This area can be divided into acute physical events which can be floods, storms or wildfires, and chronic events, where we see things like prolonged water stress, drought and increased sea levels. Extreme weather events as a result of climate change can cause damage to property itself, the transport infrastructure you may rely on and product availability across your supply chain, not to mention what you pay for things like energy, transport and insurance. The climate crisis may seem far away, but for businesses that source products or ingredients globally, it will feel much closer to home.
According to the Bank of England weather related losses, both insured and uninsured are much higher globally in recent decades.
Risks associated with transitioning are typically categorised into those around consumer sentiment towards the change, the requirements for new technology to replace old and reputation, where transitioning (or not!) could result in a backlash and a loss of customers. There will be a cost attached for businesses to adapt to the effects of a changing climate as new governments introduce new regulations to meet their commitments. Transitioning to more sustainable practices also means that some companies could be left with stranded assets such as land or property which no longer valuable. Changing attitudes among customers and investors will mean businesses have to show their practices are much more sustainable, making that happen is likely to require investment. A move to a net zero economy is not going to be an easy one and businesses need to plan ahead to mitigate cost, reputation and fall out.
As people and businesses are more affected by the effects of the climate crisis they’re likely to look for a place to put blame. If a business is not equipped to adapt to extreme weather and their customers suffer as a consequence of this, they’re likely to seek some compensation. This isn’t only costly, but could also affect that company’s reputation. Businesses who aren’t clear to those choosing to invest with them about their exposure to climate related issues, will also risk claims being made against them.
Is it all bad news?
Fortunately no. With most challenges of the scale the climate crisis represents, there follows a race to find a solution. The transition to a low carbon economy is driving innovation, the development of new technology and is creating businesses to meet new customer demands. Many businesses and property owners will find that they can access cheaper financing for their sustainability efforts.
The green industry is blossoming with projections for the use and development of renewable technologies surpassing previous forecasts. In part we have the soaring costs of fossil fuels to thank for this; it’s a stark reminder that we need to be less reliant on them. The International Energy Agency expects the solar capacity to overtake all other sources of electricity in the next five years (IEA Renewables 2022).
Discover more atand find out about the UK government’s ten point plan for a green revolution here