Climate change has the potential to bring financial costs of as much as 28% of the value of real assets held by global companies by 2050, with extreme heat presenting the greatest threat to global systems (S&P Global 2023). Over the past 40 years, economic losses from weather and climate-related extremes in Europe reached around half a trillion EUR, and financial impact is expected to double between the 2050s and 2090s (EEA 2024). Ameliorating these impacts relies on how institutions respond and adapt to climate risk, a sentiment echoed by governments around the world mandating climate risk disclosures, such as the CSRD, IFRS, and the SEC Climate rule.
How does climate risk affect your business?
All too many businesses are waiting on standby for climate risks to surface, not recognising that many of their current business risks like supply chain disruptions, regulatory risk, and transportation disruption, are intertwined with climate-driven disasters (NBS 2022). With each year that companies do not take action, climate-related costs will only accumulate, while the myriad of currently existing climate opportunities will diminish as the window for action shrinks (S&P Global 2023). It is becoming a business continuity imperative to include climate risks as part of business strategy and risk management processes.
All economic sectors are implicated, and risk exposure varies according to industry and risk type. Integrating climate considerations into risk management therefore requires accurate climate-related measurement and reporting to establish a credible baseline and determine company-specific exposure across emissions scenarios, ranging from business-as-usual to Paris-aligned net zero scenarios. Risk assessments enable companies to understand the full range of possible outcomes for their businesses, to inform plans to build resilience across those outcomes. Assessments must consider risk cascades, to allow the identification of possible targets for comprehensive risk strategies that encompass mitigation of complex systems failures (EEA 2024).
Integrate climate into your risk management processes to future-proof your business
Front runners stand to reap significant first-mover benefits from acting on climate-related opportunities and mitigating risks (Cervest 2023). Getting ahead on planning for future climate change can look like retrofitting infrastructure, implementing business continuity plans, pre-empting price volatility, and stabilising supply chains. Meanwhile, being caught as a laggard puts companies at risk of stranded assets, as well as reputational and regulatory non-compliance costs.
How can we help?
At Holtara, we have extensive experience with modelling and understanding climate risk. We provide climate modelling services using our in-house climate model featuring state-of-the-art IPCC climate scenario databases, as well as tailored advisory to translate your climate risk exposure into decision-useful insights and strategies, while complying with regulations.
Contact us if you would like to become a first mover and turn your climate-related risks into opportunities.
