advocate for depending on the market - we heard mentions across multiple sessions that harmonization for its own sake might lead to pushback.

…but mandatory disclosure can provide an opportunity for the sustainability team

As we move from voluntary to mandatory disclosure and potentially add assurance requirements, we’re also seeing a shift from decentralized “let the sustainability team collect that in spreadsheets” to centralized “let’s build a formal structure that will meet mandatory disclosure needs” processes. Done right, these also can help “futureproof” for the next set of regulatory requirements and avoid future costs.

The CSO role looks very different from 18 months ago, and its remit has narrowed…

There are fewer new CSOs, and the remit of those taking the role has narrowed. Reporting lines also look different, with more sustainability leads shifting their reporting to Legal or Human Resources at the expense of CFO. On a compensation basis, the spike in total comp for head of sustainability seen in the 2020-2022 era has evaporated, leaving some more experienced professionals with higher expectations than the current roles offer.

CSOs today are much more likely to have their goals defined in financial performance (increased revenue, lower costs, lower risks). Further, the days of a CSO that’s responsible for “everything that sounds like the environment” have waned. We heard that CSO roles today are defined by three C’s: Connection, Collaboration, and Catalysts - and none of these are easily replaceable by AI tools in the near term.

…and similar is true of the responsible investment community

In 2021, an “ESG analyst” at an investment firm may have been responsible for measuring the climate transition plans of power producers and showing their alignment to a client portfolio with a net zero target. In 2026, this individual is referred to as a “utilities analyst.” Data, workflow tools, and the education process are more ingrained into the investment process at larger investors today. Viewed from the outside, this mainstreaming of capabilities could be branded as “retreat,” or as “maturity,” and the best analysts see wielding these capabilities as a differentiator.

We’ve seen a version of this in fund flows reports - moving $10m from a “light green” mutual fund that invests based only on ESG scores, to a bespoke climate transition theme portfolio, looks like a “$10m ESG fund outflow,” when it’s decidedly not.

Sustainability’s language is beginning to vary depending on where you are in the world

Different audiences respond better to specific syntax when it comes to your sustainability story - for example, the vocabulary in Latin America tends to be framed around social integration, while in APAC sustainability’s contributions to efficiency stand out. Public companies need to speak with a single voice with material information for the investment community, but the way the story is told to specific stakeholder groups may offer some opportunity for variation. (As one example, this may be particularly important for companies that face human capital transparency requirements in Europe but are also regulated in the US).

AI tools might help you test out how to best tailor messages for specific stakeholder groups. Your communications teams may also be able to create “feedback loops” that show where and in what audiences your message is effective, and where it may need some work.

Generalized AI tools are giving companies and investors new capabilities

Nearly every session included a view on AI and workflow. Some comments we heard included:

Carbon accounting is likely to look very different in a few years

The GHG Protocol’s initial proposed changes to Scope 3 coincidentally released on the day of our Summit, and may change the way companies think about the boundaries they measure. We’re also seeing the alignment process between ISO and GHG Protocol, a consult on changing the nature of Scope 2, and numerous other initiatives.

We heard from two organizations that are addressing gaps in the market that exist today: PCAF (Partnership for Carbon Accounting Financials) is working on financed emissions and financed avoided emissions, while Carbon Measures is looking to build product-level emissions intensity standards for key products in hard-to-abate sectors.

Building standards that treat carbon accounting like financial accounting is not an easy task, but if done well, can provide a foundation of confidence that allows for comparisons between different products and different markets.

Carbon pricing continues to expand, driven by policy

The first EU CBAM liabilities have been priced and will produce payments from companies starting in early 2027. This also means investments that lower the carbon content of those products are beginning to see improving ROI measurements. Since the Paris agreement (when about 5% of global carbon was covered under a carbon price), we’ve seen policy progress that has led to ~30% of global emissions now covered by carbon pricing arrangements.

Industrial policy can lead to carbon pricing - we discussed the PROVE IT Act, passed with bipartisan support in Congress this year, that is designed to study the emissions intensities of key products made in the U.S. to show their advantages vs. foreign products, as one example.