Some of the world’s biggest companies, representing $17 trillion in market capitalization, have said that climate change could cost them almost $1 trillion, much of it within the next five years, with a potential $250 billion write-off of stranded assets.
However, they also said that there are climate opportunities of $2.1 trillion, “nearly all of which are highly likely or certain”. Financial companies alone saw potential revenue of $1.2 trillion from low emissions products and services but they also face almost 80% of the total financial impacts, increasing the urgency for them to shift their investments into lower-carbon projects.
Manufacturers see potential revenues of $338 billion, the services sector $149 billion, fossil fuels $141 billion and the food, beverage & agriculture industries $106 billion.
Perhaps contrary to expectations, fossil fuel companies report more opportunities than risks from the low-carbon transition, “raising questions about what they are reporting”, says CDP.
“The goalposts for climate action have never been clearer for companies,” said Nicolette Bartlett, Director of Climate Change at CDP. “Our analysis shows that there are a multitude of risks posed by climate change, including impaired assets, market changes and physical damages from climate impact, as well as tangible impacts to business bottom lines.”
The findings are revealed in a new report from environmental disclosure non-profit CDP, which questioned 215 global corporations about their climate-related financial risks.
More than four fifths predict that their business will bed+ affected by climate impacts such as extreme weather patterns and rising global temperatures leading to higher prices for greenhouse gas emissions and higher operating costs linked to legal and policy changes, with costs of at least $500 billion.
Many companies fear that they may be left with stranded assets as a result, including fossil fuel companies that may no longer be economic “as a result of market shifts associated with the transition to a low-carbon economy, or companies that are significantly exposed to the physical impacts of climate change”.
But the businesses also anticipated opportunities for new business from selling low emissions products and services such as renewable energy, electric vehicles and battery storage, boosted by shifting consumer preferences and increased capital availability as financial institutions start to favour low-emissions companies.
On average, the report says, climate-related opportunities generate almost seven times as much revenue as it costs to achieve them – $2.1 trillion in opportunities against costs of $311 billion – suggesting there will be a significant shift to more climate-friendly products and services from the world’s largest companies. We are already starting to see evidence of this in the way companies in sectors such as oil and gas, utilities and automotive are starting to move into areas such as electric vehicles and their infrastructure, renewable energy and battery storage.
“Our collective response to climate change is more urgent than ever, and it is clear that corporate action cannot be delayed,” Bartlett adds. “So it is hugely encouraging that companies are reporting that the potential value of climate opportunities far outweigh the costs of investing in the transition.
“However, while our research shows that financial organizations see the most opportunities and value at risk from climate change, a more concerning story may sit behind this statistic. It is likely that this growing awareness is partly caused by the increased scrutiny of regulators and stakeholders. And the potential gaps in awareness and disclosure elsewhere in the economy present real risks. Regulators and investors should take note, and all companies from all industries need to step up.”