Patch

There are new proposed governance requirements in SBTi's draft Corporate Net Zero Standard. The draft introduces several significant governance requirements that elevate climate strategy to a higher level of organizational responsibility and oversight. 😅 Somehow missed these in my first read through, but they seem like a pretty significant departure from what's currently required: ➡️ For Net-Zero Commitments ⬅️ - Formal approval requirement: The standard explicitly requires net-zero commitments to be "formally approved and adopted by the company's highest governing body responsible for external commitments (e.g. the Board of Directors or equivalent)" (CNZS, p.33). - Assigned leadership responsibility: Companies must "assign responsibility for the net-zero commitment to specific roles or committees within its governance structure and/or within the leadership of the organization (e.g. C-suite level)" (CNZS, p.33). ➡️ For Transition Plans ⬅️ - Formal approval of transition plans: The standard proposes that transition plans "shall/should be formally approved and adopted by the highest level of governance within the company (e.g. the Board of Directors or equivalent)" (CNZS-C2.1, p.34).

One of the founding motivations behind the inception of carbon markets was to drive climate finance to the global south. To enable for heavy emitting northern nations to compensate for their historical emissions. Understandably, I've received a lot of questions over the last three months if this opportunity is at risk, now that President Trump begun his second term. The short answer is: no. The CEOs and CSOs I speak to every day plan on being in seat longer than a four year term. They are thinking on timescales that are commensurate with the magnitude of the climate change problem. Yes, the tactics on the ground are changing. But, the long term objective is the same: manage our climate towards a livable future. I break it down further in the piece below - thanks for the time Ben Payton. Link is in the comments.

📢 SBTi's Draft Net-Zero Standard V2.0 Released 📢 SBTi just dropped its consultation draft for the Corporate Net-Zero Standard V2.0. Carbon market professionals take note! Here's a quick summary and some initial thoughts: 💡 Key Proposed Changes 💡 • Expanded framework from target-setting to include performance assessment, implementation, progress evaluation, and claims • Company categorization (Category A: large companies and medium companies in wealthy countries; Category B: smaller companies and those in lower-income regions) • Three-stage validation model: Entry Check, Initial Validation, and Renewal Validation • Strengthened Scope 3 approach focusing on relevant emissions sources rather than percentage coverage • Clearer distinction between direct mitigation, indirect mitigation, and beyond value chain mitigation (BVCM) 📈 Carbon Markets Elements 📈 ➡️ Residual Emissions and Removal Credits The standard proposes three options for addressing residual emissions, which apply only to Scope 1 emissions (projected to be <10% of base year emissions): 1. Required removal targets (separate from reduction targets) 2. Optional recognition for setting removal targets 3. Flexibility to address residual emissions through either additional reductions, removals, or both. This means modest CDR market impact and is likely something that SBTi will receive a lot of feedback on. Even mandatory targets would apply to just a fraction of emissions. Hard-to-abate sectors might drive some demand, but other factors will likely limit growth. ➡️ Ongoing Emissions and BVCM The draft standard introduces the idea of optional recognition for companies addressing "ongoing emissions" (those released during the transition period) through BVCM, which can include high-integrity carbon credit purchases. It’s unclear if "recognition" for addressing ongoing emissions through BVCM would drive additional corporate action. My overall take: While the options for CDR targets seem like a potential step in the right direction, the impact of this in channeling climate finance to CDR projects will be limited if these options remain focused on Scope 1 emissions. Additional recognition for BVCM action is interesting, but it’s a question mark as to whether this would actually be a real demand-driver in the market for high integrity credits. I would love to see SBTi go further here.   ⏰ Act now: Submit feedback by June 1, 2025. Shape how carbon credits fit into corporate climate leadership! (link in comments) 🧐 For more details, check out our blog post (link in comments) ❓ Reviewed the draft? What does it mean for your strategy? Share your thoughts below 👇

The Sustainable Markets Initiative, established by King Charles when he was Prince of Wales, marked its 5-year anniversary last week in what is intended as a ten year mission. I joined a broad range of CEOs, of both major businesses and entrepreneurial innovators, at Hampton Court Palace to mark the occasion. Oliver Wyman and Marsh McLennan have been supporting SMI from close to the start of their effort to accelerate a sustainable future, as a contributor to both the Energy Transition Task Force and the Insurance Task Force. The SMI sessions are always pragmatic, action oriented, and speak to a commercial-smart transition; it was exciting to see multiple new technologies being given a showcase. I spoke at a roundtable on the Voluntary Carbon Markets, where alongside innovators and partners that OW has relied on for support, like Patch and Charm Industrial, I shared our approach to internal carbon pricing and investing in carbon removal though our Climate Leadership Portfolio; on Nature investing; on how the nexus of arts and science can help advance people’s understanding of climate risks; and I attended several plenary sessions including on gender diversity in the C-suite. On top of the attendees and well-curated agenda, the surroundings were also spectacular as you can see from the photos. Several of my sessions were in the Little Banqueting House, in a room vividly painted by Antonio Verrio that I have never managed to see on my touristic visits. Discussing climate and nature in a room built 325 years ago, never mind holding the plenary sessions in the Great Hall of 500 years standing, is very effective in reminding us of our duties to the planet for targets set over the next ten to 25 years.

Coming back from a fantastic week in London and attending the fifth anniversary CEO Summit hosted by the Sustainable Markets Initiative. I had the opportunity to participate in several CEO roundtables with some of the world's largest companies to discuss how enterprises should be folding carbon removal into their sustainability strategies. The theme of the week was pragmatism with an eye towards action, not idealism. There was consensus that we're going to overshoot 1.5°, making carbon removal all the more important — and that it’s going to take pragmatic steps, not perfect ones, to scale this ecosystem. The CEOs at the summit were thinking differently. They’re looking long-term, and making targeted, strategic investments in carbon markets. They understand it takes time to ramp carbon removal capacity and the importance of setting interim investment targets between now and 2030. We know carbon removal is part of the long term solution to climate change, and we need to invest today to ensure we have the solutions tomorrow. Feeling energized heading back to California after a productive few days and seeing friends and partners! Nick Studer Karen Fang Amy Brachio David Livingston Peter Reinhardt Martin Berg