With President Joe Biden rejoining the Paris Climate Accord, S&P Global ESG Chief Product Officer and Trucost CEO Richard Mattison joins Yahoo Finance Live to discuss the implications for the U.S. economy.

Video Transcript

JULIE HYMAN: Well, the United States has rejoined the Paris Climate Accord under President Joe Biden. What effect is that going to have on companies and on the economy? To talk more about that, we bring in Richard Mattison. He is the ESG chief product officer for S&P Global. And he's the CEO of Trucost as well. Richard, thank you so much for being here.

So what are companies going to have to do differently in sort of, on the one hand, you have the sort of messaging, right, that President Biden is sending a message by rejoining about his intentions on climate. On the other hand, you have the actual real effects of resigning. So what are some things companies are going to have to do to change, now that the US is, once again, part of the Accord?

RICHARD MATTISON: Well, I think this sends a clear signal to market participants that the US is really moving in a direction to reduce its climate impact and to build in more resilience to its economy. So what you can expect to see from a more macro perspective is a lot more infrastructure funding, a lot more, you know, spending on climate change, low carbon transition pathways.

And so, for companies, I think it's going to be necessary to be very clear when reporting on your strategy to report on the extent to which your strategy is aligned with a low carbon transition pathway, to think about your strategy in that context. And we're going to see a lot more debt and financing around climate change in general in the US. That's what we would expect.

And so, we think that there's a huge opportunity, I think, alongside greater transparency, for companies to really think about the strategy towards-- you know, throughout this decade to help the United States address climate change and to move towards that low carbon transition pathway.

BRIAN SOZZI: Richard, does this fundamentally change fund flows into ESG funds?

RICHARD MATTISON: Well, I think what we saw during the pandemic was that against the general trend of an outflow from equity funds, we saw a huge inflow to ESG-themed funds. And so, yes, I think there's an opportunity here. We've already seen an effect in Europe, where 30% of Europe's COVID relief plan has been dedicated towards green and sustainable projects. So that's 30% of 750 billion euros.

That kind of signaling creates huge appetite in the private sector for funding of various different green and sustainable projects. So I think we can see some interesting dynamics going on in the marketplace at the moment and definitely some opportunities for investors from a sustainability point of view.

MYLES UDLAND: And Richard, along those lines, as we see this surge of capital come into the space, what's the next challenge for ESG, if we can see that fundraising, or whatever, the entry level has that's a solved problem at this point? What's the next step to actually prove that this works and is something you need to keep investing in?

RICHARD MATTISON: I mean, I think you need transparency and rules. So I think you need good disclosure to guide investors to ensure that they are making the right decisions. So, you know, sustainable funds are actually genuinely investing in companies and opportunities that are driving outcomes in the real world. So I think there's a big debate going on at the moment about the extent to which there should be more transparency, should there be more regulations around disclosure.

I think an interesting move comes from the Federal Reserve, the Fed joining the network for the greening of the financial system, which is a network of central banks across the world, now representing probably the majority of the world's GDP. So, a focus on climate risk, making sure that banks are not unduly increasing their risk exposure by financing projects that are actually not in line with the climate transition pathway.

So we can see more focus on transparency, more focus on disclosure, more focus on the rules, if you like, as to how you market a green fund, for example. We're going to see a lot more of that, I think.

JULIE HYMAN: Well, Richard, maybe we're a long, long ways off from this, but the more that we see these sorts of measures implemented, the more intragovernmental cooperation on these kinds of things. Does ESG become more and more meaningless? If everyone is doing it, then, you know, at some point, it will become less useful.

RICHARD MATTISON: Well, I mean, that assumes all the issues sort of priced in markets in a uniform way and that we have a perfect market. I think what we'll see is, it's become more-- it will become more meaningful. So, really being able to dig deep to spot trends to see future opportunities to identify the companies that are creating a positive impact, not just for society, but for shareholders as well.

I think there's a lot in that, and there's a lot of information that's required. And really, that's what we're very much focused on at S&P Global, is making sure we're providing the right intelligence to capital markets to make the right decisions.

JULIE HYMAN: Yes, very much needed right now. Richard Mattison is ESG chief product officer and CEO of Trucost. He's the chief product officer for ESG and S&P Global, just to be clear. Thank you so much, Richard. Really appreciate it.

RICHARD MATTISON: My pleasure. Thanks very much.