Over 80% of the world’s largest companies have come to recognize extreme weather and climate-related impacts as a business risk. These are the findings of a recent report produced by the Center for Climate and Energy Solutions, a nonprofit think tank focusing on energy and climate risk. The impact of extreme weather is being felt around the world and is projected to intensify in the coming decades. For the various companies listed in the S & P’s Global 100 Index, climate impacts are increasingly perceived as a present or future business risk.
For these businesses, this new approach to risk management means many things. To start, undertaking vulnerability assessment of future climate risks is essential. It also means working to strengthen climate resilience. We are also seeing climate risk included in financial filings reports and sustainability reports.
Planning to weather the storms of the future comes with significant challenges. It requires adapting to the changing risk landscape and accounting for increasing threats. For lack of a better lense, many companies typically rely on historic data to project future risks. To climate experts, this approach is a bit like using a spring shower to gauge the intensity of an imminent hurricane. Using only historic data to project risks in a shifting climate means missing certain risks and underinvesting in resilience.
Mitigating risk requires rethinking how we pursue risk management. Admittedly, climate projections are not granular enough to project future risks with the same clarity as historic data. But, we don’t need a crystal ball. A renewed global attentiveness to climate change is resulting in improved climate models and the availability of more climate data. This is increasingly becoming an actionable science.
In Southern Ontario, we know what kind of extreme weather to expect. Milder winters are projected to result in more ice events and an actual increase in snowfall. Fluctuating temperatures will cause sudden rising water levels and more frequent flooding. Additionally, warmer summers bring increased risks of powerful, torrential storms.
At the very least, resilience planning means viewing climate impacts as magnifiers of existing risks. Threats to a company’s physical assets and immediate means of operations are central to risk assessment. One’s workforce, supply chain, access to transportation, and energy needs are no less vulnerable to climate impacts. All companies should be starting with a vulnerability assessment of the most critical parts of the business. This should be followed by clearly identifying risks and implementing resilience planning.
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