Climate change business and finance

This blog is not only on statistics and, even more, not only on COVID-19. As the pandemic becomes “normalised” (whatever that means), I will be looking at other topics. Plus, writing only about the coronavirus is getting a bit boring.

One of these topics is climate change. Regardless of what we think about the mechanisms, it is becoming increasingly clear that something indeed is going on. From more extreme weather conditions to rising temperatures, from disappearing glaciers to freak firestorms, the evidence is mounting that climate is changing in ways that could have severe implications.

My professional interest lies in how these changes affect pests and diseases, but the implications are for all businesses.

The World Bank estimates that climate change could push an additional 100 million people into poverty by 2030. However, the impacts of climate change are not evenly distributed, and the poorest and most vulnerable people are often the most affected.

For example, as shown in the movie below, it is often the poorest farmers who are most impacted by climate change. They usually can least afford new plant varieties that might cope better with changing weather or emerging pests. The outcome is that they will often lose their livelihoods and will have to migrate.

Thus, directly or indirectly, climate change has significant economic and social impacts. These include lost productivity, increased healthcare costs, damage to infrastructure, and disruptions to trade.

The precise impacts of climate change are difficult to predict. Still, companies need to take action to prepare for a future in which extreme weather events are more frequent and intense.

Climate change is already having an impact on businesses around the world. The World Economic Forum’s 2018 Global Risks Report found that extreme weather events are the top global risk in terms of likelihood and have been for the last three years. The effects of climate change are far-reaching and will touch every aspect of our lives and business, from supply chains and manufacturing to individual person’s health and safety.

Supply chains can become disrupted. We are now perhaps more concerned with the effects of war in Ukraine on food supply than on climate change impacts. But, India has recently announced that extreme weather earlier this year has severely affected grain production. India was hoping to substitute their production for Ukrainian and Russian exports, but this might no longer be possible.

Changes in temperature and precipitation patterns can affect factory operations. Heat stress from rising temperatures can increase absenteeism and accidents.

We have already seen increased flooding in some parts of the world and drought leading to fires in others. The damage to buildings, roads and railways needs to be taken into account.

In addition to the physical effects of climate change, businesses also face financial risks from climate change. These risks come from both the direct impacts of climate change on business operations and indirect impacts such as regulatory changes, legal liabilities, and reputational damage.

Businesses – small and large – need all help from governmental or non-governmental organisations. In the financial context, an example of such an initiative is the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD guide and recommendations were formed to help businesses understand and disclose these risks. So, if you are involved in any financially-related business, TCFD might be a useful link to explore.

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