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Catalytic Climate Policies and Carbon Markets: Interview with Jennifer Tsim & Sayli Chitre from Oliver Wyman

By, Jennifer Tsim, Financial Services partner and head of Climate and Sustainability in the United Kingdom and Ireland, Oliver Wyman & Sayli Chitre, partner in Finance and Risk, Oliver Wyman

In this interview, Jennifer Tsim, Financial Services partner and head of Climate and Sustainability in the United Kingdom and Ireland at Oliver Wyman & Sayli Chitre, partner in Finance and Risk at Oliver Wyman discuss the impact of catalytic climate policies and the expansion of carbon markets. They highlight the global response to the 2022 Inflation Reduction Act, China's renewable capacity plans, and India's green hydrogen initiatives. They also address the importance of carbon pricing mechanisms such as Europe's CBAM and Singapore's Carbon Pricing Act as well as the growing investment in Carbon Dioxide Removal (CDR) projects.

Looking forward to 2050, what makes you optimistic that the global economy is on the road to net zero?  

Tsim: While the road has not been easy, there are developments that continue to encourage me. For instance, there has been recent legislation, including several pieces from the European Union and United Kingdom, that will result in corporates staying better abreast of their own emissions and requiring them to develop more effective transition plans.  

Our most recent report with CDP Europe, based on a survey of companies covering 89% of total European market capitalisation, showed that 55% had climate transition plans in place versus about 40% the year before. An even higher percentage had set decarbonisation targets.  

While that’s encouraging, the quality of those plans matters too. That’s where we see an “implementation gap” developing. Only about one in five was deemed to have made the kind of substantive progress that would lead to new low-carbon business models, and over half of those companies cited limited access to sufficient capital as a key challenge. There’s progress but still work to be done.   

Another reason to be optimistic is the increasing role millennials and Generation Z will play in the economy moving forward as consumers, employees, and eventually leaders. According to a 2021 Pew Research Center study involving nearly 14,000 people, both generations are far more concerned about climate change than previous generations. They also consider it a top priority. Eventually, that could alter the trajectory of climate change. The question is whether it will make a difference soon enough to avoid the worst consequences. 


Chitre: What’s also exciting is that the fight against climate has become more global — not just through agreements but in terms of real action. The 2022 Inflation Reduction Act in the United States kicked off a trend of catalytic policies and investment that will foster the financing of transition solutions and construction of transition infrastructure.  

Its incentives have proved a powerful enticement for investors and even prompted an acceleration of competitive responses by several other jurisdictions. I would also point to China’s plans to quintuple renewables capacity by 2050 and the progress made by India on setting up and scaling green hydrogen plants, essentially establishing a blueprint for emerging markets around low-carbon business models. 

Last year’s COP28 helped generate momentum in the Middle East, and I expect COP29 in Baku, Azerbaijan, at the intersection of the Middle East and Eurasia, to build upon that impetus.  

Tsim: Among other recent positive developments, I include the establishment of a real foundation for carbon pricing and a carbon market. In Europe, that started with the Carbon Border Adjustment Mechanism (CBAM). CBAM prevents carbon-intensive imports or imported raw materials from underselling lower carbon but higher priced European production. This recognition that the cost of carbon should be paid before the threats it creates are realised is a major step forward towards levelling the playing field for low-carbon alternatives. 

This has not only been happening in Europe. In Singapore, the government enacted the Carbon Pricing Act in 2018 and has been building upon it ever since, with the most recent increment taking effect this year. 

Another exciting carbon markets development has been the growing acceptance that carbon removal from the atmosphere needs to be a key part of any decarbonisation plan. Both the World Resources Institute and the Intergovernmental Panel on Climate Change have come to that conclusion in the last couple of years.  

This assumption will become the foundation for a thriving carbon market. Carbon dioxide removal (CDR) credit issuances already expanded 23% since 2020 to reach 41 megatonnes of carbon dioxide equivalent in 2023, at an estimated value of $2.7 billion worth of credits purchased. But this is just scratching the surface of the need. Even in a net zero scenario where 90% of global emissions were reduced by 2050, one to 1.5 gigatonnes of removals per year would likely be required between 2030 and 2035. As many as five gigatonnes would be required by 2050 to eliminate those remaining emissions.  

