S&P Global Inc. (SPGI) Earnings Call Transcript & Summary

My name is Lindsey Hall, and I'm Head of ESG Thought Leadership at S&P Global, where I co-host the ESG Insider Podcast. And you can find links to listen to the podcast on Apple Podcast, SoundCloud and Spotify in the widget at the bottom of your screen. Now it's my pleasure to moderate today's webinar, Plotting the Path to Meet Net-Zero Target: Energizing Efforts for Action. Before we get started, a couple of housekeeping things. I'd like to share our new appreciation program. For every participant that attends an S&P Global Market Intelligence ESG-related event from February through April and completes the event survey at the end of the webinar, we will plant a tree through EcoMatcher, which is a third-party vendor. And shortly after completing your survey, you'll receive an e-mail about the tree donation. You can also track growth of the tree over time. So please do take a moment to complete the survey. We always appreciate the feedback. It's extremely helpful for us as we organize these webinars in the future, and we hope you enjoy the special gifts. Now we recognize that net-zero is a topic of great interest to those of you on today's call, and we want this to be an interactive session. So please feel free to submit questions throughout the presentation or during the Q&A session during the end of the broadcast. Also, please check out the widget at the bottom of your screen. We'd like to point out the resources widget, which is filled with valuable content and thought leadership as well as the survey widget. Again, please take time to fill up the short survey. We really value your insight. And lastly, before I begin, please note that the activities of S&P Global Market Intelligence are independent and separate from S&P Global Ratings. Thank you for joining us. And now for the fun stuff. I'd like to introduce today's panel. I am so thrilled to be bringing together this group of experts and trendsetters to talk about net-zero. I want to share a little bit first about the impetus for this webinar. We've been seeing this absolute explosion of net-zero targets over the past month -- 6 months. And those announcements have come from across geographies and industries, and that's prompted a lot of questions for us. When you move beyond the hype and the buzzwords, what comes next? How should companies be thinking about these targets? How are they setting their emissions goals? How are they meeting them? And how are they measuring progress? And also what about investors? How should they be thinking about net-zero? So we're really fortunate today to have 4 panelists with the answers to those questions. These panelists come from some of the world's largest companies. And they come at this topic from very different industries and different perspectives. So I'm really excited to bring those together today and see what we can learn. On our panel, we have Kathleen McLaughlin, who is Executive Vice President and Chief Sustainability Officer at Walmart, the world's largest retailer. Kathleen is also President of the Walmart Foundation. And she's responsible for programs that help Walmart create economic opportunity through jobs and sourcing, enhance the sustainability of food, apparel and general merchandise supply chain and strengthen the resilience of local communities. Before joining Walmart in 2013, she spent more than 20 years with the global consulting firm, McKinsey & Company. Also joining us today is Katherine Neebe, Chief Sustainability Officer at Duke Energy, one of the largest utilities in the U.S. Katherine joined Duke in July 2020. And before that, she was at Walmart, where she led environmental, social and governance strategy and oversaw stakeholder engagement on behalf of Walmart's sustainability team. Prior to that, she worked for the World Wildlife Fund. We're also joined by Charlene Lake, Chief Sustainability Officer and Senior Vice President of Corporate Social responsibility at a AT&T, one of the world's largest communications companies. Charlene is also chair of AT&T's charitable foundation. She leads AT&T's social, innovation, environmental, philanthropic and civic engagement endeavors, and is responsible for helping the company connect social needs with business objectives. And finally, representing the financial industry perspective, we have Carlo Funk. Carlo is the lead ESG investment strategist at State Street Global Advisors, covering Europe, the Middle East and Africa regions. Now State Street Global Advisors is one of the world's largest asset managers with about $3.5 trillion in assets under management. Prior to joining the firm, Carlo was responsible for the design and distribution of passive ESG investment solutions at BlackRock. So we've got this wealth of perspective and knowledge here today. And I want to dive right into the discussion. But first, I thought we could kind of give each panelist about 30 seconds to a minute to share where their company stands in its net-zero journey. And then once we have this lay of land, we'll dive into these questions in more depth. I'll start with you, Kathleen. Can you please tell our audience, where does Walmart stand in its journey to zero emission?

Well, thanks so much, Lindsey, for having me here today. It's a real pleasure to be with everybody. So we've been working on progress toward emissions reduction really since about 2005 at Walmart when the CEO at that time set out a goal for us to be powered 100% by renewable energy. And what started really as an energy journey turned much more into an emissions journey along the way, as I think all of us became more aware and we're educated about what's needed to keep the climate on a good trajectory. So in 2017, we became the first retailer to set a science-based target for emissions reduction. And we've been working on it ever since. And just last September, we elevated that ambition to set a date to get to zero emissions in our own operations to Scope 1 and Scope 2 basically by 2030 -- or sorry, 2040. So that means getting to zero in all of our electricity, powering our facilities globally, our refrigerants transitioning to low global warming potential refrigerants, converting our on-site fuels to zero emissions solutions and then transitioning our fleet which is substantial. That includes our long-haul tractor trailers in the U.S. and other markets to zero emissions technology by 2040. Our science-based target also includes our work on Scope 3, which we do through something called Project Gigaton, and I'll talk more in detail about that later, but it essentially involves now over 3,100 of our suppliers engaged and drawing down emissions across our supply chain, which is also substantial. And our goal there is 1 gigaton by 2030 of emissions avoidance.

