Climate Change
Climate change will continue to have increasingly significant environmental, social and economic impacts. Global temperatures are projected to continue rising, with consequential changes in weather patterns, rising sea levels and increased frequency and intensity of extreme weather events. It will also lead to changes in precipitation and freshwater availability. The impact of climate change is exacerbated in emerging markets due to their reduced capacity to adapt or recover from climate-related shocks.
Climate change is already impacting the competitive context within which all companies operate by affecting the availability and demand for resources, products and services, and the performance of day-to-day business operations, physical assets and supply chains. It also presents opportunities for new low-carbon / resource efficient products and services to help mitigate climate change and through improved understanding of climate change risks to build resilience into business operations. At the global level, industrialised countries have committed to provide $100 billion per year by 2020 for actions that reduce greenhouse gas emissions and build climate change resilience in developing countries.
Climate change will not only impact a company’s own assets but also the natural resources and infrastructure upon which the company depends. Energy, water, transport and communications infrastructure may all be impacted by flooding or extreme events, and the on-going reliability of these services will also be affected, with consequential impacts for company operations.
While some companies are starting to understand the full strategic implications of climate change, most are approaching it at a relatively superficial level. Corporate action tends to be driven primarily by a desire to reduce energy and regulatory compliance costs. The resulting emphasis on tackling direct emissions (mitigation) – and thus on reducing the impacts of business – has detracted from a consideration of the impacts climate change will have on business and their need to adapt over the longer term.
While a number of companies are now looking to the future and predicting more regulation, increasing (and volatile) energy costs, and carbon-pricing – and are looking to future-proof themselves against these trends – these represent only a subset of the risks that climate change poses. Floods, storms, and increasing sea levels will physically impact corporate assets. Brands and reputations will be harmed (and some strengthened) by responses to climate change, and high-emitters may face stranded-asset and / or legal risk over time.
Climate Change Mitigation
Sectors and activities that present opportunities for GHG reductions, and energy and water efficiencies include:
Agriculture and aquaculture (effective water resource management and water efficiency interventions to reduce input).
Healthcare (water and energy efficiencies to reduce operational costs; deployment of renewable energy technologies).
Infrastructure (opportunities to set the standards for green buildings and low-carbon construction and reduce water and / or energy costs).
Financial services (access to climate finance and carbon markets).
Forestry and plantations (forestry will form a significant part of the global approach to mitigating climate change; carbon market / UN Reducing Emissions from Deforestation and Forest Degradation (REDD) funding may be available for avoided deforestation and reforestation).
Power generation, transmission and distribution (energy efficiency improvements reducing input costs and obviating the need for additional infrastructure).
Sectors and activities that are particularly vulnerable to climate change include:
Agriculture and aquaculture (changes in temperature and increased incidences of extreme weather may change the productivity or viability of crops).
Healthcare (temperature changes leading to a wider distribution of disease vectors).
Infrastructure (damage and operational interruption, and higher maintenance costs).
Financial services (access to insurance and financing).
Forestry and plantations (impacts on the productivity or viability of plantations and increased incidence of plant / tree diseases).
Power generation, transmission and distribution (reduced operational efficiencies and increased transmission and distribution line losses).