The growing importance of CDR attracted some $17 billion in private investment to CDR projects to date, split evenly across nature-based projects, such as afforestation, and engineered solutions, such as direct air capture (DAC) and bioenergy with carbon capture and storage (BECCS). We also estimate that another $15 billion of public money has been invested to date in CDR, heavily skewed towards engineered solutions. 

But despite this momentum, investors still need more certain demand for credits, which can only be assured with government clarity on how credits will be counted towards emissions reduction and/or more incentives for solutions development. 

Chitre: Another advance that I expect will make a significant dent in our need to reduce emissions is the progress being achieved by some of our highest emitting sectors, including power generation, steel production, and automotive manufacturing. All three have developed low-carbon technologies. Now, it’s a case of building commercial scale so that low-carbon business models can replace carbon-intensive products and processes.  

In the case of power generation, renewable energy from solar, wind, and hydro is already at commercial scale in several markets. However, challenges remain around the economic feasibility of investments, given saturated financing markets, limited certainty around long-term offtakes, and the tailing off of historical subsidies. 

Far too many countries are still using coal, which also needs to be addressed through the growth of renewables.   

Tsim: To make progress, there must be specific and supportive policy in place to ensure that both industry and consumers are on board. Take automotive. While we have a distance to travel yet, we are on the road to a year with zero sales of new internal combustion engine (ICE) cars — especially in Europe. That is, in no small part, thanks to EU policy that has essentially outlawed the sale of new ICE cars in the region after 2035 and generous tax credits provided in a multitude of places, most notably in the US and, in the past, China. 

In 2023, 18% of global new-car sales were electric. That’s up from 14% the year before and only 5% as little as five years ago. But the big number that shows the industry sees the future is the fact that over 60% of the R&D is going to EVs. Again, this doesn’t happen without a supportive policy foundation.  

Where support is needed now is for the building of sufficient renewable energy and provision of the storage technology and infrastructure for solar and wind to overcome the fact that neither are available 24-7. Without a sufficient supply of green energy, there won’t be enough clean power to handle the surge in EVs that will need charging or enough to meet the need for green hydrogen to produce sufficient green steel to build the cars 

Government must recognize that the decarbonisation of a few bedrock industries must be prioritised before the rest of the global economy can be successful. Power generation is certainly one of them. 

That’s a pretty impressive list. But lots of caveats. Are you more pessimistic than optimistic? 


Tsim: The world’s leading climate scientists see the Earth currently on a path to an increase of around 2.5 degrees Celsius by the year 2100 over pre-industrial levels. While to the layperson that doesn’t sound significantly higher than the 1.5-degree target the Paris Agreement and scientists have been calling for, the consequences of missing the mark by that much would be devastating for people, public health, and the global economy

Even at two degrees higher, there is a risk that more than five million people could be displaced by rising sea levels. Then, there is the threat of devastating storms and droughts, which rises precipitously with every degree of global warming. The World Health Organization says as many as 700 million people could be displaced by drought by 2030. That’s staggering. The mosquito population would also rise precipitously at the higher temperature, spreading the risk of malaria to the Northern Hemisphere. Those phenomena are not 100 years away but rather closer to a decade.

Chitre: These paint a dire picture and one that demands urgent action. At this point, some of this devastation is still preventable, but only if we move quickly and decisively. One important hurdle that we must clear is accelerating the scaling of transition solutions, developing de-risking mechanisms, and tackling innovation risk. This is critical if we are to meet the promised targets and commitments.  

While we have not solved for that challenge, there are lessons to be learned from the scaling of renewable energy models over the last couple of decades, especially regarding the financing blueprints and policies can play in expediting commercial deployment. This needs to be a focus moving forward for both the public and private sectors.  

We also still do not have end-to-end, feasible solutions for important sectors, such as agriculture, shipping, and housing, and there is an urgent need to fund pilots in areas with such substantial impacts on climate and emissions. 

Tsim: I am concerned because I am sensing some fatigue in the business community and among policymakers as they struggle to balance target-setting, reporting, and disclosure with activities to cut real-world emissions and create new low-carbon business models.  