Thanks, Kathleen. That Gives us a ton of things to dive into, and we are going to circle back. But first, I'd like to hear a little bit from Katherine. Katherine, can you talk to us a little bit about where Duke stands in its journey?

Sure. It's a real pleasure to be here and to chat with some of my fellow panelists of whom I know from a previous life, so it's really exciting. I joined Duke this summer. And part of the reason I came -- this past summer, part of the reason I came to Duke was because they have set an ambition to net-zero by 2050 with 2 interim targets: one, a net-zero target for methane emissions by 2030; and the other, an ambition to at least halve emissions by electricity generation by 2030. As an energy provider, the thing that I really, really appreciate is that we have been on this journey for some time. We first started reporting our progress in 2007. We set a target in 2010. We've moved forward and -- addressed it and moved it forward in 2019 with our net-zero ambition. So really exciting progress. The energy sector is in the midst of massive transformation and what it looked like 10 years ago, 20 years ago is going to be completely different from how it's going to look in the future. So a really exciting time to be here.

Thanks, Katherine. Charlene, same question for you about AT&T.

Thanks, Lindsey, and thanks to S&P Global for the invitation. We have been on this journey at AT&T for 14, 15 years. It's something that's really important to us because it affects our business, and it affects -- it affects us personally. And when I think about it, it's somewhat unlike other ESG topics when it affects the business, but it affects us personally, it affects our family, it affects our children, our grandchildren. So we do take it very seriously. We have a net-zero goal. That's the first of our plank of our plan. Our second one is for our suppliers, and we have a science-based target. And then the third one is for our customers because technology actually is one of those enabling solutions for carbon emissions reductions. So we work very closely with our customers in order to help them reduce their emissions. So overall, that 3-plank plan, we believe, is good for our business and certainly good for our stakeholders and us personally. Look forward to the conversation.

Thanks, Charlene. And lastly, Carlo, can you talk to us about State Street Global Advisors, and how you're thinking about net-zero?

Yes, certainly, and greetings from London across the pond. Very happy to be here, and thanks for the invitation. Different from the other panelists, see, I'm representing the asset management side, right? So we are part of states and corporation, which has set out very ambitious planned goals for the corporation itself, which turned carbon neutral last year already, a little bit ahead of plan. But the side that I'm representing here is the asset management side. So you mentioned yourself that we are managing, as fiduciary, a little over, like, $3 trillion in assets on behalf of our clients across asset classes, across investment styles, active and passive. And what we are seeing is that more and more special institutional investors, but more and more retail investors as well are asking to improve the carbon profile of the portfolio. But it's fundamentally a different approach on what you would need to do in a portfolio context, in a diversified portfolio context and how we will tackle this as a corporation. And this is completely a top priority for the house, and we need a lot of research. We need to acquire a lot of data in the market to be able to improve climate metric just in portfolio construction. So that's where we stand to push down carbon profile of the portfolio in our AUM.

Great. Thanks, Carlo. And thank you all. I think now that we know the general landscape, I'm hoping our panelists can give the audience a bit of on-the-ground perspective. Often, when we talk about net-zero, it's at this very high level. And so I'm hoping to get a little bit more granular and talk about, step 1, you announced your emissions goal, which is a fantastic first step, but what comes next? I'm really interested to hear from all of our panelists on this question. But I'd like to start with Walmart, which, as Kathleen noted, announced its goal to hit zero emissions by 2040 in September 2020. Kathleen, can you tell our audience what comes next or what has happened in the months since you announced that goal?

