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S&P Global Is Keeping an Eye on Climate Change

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S&P Global Is Keeping an Eye on Climate Change

A couple of key transactions are making S&P Global a climate change data powerhouse

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The name S&P is synonymous with financial analytics. The 105-year-old company dates back to the days before automobiles were everywhere and the railroad ruled the land. Over the last century, it has evolved into one of the few mainstays of Wall Street.

S&P Global Ratings are treated as gospel, and S&P Global Market Intelligence insights are vital sources of real-time information for billion-dollar banks, the casual day trader, and everyone in between. If your company makes it to the coveted S&P 500, one of the five hundred largest companies listed on stock exchanges in the US, you have truly arrived.

In January 2022, S&P Global moved to enhance its ability to predict outcomes that have become increasingly critical not just to the business environment, but to humanity’s survival. With the acquisition of the Climate Service, it drastically increased its ability to provide complex and comprehensive climate data, models, and analytics.

The Climate Service had made a name for itself since its 2017 founding and had won several awards for its ability to analyze climate risk. S&P recognized that the realities of climate risk poise are already far too apparent, and their effects could downright cripple not just businesses, but entire economies of the world.

The acquisition is a further buildout of S&P Global’s ESG focus, Sustainable1, the company’s all-in-one source of essential sustainability intelligence that includes a full suite of data, analytics, benchmarking, evaluations, and indices for customers to get the full view of how to enhance and achieve their sustainability goals.

“We are passionate about providing the market with the essential information it needs to make smart decisions in the face of climate change,” James McMahon, CEO of the Climate Service, said in a statement. “Together with S&P Global, we will take our climate risk capabilities to the next level and be able to deliver insights at scale that the world urgently needs.”

The acquisition was no doubt vital to S&P’s September 2022 announcement about how its updated physical risk database assesses the ways that company and asset-level valuations could be impacted by climate change incidents.

S&P can also provide actionable data for investors who want to drive ESG initiatives. The database combines asset-level data with future climate hazard predictions that, while notoriously difficult to model, are becoming better understood as humanity continues to grapple with the effects of global warming. The database also contains information on more than 870,000 global assets and more than 20,000 companies. Users can seek out ratings on companies or assets that might be at high risk of climate-related business downturns.

According to S&P, 92 percent of the world’s largest companies hold at least one asset that is likely to be exposed to climate risk by 2050, even under the best-case models where global temperature changes are kept below two degrees Celsius—an unlikely feat. 

With that information in mind, S&P made another move to strengthen its climate research capabilities. In December 2022, it announced the acquisition of Shades of Green, an independent, research-based second-party opinion (SPO) provider of a company’s financing and framework through an environment, social, and governmental (ESG) lens. Shades of Green was the first green bond framework issued by the World Bank in 2008, and since then, it has become a leading provider of SPOs, winning multiple awards for its transparency on climate risk.

While climate change continues to pose significant present and future risks to businesses, Jesse Kramer has made the best of a bad situation. The associate general counsel, who heads up mergers and acquisitions at S&P Global, has no doubt played an invaluable role in helping the organization become a climate information giant in an incredibly short period of time.

As S&P has sought to evolve its climate prediction and modeling capabilities, it’s absorbed some of the most prestigious names in the game to get there. Kramer must be credited for helping S&P bring ESG issues to Wall Street. “Climate-exacerbated disasters cost companies and investors billions,” according to S&P Global Sustainable1’s homepage. “Natural capital costs were 77 percent higher than net income for major global companies in 2019, and 66 percent of such companies will have at least under high physical risk in 2050.”

“We are fortunate to have partnered with Jesse and S&P Global on several transactions over the years. Jesse’s commercial knowledge, sharp legal skills, and decisive leadership allow him to efficiently execute the most complex deals,” says Kimberly C. Petillo-Décossard, cochair of the M&A and Corporate Advisory practice group at Cahill Gordon & Reindel LLP.

S&P Global continues to usher in a new age of climate research and data with the goal of avoiding a climate catastrophe. With initiatives like Sustainable1 and S&P’s continuing appetite for climate-data acquisitions, nobody can say we didn’t see it coming.

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