In general, current financial cycles still are generally too short-term-oriented to plan and execute a decades-long climate transition. That can be frustrating for companies looking for capital. Yet many press on, and I am heartened by the huge increase in the number of corporations putting significant resources towards climate transition. 


What are actions financial institutions could take tomorrow that would make the picture brighter by 2030? What longer-term changes needed? 

Tsim: Providing significant volumes of capital where it matters is a first step. For instance, investments and financing in scaling renewable energy and infrastructure, carbon capture, utilisation, and storage (CCUS), and alternative fuels are critical for the transition of hard-abate industries to a low-carbon economy, both pre- and post-2030.   

While this may require acting before business models crystallise, transition finance needs to focus on the heaviest concentrations of emissions. For financial institutions, that means working closely with corporate customers still in the process of moving from brown to green rather than eliminating them from portfolios or limiting their access to capital.  

But for financial institutions to take risks, there must be market-wide recognition that financing and insuring credible transition plans of carbon-intensive companies will increase financial institutions’ main metric of point-in-time financed emissions when it comes to Scope 3. Ideally, financial institutions would be able to ringfence the reporting of transition financing for such heavy emitters.   

Chitre: I agree. The most important action financial institutions could take is defining their transition finance strategy — identifying areas where they have a right-to-win and then doubling down on capabilities necessary to scale financing in these areas.  

Here, insurance firms have an important role to play. Given the scaling, technology, and innovation risks associated with transition solutions and infrastructure, the performance guarantees, risk sharing, and risk transfer solutions underwritten by insurance companies and export credit agencies will be critical. While a few leaders are taking some of the first steps in this space, there is an opportunity for the financial sector to do more.  

Ultimately, for the financing gap to be addressed quickly, financial institutions and corporates need to be able to integrate climate into their business-as-usual operations and execute on their strategies in an economically feasible manner.  

I am seeing innovative and bold solutions emerging across the financial sector. These include launches of new products and services and partnerships in the marketplace to provide clients end-to-end solutions as they look to transition their operations and processes.  

Banks are going as far as hiring engineers to help assess climate solution deals, establishing centres of excellence to educate employees and clients, and revisiting risk appetite frameworks to integrate considerations and mitigations specific to climate transition solutions.  

The public sector and development finance institutions are starting to innovate too, with launches of powerful public-private partnerships like the Just Energy Transition Partnerships, which was set up to accelerate the greening of power sectors in emerging economies.        


Where does protecting nature fit into financing the transition?   

Tsim: Let’s be clear — there is no climate transition without nature. If we lose our forests, we lose our natural carbon sinks; same with the oceans where we are already seeing dangerously high temperatures that are threatening our coral reefs. With dwindling forests and oceans, we lose the planet’s biodiversity. We kill off our pollinators.  

This is not just an environmentalist’s nightmare. It is also an economist’s nightmare. More than one-half of the global gross domestic product is moderately to highly dependent upon nature, so depleting nature endangers the world’s growth.  

The Kunming-Montreal Global Biodiversity Framework that was agreed to by 196 countries in 2022 was a welcome complement to the 2015’s Paris Agreement goals for curbing emissions. But we still face a long journey to get the agreement’s provisions embedded in legislation and private-sector practices.   

Meanwhile, the state of nature has been declining rapidly. Wildlife populations have shrunk 69% on average over the past 50 years, and three-quarters of the land surface on earth has been severely altered by the impacts of human activity. 

Private finance flows into innovative nature financing mechanisms including biodiversity credits, impact investments, or blended finance mechanisms, grew 10% from 2022 to 2023. But that was on a small base and falls short of what is required. 

It is important companies incorporate nature-positive strategies into their broader climate agendas to make sure they complement and build upon each other as companies invest in climate transition. There are several avenues for corporates to pursue, especially by addressing the sustainability of the suppliers in their value chains and of their own products and services.  

Value-chain modifications that would help both climate and nature goals might include increasing efficiency of production, substituting more sustainable raw materials, reducing consumption of feedstocks and water, or moving to circular economy practices that reduce waste and lower carbon emissions. It can also be accomplished by the development of low-carbon product.  

