Business leaders in the US and UK have expressed concern over the impact of climate change.
Ahead of the COP26 conference in Glasgow next month, research showed that 83% of more than 800 senior executives at large businesses believe climate volatility poses a tangible risk to their corporate bottom line.
The 2021 Climate Intelligence Outlook, compiled by tech firm Cervest, said almost half of the decision-makers – responsible for climate-related strategies – claimed to place a greater emphasis on mitigating or managing climate risk than on imperatives like revenue growth, digital transformation and profitability.
However, there is a wide gap between organisations’ awareness of climate-related risk and their readiness to mitigate its impact, even as extreme weather activity threatens more and more of their assets.
A whopping 87% of respondents said their organisation understands the financial risks that climate change poses, but nearly half are yet to integrate climate into their financial risk management while a similar proportion are not actively assessing and managing relevant physical climate risks.
More than a third (36%) believe their company has not allocated enough resources — including budget and people — to effectively manage the risks and opportunities of climate change.
“Decarbonisation is critical, but it’s not enough to protect organizations and investors against the risks of climate change,” said Iggy Bassi, founder and CEO of Cervest.
“Decades of greenhouse gas emissions have locked us into decades of accelerating climate volatility which translates into trillions of dollars of assets at risk. Even if we were to reach net-zero tomorrow, it would not reverse the persistence and intensification of today’s extreme weather events.
“Organisations need to understand how to adapt with climate change and build resilience into their strategy.”
Conducted in September, after Hurricane Ida, the California Wildfires, and the flooding and droughts across the UK and Europe, the Cervest Climate Intelligence Outlook finds the impact of climate-related risks on corporate physical assets may be more significant and broader in scope than recently forecasted.
Last year, S&P Global reported that 60% of companies in the S&P 500 Index owned physical assets at high risk of climate-related events. But the Cervest survey found 88% of companies have already had a corporate physical asset, such as an office, warehouse, or other building, affected by extreme weather.
Flooding (61%) topped the list of climate hazards that executives say pose the most significant risk to assets, followed by extreme precipitation (59%), heat stress (46%), wind stress (40%), and drought (33%).
“Businesses are becoming increasingly aware of the complex transitional and physical risks posed by climate volatility,” added Bassi. “Our survey results clearly bear that out. However, despite their best intentions, decision-makers across organisations are struggling to factor climate change into their decision-making.
“All internal and external stakeholders need to see the projected impact of climate change on the same physical assets. When this happens, we will create a network of climate intelligent organisations driving transformative change at a global level.”