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Building business resilience to inevitable climate change seminar

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Blake Lapthorn's Climate Change team held a breakfast seminar on building business resilience to inevitable climate change during October 2009.

Blake Lapthorn's Climate Change team held a breakfast seminar on building business resilience to inevitable climate change during October 2009.

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Building business resilience to inevitable climate change seminar Building business resilience to inevitable climate change seminar Presentation Transcript

  • Building business resilience to inevitable climate change Dr Richenda Connell, CTO & co-founder Acclimatise Green Breakfast Blake Lapthorn © Copyright Acclimatise and Climate Risk Management Limited 2009 14 October 2009
  • About Acclimatise Acclimatise is the market leader in climate risk management consultancy and intelligence services. We help businesses and governments assess and manage the risks and opportunities of inevitable climate change by: • Bridging the gap between the scientific community and the corporate world, reviewing the latest climate change science, providing clear guidance on the potential business and financial impacts. • Working with our clients to understand the direct and indirect climate change implications for their strategies and business models. • Assessing the implications for financial performance, as well as for issues including brand, reputation and litigation risk. • Advising on the climate change positions being taken by our clients' key stakeholders, including governments, regulatory agencies, investors, banks, insurers, analysts and NGOs. • Advising on robust strategies to manage risks and uncertainties and realise business opportunities. © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Who we work with on climate risks Netherlands Government © Copyright Acclimatise and Climate Risk Management Limited 2009
  • ‘Physical’ drivers © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Inevitable climate change • Climate change is underway • Unless the risks are managed appropriately, climate change will increasingly impact business performance • A wide range of business stakeholders, including governments, investors, banks and insurers are developing climate change adaptation policies • Climate risk management should be integrated into core business risk management processes by companies with large fixed assets and their financial services partners. © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Two climate change challenges: mitigation and adaptation “Adaptation is the only response available for the climate change impacts that will occur over the next several decades before mitigation measures can have an effect.” Sir Nicholas Stern "Ten years ago we were talking about these impacts affecting our children and our grandchildren. Now it is happening to us. Even if we achieve a cap at two degrees, there is a stock of major impacts out there already and that means adaptation. You cannot mitigate your way out of this problem. The choice is between a damaged world or a future with a severely damaged world." Professor Martin Parry, Co-chairman of the IPCC © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Decisions based on historic climate data are no longer robust Observed changes in climate, physical and biological systems from 1970-2004 © Copyright Acclimatise and Climate Risk Management Limited 2009 Source: IPCC AR4 SPM, 2007
  • Climate costs business • Hot summer 2003 across Europe • Agricultural production fell by 10% was a 1 in 500 year event – Financial impact estimated at • By 2040 this will be a 1 in 2 year €13 billion event, i.e. ‘normal’ • EDF had to shut down ¼ of its 58 nuclear power plants – Lost €300 million Summer 2003 © Copyright Acclimatise and Climate Risk Management Limited 2009 [Stott et al, 2004]
  • Business risks from unmanaged climate risks • Changes in market demand • Lower profit margins • Business becomes less competitive • Lower asset values • Reduced output, productivity, efficiency • Reputational damage • Increased CAPEX & OPEX • Unable to repay debts • Asset deterioration & reduced asset life • Equity growth not • Increased insurance costs / lack of availability realised • Increased risks of environmental damage & litigation • Increased risks of community conflict • Decommissioning liabilities Alaskan infrastructure: Extra wear and tear costs © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Regulatory, financial and legal drivers © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Adaptation regulation UK Climate Change Act includes: • Statutory requirement on Government to report regularly on risks • National risk assessment plus cost-benefit analysis • Powers to require organisations to undertake risk assessments European Commission White Paper: • “Objective of EU’s Adaptation Framework is to improve EU’s resilience to deal with the impact of climate change”. • 4 pillars including “Integrating adaptation into EU key policy areas” © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Institutional investors are asking difficult questions of companies Universities Superannuation Scheme, Railpen, Hendersons, Insight Investment released a report earlier this year, “Managing the Unavoidable: Understanding the investment implications of adapting to climate change” • Peter Moon, Chief Investment Officer, Universities Superannuation Scheme – “We need more and better information about how companies and other assets will be affected so that we can make better informed decisions as to how we allocate our long-term capital.” • Rory Sullivan, Head of Investor Responsibility, Insight Investment – “Adaptation has been the poor relation in the climate change debate. This project will provide us and other investors with a framework within which to analyse all of the risks - and opportunities - that a changing climate brings.” © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Banking sector action • “EBRD considers that climate change may pose a range of risks to its investments …. This assignment will develop guidance and practical tools for integrating climate risk assessment and climate change adaptation into EBRD’s project cycle management.” • “These impacts may be valid considerations in credit risk analysis for lending banks.” © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Insurance company concerns: Some now refuse to insure in vulnerable locations • “Insurance is in the front line of climate change…. it is insurance companies that will have the responsibility of dealing with many of its consequences. And it is insurers who must be equipped to analyse the new risks that flow from climate change, and to help customers manage these risks.” (Association of British Insurers) Weather related catastrophes and insured losses Source: ‘Financial risks of climate change’ ABI, 2005. Report prepared by Acclimatise © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Legal risk: Climate change is now ‘reasonably foreseeable’ • A leading law firm has stated that: – “The effects of climate change can now be regarded as being reasonably foreseeable at every stage – from initial instruction, through the design and planning process to construction and beyond. It must be incumbent upon professional advisors to ensure that appropriate steps have been taken.” • This has consequences for all those with legal duties for decision making and those providing advice: – Regulators and government agencies – Accountants – Lawyers – Company directors – Engineers, architects etc. – Banks and financial services companies © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Increasing legal liabilities © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Calls for climate risk disclosure • Japanese Institute of Certified • A commissioner at the US SEC said Public Accountants have proposed they are preparing to launch “a very that companies disclose climate serious look” at requiring risks to investors covering: corporations to assess and reveal the effects of climate change: • Information on exposure to climate – Physical damage change risk – Financial loss – Effects of regulations – Legal liability – Physical effects of climate change July 2009 • Current status of GHG emissions • Current status of climate change policies January 2009 © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Business opportunities © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Adaptation benefits business and its stakeholders • Climate-resilient private sector development can: – Ensure returns to lenders and investors – Avoid environmental, social and reputational risks – Help improve the adaptive capacity of local communities Proactive adaptation can save money: The World Bank and the US Geological Survey estimate that economic losses worldwide from natural disasters in the 1990s could have been reduced by $280bn if $40bn had been invested in preventative measures © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Opportunities for investment in adaptation • Estimated investment and financial flows for adaptation are 0.2% to 0.8% of global investment flows by 2030 for just 5 sectors: – water; human health; agriculture, forestry & fisheries; coastal resources; infrastructure • Private sector investment has important role: – US$33 billion invested in transport, water & sanitation projects in low & middle income countries in 2007 © Copyright Acclimatise and Climate Risk Management Limited 2009
  • Thank you Richenda Connell Acclimatise r.connell@acclimatise.uk.com www.acclimatise.uk.com © Copyright Acclimatise and Climate Risk Management Limited 2009