Yes. So we announced that goal last September. But as I mentioned before, it comes in the middle of many years of working on all the components that are required to get us to zero emissions in our operations by 2040 as well as I look at supply chain. So renewable energy, we're doing that in a couple of ways. One is through procurement and the other is on-site generation. In the procurements that we're doing, we aim to enter into deals that allow us to help add to the grid in terms of renewable energy that's out there. And we're making great progress. We're well over 1/3 of our electricity needs globally being provided through renewable energy. And then we also work on energy efficiencies. So conversions to LED lights bulbs and things like that all across our store network, in our DC, distribution center, and fulfillment center as well. In terms of the other components, refrigeration, on-site fuel, fleet, in those areas, we are really trying to drive innovation in partnership with others to help the whole industry go faster and have solutions that actually work. So for example, in terms of transportation, we have already converted smaller trucks, forklifts, things like that. The real question is the larger fleet and the innovation that's going to be required, not only in terms of the vehicles themselves, but also the charging infrastructure required for such a large network of long-haul tractor-trailers. So that's really more about innovation with our business partners, with NGOs like Environment Defense Fund, with administration, with other experts in the industry that say, "Well, how can the whole country, how can the whole world really go faster on innovating for long-haul transportation?" Then if I look at Scope 3 and Project Gigaton, the way we've approached that is pretty practical. We're trying to really make the progress on zero emissions be something that's a transformation of business, transformation of the culture, just the way that business functions in supply chain. So the way we've set up our program is to identify 6 different arenas where suppliers of everything from beef to apparel, to electronics, to produce, you name it, any category that Walmart sells, can consider in the supply chain making changes in 6 practical areas. So energy in manufacturing of those products, much the way we're looking at energy in our own operations. So renewable energy, energy efficiency and so on. Product design, so considering the entire life cycle of a product and how to redesign it to lower emissions. So Charlene, you talked about the customer, an example of that would be cold water laundry detergent. If you can wash your clothes in cold water, you're drawing out emissions, avoiding emissions in terms of that use of the product. Packaging and -- significant work underway across thousands of suppliers to outright eliminate packaging, replace it with lower-emissions and lower-waste solutions, usable packaging, recycled content and so on. Waste reduction, that's food waste reduction, which is a major driver of emissions in supply chains, whether it's on the agricultural field or in our kitchens at home. So working with customers and suppliers to draw down food wastes. Agriculture, sustainable agriculture practices, and that's on everything from corn to tomatoes. So finding different ways to farm to lower emissions from practices on the field. And then finally, forests, not only that are management forests for production of commodities like palm oil, for example, or paper, but conservation, restoration and so on. And so each of those areas have very practical actions that businesses can take. We help identify those, make them easy for suppliers to pursue those and then report on them. And the program provides support across those areas as well, so not just the business practices and measurement tools and so on, but support. So for example, we, with Schneider Electric, launched a renewable energy PPA, which allows suppliers who might not have their own procurement teams to come together and be part of a collective to purchase renewable energy. So it gives access to that as a tool for even small suppliers. And that's really the core idea, Lindsey, is we want to democratize climate action to make it extremely accessible, practical, feasible for any company of any size that's involved in the retail or consumer goods and really just make it the norm. So it's our own emissions getting to zero and then engaging Scope 3 with suppliers to drive them towards net-zero as well.

Thanks, Kathleen. And what I'm hearing is that there's a lot of work that has to be done with a lot of different stakeholders along the supply chain. Charlene, is that something maybe you could speak to as well? I know that you were talking a little bit about the need to work with different stakeholders in your earlier answer. So maybe you can pick up the baton from Kathleen there.

Yes, absolutely. So for our supply chain, we have set a science-based goal of 50% of our suppliers, based on spend, will have a science-based goal by 2024. And so we're working toward that. We're leveraging TIA QuEST and CDP supply chain to help us in that regard. And we learn from them how to benchmark, we learn how to assess. And it certainly helps the progress of our supply chain. But like what Kathleen said, it's important to look outside the company. So we have our operations goal of net-zero, and we have our supplier goal as well. And then we have our customer goal. And when you look up and down the supply chain, it's important that you're working with businesses all around you. And our customer goal is similar to that. What we have been working towards for a good number of years is to be able to prove emissions reductions for our customers 10x our own footprint. Now that's a goal that's in progress of being reset since we set our carbon neutral goal. Of course, we did it shortly after Walmart did. I believe we in October. But in that regard, we're working with each individual customer, and we're tracking what the technology can do help them solve their emissions problems. And we have customers who are putting in their sensors on everything from water heaters to shipping pallet and becoming more efficient. And we're tracking them and creating a case study so other businesses can understand how to use technology to reduce their emissions. That reminds me a lot of what Kathleen was saying about smart agriculture and different industries, because if you can apply that technology, certainly, that can be an accelerant to carbon reductions. One other thing that I wanted to pick up on that Kathleen mentioned was the fleet. Part of our operation's focus get to net-zero is to focus on our fleet because we have a fairly large fleet as well. And of course, just reducing the number of fleet is part of that core, but transitioning that fleet to hybrids and to electrics is key, that innovation is key, too, because it's the big bucket trucks that aren't exactly coming off the electrical line right now. And so we're really needing to push innovation with partners in order to do that and working with third parties like the Corporate Electric Vehicle Alliance. So I think it's really important that we look at the whole ecosystem of support through suppliers, through customers, through nonprofits, through coalitions in order to move forward.