But sometimes there can be friction: If the push is for the substitution of animal-based protein with plant-based, the need for more farmland to increase output of products like soy can threaten forests. 

There are also efforts that can extend beyond the immediate value chain. Corporate conservation and restoration projects can include protecting wildlife, cleaning up coastal and marine areas, and restoring mangrove forests. It can also mean policy advocacy, supporting subsidies to encourage preservation, and awareness raising. 

While nature complicates the quest for emissions reduction, it will be increasingly difficult to ignore. 


What would you like to see come out of COP29 that would speed up the financing of the transition?


Tsim: COP29 should look to prioritise a few sectors for mandates, incentive programs, and investments that are catalytic in their impact. Certain hard-to-abate industries such as power generation, steel, and agriculture have the most potential to create a ripple effect of emission reductions throughout the economy. For instance, if the world only produces green steel, then the automotive and infrastructure industries automatically become less carbon intensive.  

Chitre: My hope for COP29 would be twofold: a renewed focus on scaling ecosystem-wide solutions, and an effort to drive alignment across global regulatory systems. Both efforts are likely to accelerate financial flows and catalyse investment into countries and sectors most in need of investment. Building on previous COPs, I also hope to see continued momentum and investment in knowledge transfer and capacity-building support from advanced economies to emerging markets as well as fostering of collaboration across the public sector, financial institutions, and corporates. 

Tsim: Sweeping approaches like these require huge commitment from not only the financial community and industry but also governments. With 85,000 people showing up for COP28 in Dubai last year — double the attendance at COP26 and COP27 — these UN summits are among the few places where that kind of collaboration becomes possible.     



About Oliver Wyman

Oliver Wyman is a global leader in management consulting. With offices in more than 70 cities across 30 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has 7,000 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman works with clients to set and execute low-carbon transition strategies that collectively chart a path to net zero. We help clients to pursue a commercially smart transition, enabling leadership teams to deploy their financing, operating capabilities and customer relationships to achieve sustainable outcomes. Oliver Wyman is a business of Marsh McLennan [NYSE: MMC]. 


About Jennifer Tsim

Jennifer is a partner in Oliver Wyman's Financial Services practice and head of the firm’s Climate and Sustainability practice in the United Kingdom and Ireland.   

She is committed to supporting clients to drive positive outcomes for their businesses as well as society. In recent years, Jennifer has worked closely on research and strategy with industry organisations and climate standard setters, such as the Glasgow Financial Alliance for Net Zero, Net Zero Banking Alliance, CDP, and the World Economic Forum, among others.  

Her recent focus has helped clients raise standards, effectiveness, and efficiency in embedding climate and sustainability in their organisations and building sustainable finance capabilities. Beyond her climate work, she advises leading financial services and public sector clients on core strategic, organisational, risk, and operational challenges as well as large transformational programmes that drive change across businesses and functions.  

Jennifer is also co-founder of Oliver Wyman’s Social Impact practice. She joined the firm with first class honours in chemistry from the University of Oxford. Outside of Oliver Wyman, Jennifer is on the board of trustees for the national UK charity Police Now, which works to recruit, develop, and inspire diverse leaders in policing. 

About Sayli Chitre

Sayli is a partner in Oliver Wyman's Finance and Risk practice, with a thematic focus on climate and sustainability. She co-leads Oliver Wyman’s Financing the Transition initiative at the World Economic Forum and often partners with global industry organisations, such as International Association of Credit Portfolio Managers and Glasgow Financial Alliance for Net Zero, to develop thought leadership on scaling sustainable finance and solving ecosystem-wide problems.  


Predominantly working with financial institutions, policymakers, and catalytic finance organizations, Sayli supports clients on defining strategy, building out risk assessment, kickstarting implementation activities, and unlocking financing for critical transition projects and new sustainability businesses. Her public sector experience ranges from helping governments develop national sustainability strategies and working with development finance institutions on transition initiatives. She previously advised the Planning Commission of India on developing the nation’s solar rooftop strategy.  


Sayli was identified as a Top50 Future Female Leader by the Financial Times in 2019 and a Top5 Rising Star in Consulting by WeAreTheCityUK in 2017. She graduated with first class honours in engineering, economics, and management from Oxford University.  


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