Extreme weather and climate change are significant business risks, but businesses are in the dark when it comes to both reliable data and appropriate tools to manage those risks, according to a report from the Center for Climate and Energy Solutions (C2ES).
Of companies included in credit rating agency Standard & Poor’s Global 100 Index, 90% identified extreme weather, such as flooding, and climate change impacts, such as increased water scarcity, as risks to their businesses, according to the report. Over 60% have already been affected by climate change, or expect to be in the next ten years.
But “relatively few are investing in resilience beyond ‘business as usual’ because of a lack of information and tools to help them relate these risks to their specific business operations,” said C2ES in a statement.
One major potential challenge is an inability to accurately forecast the impact of a changing physical environment on critical components of businesses, such as physical property and supply and distribution networks.
“There is uncertainty regarding the precise nature and timing of changes in climate and extreme weather risks,” the report said. “Companies are wondering whether they have entered a ‘new normal’ of increasing frequency and magnitude of extreme weather events.”
A lack of clear understanding, both of the nature and degree of impending changes, and how to prepare for them, complicates preparation. “Business activities to build resilience are largely a continuation of existing practices and policies that are based on a historical picture of past risks, and often fail to sufficiently consider changing climate and weather conditions,” the report said.
Some companies have begun taking steps to better understand their businesses’ vulnerabilities in extreme weather or climate change situations. Electricity provider National Grid, for example, has undertaken evaluations of worst-case climate change scenarios in the UK through 2080, assessed flood risks in the US, and prioritized investments to minimize interruption losses.
On the flip side, many companies see opportunity in climate risk. “Drought- and salinity-resistant crops, technologies that enhance water use efficiency, weather-related insurance products, enhanced land management techniques, and storm-resistant building materials are just a few examples of the market opportunities that companies have identified,” the report said.
You can read it in full here.