Thanks, Charlene. I wanted to dig in on just that goal that AT&T set in fall of 2020 to achieve net-zero Scope 1 and Scope 2 emissions. Those are, of course, direct and semi-indirect emissions. And it was just striking to me, that is the yearly equivalent of more than 1.1 million homes' electricity use. And I'm just wondering, can you tell me any more about what has happened on the ground in the intervening months since you put out that target, what kind of conversations have you been having? Or what kind of developments can you share with our audience today?

Sure. I think the conversations that happened after the goal, frankly, are not as important as the conversations that happened before the goal. And because that's really what sets the path for everything else. And we set our goal, not only from the top-down, from the bottom-up, and I think that's really, really important. You said it only from the top-down, that top may move, and you may be left without a goal or without the support. But if you do it both ways, then at the time -- by the time you set your goal, you're going to have a clear pathway for moving forward. And so in the conversations after we set the goal were really the individual work streams that are needed to build up to 2035, which is when we've set our goal for. We have our energy efficiency and network optimization work streams, where we're virtualizing our network. We're decommissioning the old pieces of our network. We have our renewable energy marketplace goal. And we are really bullish on renewable energy. We think that's a big answer to where we all are going. We are probably one of the biggest users and of renewable energy, 1.5 gigawatts of capacity is what we're buying. And then, of course, I mentioned our fleet. We have that work stream as well. And then we -- of course, we have Warner Media now in our portfolio. And so we are expanding our sustainable feature film and TV production projects. And we're doing that worldwide, both in our smaller productions and our larger productions, and that comes through clean tech solutions, and that comes through sustainable products and reuse and water reduction efforts. So each one of our work streams is supported by the entire global operation. And because we built it from the bottom-up as well as the top-down, people have embraced that, and our employees are often running.

Great. Thanks, Charlene. I'd like to flip over to Katherine. Because Katherine, you bring really unique perspective to the table because prior to joining Duke in 2020, you worked at Walmart. And I'm curious to know what lessons you brought from the retail sector to the utility space in this discussion of net-zero. Are there any lessons that you find apply both sectors? Or on the flip side, are there things that you saw work in one industry where you've had to change or shift your approach in the other?

Thanks for the question. I'm not sure I'm going to answer it quite right. But I think one of the things that I found about sustainability overall, setting aside even my time at Walmart, if you look back to my time at the World Wildlife Fund with Coca-Cola is this conversation that we're all kind of swirling about, which is what are the outcomes that we're trying to drive towards. And then for the discussion today, it's about how we're navigating and managing climate change, which is a real risk to people, to planet. But there was a lot of debate about how -- what is the best pathway to get to that end state. So not a lot of disagreement about the outcome, but often a little bit of different points of view about the right pathway to get there. And I think my experience at a utility is that -- at a regulated utility is that there are a lot of opinions out there about what's the best way to get from A to B to C that I think is kind of the most applicable thing. But again, it relates back to my time at Walmart when people have a lot of different opinions about what Walmart needed to be doing. Or when I was at WWF and working on -- at Coke, I think -- or working with Coke. I think one of the unique things about Duke Energy is that we really do look at our climate strategy as our business strategy and vice-versa. You can't really pull them apart. And we're investing $59 billion in the next 5 years to make this clean energy transformation kind of really manifest and occur. And again, we're well on our way. But when I think about where the technology is, and how we're going to meet those ambitions by 2030, 2035, it is going to be doing things like investing in renewables and scaling a battery source. But there's also thinking about the role of nuclear and natural gas. And so those technologies are here. We can implement them, install them, move them forward 2030 to 2035. They were something that Kathleen touched on, which is what is the role of innovation and what are the new technologies that are going to be around the corner that we're going to need to invest in and bring to scale really quickly. And I mentioned our pathway to net-zero and the role of nuclear and the role of natural gas because I think there's something that I've also felt across my entire lifespan and sustainability, which is often there is a conversation that's very much grounded in the environmental outcomes. And certainly, that's a big focus of climate. But I think one of the systems that we're really trying to optimize at Duke, and I speak from experience in having done in the past, is how are we going to do this in a way that's affordable and equitable. So that's really kind of front and center in my mind as we advance on this clean energy transformation, how do we take into account, not just this urgent crisis, which is climate change, but also think about the people that are going to be part of that transformation, be it a customer, a supplier, a shareholder.

Absolutely. That's definitely a conversation we're hearing more and more about in the ESG world. Katherine, I'd also like to ask about how Duke works with state-level stakeholders? We're talking with our panelists today about all the different stakeholders you have to engage. And in Duke's 2020 climate report, the company talked about how in its path to net-zero, it will work collaboratively with stakeholders and regulators in each of the states that is served to develop specific plans that best suit their unique attributes and economies? And for me, that highlights the challenges that utilities face in dealing with this patchwork of state-level regulations and stakeholders. What can you tell us about the way that Duke has been collaborating with stakeholders and regulators? And how are you tailoring your approach in different locations?

