Global Trend

A Changed Climate

The new normal

Climate tipping points are happening now, in some cases decades sooner than expected.

These include the rapid loss of Arctic and Antarctic ice sheets, large-scale coral reef die-off and the increase in catastrophic wildfires witnessed across Australia, North America, Latin America and Europe. Scientists predict that fires, storms, flooding and droughts will become more frequent and intense as global temperature increase climbs above 1.2°C.

2020 Forecast

With the increasing frequency of extreme weather events and a growing body of data about their impacts, companies will face mounting pressure from policy makers and investors to get serious about climate risk. This pressure will focus on climate preparedness in direct operations and across value chains. Companies will face increasing pressure from investors to conduct climate risk assessments. The high costs of upgrading essential infrastructure such as electricity grids, roads and buildings to withstand increasingly extreme weather conditions will necessitate an increase in public-private collaboration in order to meet funding gaps. Inadequate investment will place companies and governments at risk of liability and enormous damage bills.

Signals to Watch

  • Investing $1.8 trillion globally in strategic adaptation measures, including early warning systems, climate-resilient infrastructure, improved dryland agriculture and more resilient potable water resources between 2020 and 2030 could generate $7.1 trillion in total net benefits according to the Global Commission on Adaptation.

  • In the wake of devastating fires in California, the state’s electric utility, Pacific Gas & Electric, faces bankruptcy. The company was found liable for $1.7 billion in damages after it was determined that several of the deadly fires were caused by the company’s aging infrastructure and inadequate vegetation management.

  • United Nations Development Program estimates that over the last 30 years, one out of every three dollars spent on development has been lost to extreme climate events — a total loss of $3.8 trillion

  • A recent report warns that warming between 1.5–2°C will lead to a substantial increase in the proportion of under-nourished people in sub-Saharan Africa. If warming exceeds 3°C globally, virtually all of the agricultural areas across Africa could become unviable for food production.

  • A major scientific report issued by 13 US federal agencies estimates that up to 10% of the country’s GDP could be lost due to health, infrastructure and environmental impacts, including wildfires, crop failures, crumbling infrastructure and disrupted supply chains.

  • A Nigerian bank recently issued the country’s first certified African Climate Bond. 80% of the bond’s proceeds will be allocated to protection against rising sea levels and flood defenses for coastal communities on the outskirts of Lagos.

  • The Global Commission on Adaptation has recently launched a collaboration with more than 75 governments, global companies, NGOs and foundations in order to design and implement more equitable adaptation measures around the world.

"We are seeing a greater number of extreme weather events and and climate "tipping points" where key systems change rapidly. To address the climate resilience gap, we need increased collaboration between the private sector, governments and investors to action solutions. We also need more up-skilling internally at companies – ensuring that functions such as enterprise risk management, corporate strategy, sustainability and research and development are communicating and driving the agenda forward."
James Hubbard, Senior Consultant, ERM

Advice for Business

  • Use the Task Force on Climate-related Financial Disclosures (TCFD) climate scenario analysis to assess long-term exposure to climate impacts. Integrate climate risk and opportunities into corporate strategic thinking and planning. Disclose climate preparedness and supply chain resilience.

  • Ensure that climate risk is effectively embedded into existing board and committee structures to enable adequate oversight of the issue.

  • Collaborate with stakeholders to increase the resilience of vulnerable public and private infrastructure that is essential to your business.

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