Climate Volatility a Financial Concern for Businesses

(Credit: Pixabay)

by | Oct 26, 2021

(Credit: Pixabay)

A majority of decision makers at large businesses in the United States and the United Kingdom say climate instability poses substantial risk to their bottom lines, many putting greater emphasis on that danger than growing revenue or profitability, but there is a divide in being able to mitigate the concern.

The Cervest 2021 Climate Intelligence Outlook surveyed more than 800 senior executives responsible for climate-related strategies and found 87% believe their organizations understand the financial risk climate change poses, but only 47% have integrated the issue into their financial risk management. About the same number say their companies are not actively assessing and managing climate risks and more than a third don’t think their businesses have allocated enough resources to tackle the problem.

While 80% of executives say they are very focused on achieving net zero carbon emissions, 37% say their organizations plan to adapt to climate change by modifying assets or processes for future climate scenarios.

Around three-quarters of respondents say climate change is an ESG topic.

“Decarbonization is critical, but it’s not enough to protect organizations and investors against the risks of climate change,” says Cervest CEO Iggy Bassi.

The survey was conducted in September, after several recent natural disasters, including flooding and droughts in the US and UK, Hurricane Ida and wildfires in California. As a result, Cervest says the climate outlook may have more significance in the past.

The National Oceanic and Atmospheric Administration says there have been 18 weather and climate events in 2021 through the beginning of October in the US with more than $1 billion of damage. There have been 50 such events over the past three years with $246.7 billion in damage.

An S&P Global report in 2020 revealed 60% of companies in the S&P 500 Index owned assets at risk of climate-related events. The Cervest survey shows 88% of companies had an asset such as a warehouse or other facility, impacted by extreme weather over the past five years. There were 12% who say all or most of their assets had been affected over that time.

Flooding was the biggest threat to companies, the executives say, followed by extreme precipitation that includes snow and hail, heat, wind and drought.

Most of the respondents say software that can produce actionable insights would help their organizations to more accurately manage climate risk. Currently 48% say their businesses use in-house data to make decisions regarding the problem and 38% use outside sources.

One of the actions the Biden administration recently included within a new comprehensive strategy to tackle climate change was better tools for predicting dangerous climate outcomes, including an improved NOAA website and better publicly available data.



Stay Informed

Get E+E Leader Articles delivered via Newsletter right to your inbox!

Share This