Yes. It's a really fascinating time, isn't it? We're in the midst of an international conversation about climate, certainly a national conversation about climate. But for us, our clean energy transformation really hits the road when it comes to what are we able to get across both legislatively but also physically in the states where we operate. And so having a really strong relationship with all stakeholders that are -- that we're dependent upon from a business standpoint is really, really, really critical. And these are, of course, our policy makers or legislators and our regulators, but also representatives and civil society, our customers, we've got a huge, huge part of our stakeholders that we need to be working with it as we advance our business and our climate agenda. And I think a really good example of how we've done that was last year in North Carolina. North Carolina has the lion's share of our footprint. And we do these things called, and I promise I won't walk out, in part, because I'm relatively new to the sector and can't go into great depth, but we issued these integrated resource planning plans. Basically, how are we going to get our -- in sites and move the energy journey forward in our states. In North we filed ours last year. And in it, in part, in response to stakeholder inquiries, we laid out 6 different scenarios of what that energy generation mix might look like and how that would actually manifest in the state in terms of people feels and what was in the portfolio and what was not in the portfolio, everything from gas to kind of pure-play on renewables, really so that we could paint a picture for all of our stakeholders about what is that future state. I spoke about everyone can kind of agree on the outcome, but the pathway is where there's a lot of debate, we really wanted to identify the number of different pathways that were out there so that we could really kind of have more enriching conversations.

Thanks, Katherine. Continuing on this topic of competing demand from different stakeholders, Carlo, I'd like to bring in your asset management perspective here. What kind of conversations is State Street Global Advisors having with companies in its portfolio on this topic? And what do those sound like?

Well, when you think about it from an asset management perspective, there are, like, 2 parts. There are 2 sides to those conversations. One is the engagement themes obviously where for us, climate change-related engagement and stewardship are 1 of the 2 big topics for us at the firm. One is inclusion and diversity and the other one is climate change. And climate change engagement, that we have launched last year, for example, a dedicated climate change hub from our -- for our stewardship website so that we can get our investors get more granular data on how we are engaging with companies, what are we talking to them about. But equally important, actually, is when we talk in the context of net-zero is bringing the emissions down of portfolios as well. And this is something which our clients are -- so that's what our clients are addressing us pretty much on a daily basis. And there are a bunch of different pieces of the puzzle that are all interrelated, which as an asset manager we need to -- you need to be even allowed for, right? Number one, we need to check, is climate change generally embedded in our governance and general strategy as an asset manager. The same question is the asset owner, as our client, has to ask themselves. So what kind of target has the asset owner set themselves, which we would then put to work, because we are, at the end of the day, the fiduciary of their money, so it's their call how to allocate it. But then the next part is to set targets and objectives and make that tangible. And this will then, in turn, inform the strategic asset allocation. So you need to update capital market assumptions based on climate-related thinking because we all know that and both like Charlene and Katherine and Kathleen, they all said it, it's a very significant operational risk if you don't look at climate change, but again, but again also the opportunity. For us, as an asset manager working in the capital market, we need to look at those risks and opportunities and assess them on how that will affect the risk-return profiles of our clients' money. So based on this, you can then think about how can I optimize portfolio structure. What kind of optimization processes can I run? What are kind of metrics can I include in my in my portfolio construction build. And based on that, then you probably shift and think about asset class alignment. You can then think about, okay, we want to have specific targets for certain asset classes, which I would like to set, and what are realistic targets actually? And what can we achieve without jeopardizing -- potentially jeopardizing this return profile because that is, as an asset manager, still on top of what we need to do. We cannot include, as much as we would like to do certain things that seems sensible from an ESG or climate perspective, but we have the fiduciary duty to do it in a way that's not jeopardizing those return profiles, especially not somebody like us who's actually managing the bulk of their money for pension and such. However, you can then go into the details on how to, like, construct the portfolios. And then important to that is what is your policy advocacy? Like, how can I engage with policymakers to maybe also push for better disclosure from companies based on climate-related targets and climate-related metrics. And then, again, the engagement part, to your point, that's where I started with, is an absolutely fundamentally important point for us. And you will see that, that we as an manager, who has, for example, joined Climate Action 100+ will probably get a little bit more, I wouldn't say, aggressive, but the questions are going to be, like, a little bit more tangible that we are probably going to ask our investing companies. And we see that -- I mean, obviously, we have great examples here on the panel that are on top of this. But there are tons of investee companies that are not. And this is something where we need to drive change. However, this engagement piece is not necessarily -- cannot be measured, like, overnight, different from bringing down the carbon footprint of portfolio. That's something that we can implement right away and has a manageable impact. But really driving this change for engagement is something that is all part of the asset manager's net-zero strategy.

Carlo, following up on that. Engagement is certainly a big piece of it. How are you thinking about divestment? As a big asset manager, I imagine, sometimes, you face scrutiny for holding on to investments in emission-intensive companies. How do you respond to pressure to divest?

Yes. I think the conversation around engagement divestment is going to become, like, much more nuanced. I can see this picking up already. Because, like, as a general estimate, especially getting asset management right are by default are prone to hold certain companies that are in very emission-intense sectors. And by the way, even in the EMEA region, where the European Commission set out such aggressive targets and also are introducing very aggressive climate ESG-related regulation, they completely realize, and we have the same opinion that, you should not scrutinize certain companies just because they are in emission-heavy sectors, like, there are companies that are simply, by the nature of their business, more carbon intense than others. So it's like when I look at portfolio structures of a diversified global portfolio, most of the emissions are clustered in materials, in utilities or in energy, in transport. But divesting from those kind of sectors will not get us anywhere. It will bring the portfolio carbon footprint down overnight by divestment, of course, but that's not the way forward because we will need those sectors. So it's more about then understanding who are going to be those companies within those sectors who are actually transforming faster and transforming more effectively and efficiently. And this is what you can out, not only by engagement, but there are climate-related metrics and targets that you can acquire in the market that are looking at relative carbon emission intensity of a company, like, what's that green revenue share, what's the brown revenue share. And then you can compare within sectors. And you can get a feel of who is doing a better job arguably than others. And then you can allocate and make an investment decision there. And sometimes, there will be situations where divestment can be an option. I mean we have -- we see this with some clients of ours that say, well, if the company still has an X amount of their revenue base coming from thermal coal, which is arguably going to be a relatively quickly outdated way to generate energy, then they don't want exposure to this. However, just divesting right away from every company that -- look, for example, we're in the conduct of necessarily having exposure to fossil fuel, it will -- that means that our seat at the table to engage with them would be gone. And I think that there is a certain element, which is a little bit misunderstood, in my opinion, in the market that just by divestment, it doesn't necessarily mean that those companies are -- that they are like penalized in a way and that change will be driven just by, as mentioned, like a divestment, because you could argue that there are a lot of investors out there that could see this as a buying opportunity. And those investors might actually not care so much about climate change and might engagement less, which is why actually as a long-term holder of capital, the divestment approach is nothing that we fundamentally believe in. However, in the context of clients, what we see is that there are some thresholds sometimes being put in when it comes to business involvement in a significant sense in certain areas where you might not want to have exposure to. But it's a very -- but the conversation is getting much more nuanced. And I'm glad that the market comes to realize that it's not as black and white. Because the question that we ask ourselves, even for a currently high emitting company, let's take an energy for example. I think that the transition to low-carbon economy -- do I think that major energy incumbents will be helpful for a transition to a low-carbon economy? I said, certainly, 100%. Do I think that all of them in the world will? Probably not. But that's what you then can figure out in very detailed engagement, conversations and potentially climate metrics as that can pick up how quickly a company is actually adopting.

Okay. I'd like to jump in, just spend maybe 30 seconds or 1 more minute on this topic because we had several audience questions come in for you, Carlo, about how do you measure the carbon footprint of your portfolios or what metrics do you use? What would you tell our audience members?

Yes. So there are basically -- I mean what I would tell the audience members is the best cheat sheet for this is the TCFD, the Task Force for Climate-related Financial Disclosures, which gives a great overview on how this should be done. But in general, we focus on -- and yes, multiple, but in general, we focus on 2 main points, like, you can measure the absolute emission, like, Scope 1, Scope 2 and Scope 3 strictly. So but then actually more importantly are relative emission targets. And what we look at are the weighted average carbon intensity of portfolios, which means this is a measure that is normalizing a company's carbon emissions by its revenue. And this is a great way to add compare portfolios because obviously, when your portfolio grows and grows and grows and your asset base grows and grows and grows, your absolute emissions that are associated with your asset pool are going to grow as well. So we have clients that are very much focusing on the absolute emissions. Now they need to understand, they're like, "Well, if you, overnight, would double your asset base just for the sake of argument, you would have doubled your carbon footprint." But does that necessarily you are doing a bad job? Not necessarily. Just, like, your asset growth, there's growth. And then you kind of try to monitor this over time to bring it down in a relative basis on -- relative to how quickly your asset pool is growing. But the weighted average carbon intention, which normalizes either by revenues or enterprise value, depending on which approach you use, that gives you a pretty clear indication on how much emissions a company produces given 1 unit of output. And that actually makes it comparable. And this is the measure that we use -- that's our dominant measure, which we use to look at the carbon emissions of portfolios of our clients.

It looks like we may have lost Lindsey. I don't know for -- I see, Charlene. Just maybe to -- yes, since she dropped out, maybe just to build on that, if people are still tuned in, for us, measuring emissions, we adhere to the Greenhouse Gas Protocol, and we disclose through CDP, and we encourage our suppliers to do the same. We think that's important. We also try to align to TCFD in terms of strategy and governance around climate risks. And we made CDP's A list and their supplier engagement leadership board in 2019 and 2020. And that's important to us because, again, we're trying to drive a broad culture change across the whole retail and consumer goods sector because for the world to get to net-zero by 2050 requires all of us to completely innovate the way we lead our daily lives. And what's interesting about a company like Walmart, is that we sell products that people use in their day-to-day lives. So the food they eat, the apparel they wear, the things they might have in their home, just for daily use. So if we can get the people who produce those products and the people who consume those products to be adjusting, not only the design of the products, but where the use them and so on, the potential to really transform industries through innovation is pretty significant. So it really -- reporting is a big part of that. And to your point, Carlo, what we try to disclose is not only the absolute emissions, which we do, but also the percentage change year-over-year, of course, to see if we're in line with the science-based target trajectory and also emissions intensity. So to your point, the greenhouse gas emissions per revenue dollar going through Walmart. We'd like to see all of these things coming down. And ultimately, our goal is to decouple emissions from economic growth. That's what we need to do as a planet is to get to the point where we are emissions neutral. And yet, we still have economic for folks. So I don't know Charlene or Katherine if you want to chime in on how do you guys measure and disclose.

Yes. I'll be happy to chime in. Thanks, Kathleen. So we think reporting is incredibly important. Transparent annual reporting, it creates accountability. It gives stakeholders, including investors and our advocacy groups, a real chance to see whether we're meeting our commitments. And Carlo, the explosion of investor interest actually has been really gratifying. I know that some of us have been in this space for years and years, but to see the investor interest, I think, has really catapult the whole world forward, frankly, in the last couple of years. But we we've long reported to GRI that we use TCFD. We use CDP. We also align to SASB. And I know that whole reporting industry is kind of trying to sort itself out, but it does seem that TCFD and SASB seem to be the favorite of investors. So we're in the middle of our reporting cycle, too. I think Katherine, you mentioned to begin when we began that you're in the middle of the reporting cycle. And what's interesting to note is that years ago, our involvement with investors was typically, I talked to socially responsible investors about fairly narrow issues, that now me and my team were fully engaged with our finance department, with our IR department, we're talking to institutional investors in the off-season, in the main season. And it is really gratifying to be able to understand what our owners want and be able to develop our plans in concert with that. And I think it all comes together in that transparent reporting. Kathleen, I'll kick it over to you.

Katherine any other comments on measurement and then maybe we'll go to the wrap?

Danielle, sorry, this is Lindsey, I'm dialing on the phone now. Apologies for the technical trouble, but I can take it back up. Thank you for keeping this good conversation going.

Sure.

Yes. Charlene, please do jump in if you wanted to add anything there.

Yes. That's was Charlene who was just talking and so Carlo talking about measurement and how he measures greenhouse gas emissions in his portfolio of companies, and so Charlene and I were just sharing how we measure. I don't if Katherine wanted to add. So back to you, Lindsey, you take the reins.

Okay. Thanks. Fantastic. Yes. So like I said, we had a lot of questions from our audience come in about this question of measurement. I also wanted to spend a little time talking about some of the tools that companies have available in their toolboxes to work toward their emission goals. And Charlene, I thought maybe I could turn this to you. AT&T has talked about its support for the renewable energy marketplace and also its investments in carbon offsets. Can you tell our audience a little bit more about what these tools look like, how your company is using them?

Well, let me start with on the renewable side, certainly, that is a big part of our strategy. We get involved, as I mentioned before, in collaborative partnerships, Renewable Energy Buyers Alliance. And that is a good tool we use. We do power purchase agreements, large-scale renewable energy, and that is a really important tool to be able to not only purchase the renewable energy but be responsible for putting clean energy on the grid. Kind of in a different sense for tools and strategies, and this may be coming from a bit of a different direction, but I think there's a couple of other I would mention. One, is our government, and we talked a little bit earlier, I believe, Carlos or somebody was talking about working with governments. And I think it is really important that we have private public partnerships. And that we push for policy change when the policy changes are needed to advance something that's going to help the environment. In our case, we have a huge focus on the digital divide. There's 50 million people in America who don't have Internet capabilities, high-speed Internet capabilities. And that means there's 50 million people who don't have access to the technologies that can help them reduce carbon emissions. A research has shown can reduce carbon emissions by 15% by the year 2030, but we have to have broadband expansion. We have to have 5G expansion. So pushing for those kinds of policies, not only to reduce carbon emissions, but because climate change affects the populations that are disproportionately affected and are most vulnerable. And then the final thing I would say, in terms of tools is let's not forget our employee base. Our employees and our companies, my goodness, they are amongst the most passionate for this issue. They can push for more aggressive company goals. And they are so innovative, turn them loose with tools and forums and programs where they can bring their innovation and their passion to the company to come up with new ideas to help tackle this problem.

I think that's a really important point. We've talked a lot about the different stakeholders who are involved. We haven't talked about employees. We haven't really talked about customers. I would like to see if really any of our panelists could take the question, where are you hearing the most push for net-zero from your stakeholders? Is it coming from your shareholders and investors? Is it coming from your employee base? Is it coming from your customers? Or is it some mix of all of those?

Well, I'll just holler on and say my -- we are hearing -- we were hearing it from our employees. I would say it's all of the above, actually. From our employees, questions from investors, questions from NGOs. And simply just watching other companies who are setting great examples out there who is stepping up and saying, we're going to be in that zero. So combining all of those together is a really, really powerful force that helps companies come to that conclusion.

I would just say at Walmart, as I mentioned before, we've been working on pieces of the zero emissions future since 2005 when we started to work toward our goal of 100% renewable energy, and then our ambition has just grown. I would say it's been powered by a few things. One is the recognition of the shared value opportunity and really need for all of us to address climate change. We need do that just to sustain ourselves on the planet, let alone to have business in the future. That's number one. And then there is quite a bit of engagement and guidance from the science community. NGOs and different scientists that we work with, connected to the IPCC and so on, that's been extremely helpful. And some of our NGO colleagues have been very supportive and encouraging of us to elevating our ambition consistently over time. The investor community increasingly, I would say, really since the advent of TCFD and the recognition in the capital markets of how you can't really pull apart climate risk or opportunity from business. That's been a huge driver. Our suppliers themselves, there's a question in the chat about what do we do to get our suppliers to engage. We don't really need to do much. They all want to work on this, too, for the same reasons we do. So the suppliers have been a great positive force. I would say consumers, customers that's coming along, I have to say in the middle of COVID pandemic, it's not top of mind for most folks. It's taken a while for climate to rise up among us the top concerns of people in general. But in the last couple of years, we've seen it. And especially in the last 18 to 24 months, we now the climate and concern about climate change showing up in the top 4, 5 things on the minds of our customers in terms of key social and environment risk. So it's there but it's like anything else. Right now, people are very, very focused on COVID and getting through that, but that's still on the list. I think that will start to come more to the fore. As, God willing, we come through this pandemic, I think there'll be more and more customer attention going to climate.

Maybe I can make a comment on our -- like, where it's coming from us. I mean the -- for us, it's really coming from our client base, meaning large asset owners that are driving this a lot. Because what you're seeing is you started to see governments making that zero, like, commitments and then that's followed by companies that made commitment. And then asset owners and pension plans, they we're, like, the next in line to say, okay, we have an asset pool that we control, that we own. So we need to make commitments. And once those commitments are made, they need the asset managers to implement it accordingly. And this is where we see the biggest, biggest changes coming from. Like, to your point around the pandemic and climate change, what I witnessed in Europe, at least, that's quite interesting is that there was, like, a little bit of a blip last year once the pandemic hit here in the Western world and Europe and really focused on those climate change. But in Europe, that has picked up, like, right away because all of the -- all the entire narrative, which we know is that climate change is real. Climate change is a threat, and it can literally destroy businesses, and it can lead to a lot of destruction, like a slow burning pandemic actually. What I feel happened in Europe is that people got of very scared what a pandemic, what a crisis like this can do to our lives. And once that has been really felt, people were much more receptive in understanding that climate change is a true threat, which should be avoided by all means. I mean we as humans, obviously, have a little bit of tough time to understand what might happen in, like, 20x, 30x, 40x, and then we forget about it. That's basic behavioral human nature. But I felt in -- like, in Europe, the pandemic actually pushed climate up the agenda. And then what also helped is that COP26 is happening in Europe, like, on European soil, which obviously is driving a lot in that regard. But we see, again, the biggest driver of adoption from our, like, institutional client base. And then obviously, we need to have it on the top of our mind that we acquired the tools you mentioned, scientific data points, that you need to work with scientists in order to get your hands on the right data to implement the standard portfolio structure. So yes, so I would say that's the view from State Street Global Advisors.

Thank you, Carlo. And Thank you, Katherine, Charlene and Kathleen for the excellent and engaging discussion. As I suspected would happen, we have way more to cover than we can in an hour. And unfortunately, we only have about 1 minute left. We've had so many good questions from the audience. I've tried to work in those that we could throughout the course of the hour. But if we did not get to your question today, we will follow-up with you directly within the next 24 hours. Again, if you have any other follow-up questions, please use the Contact Us widget, and we will be glad to assist. For those of you who want to review anything we've been through today, this session has been recorded, and you will receive a copy by the end of the week so you could access it on-demand at your convenience. And when we close out the webinar, you will be routed to our valuation form. We would love to hear your feedback, so please take a few moments to fill this in. Thank you again to our panelists presenting and for your time. And thank you all in our audience for taking the time to attend today's session. We look forward to you joining us again soon and continuing this conversation about net-zero. Thank you all.