Based on our experience we have identified the following as the some of the key climate change risks and opportunities for business:
Risks
- Physical and business interruption risks - the increasing likelihood of extreme weather events, stresses on water supplies and increasing temperatures represent direct threats to the viability of businesses and their supply and distribution channels
- Financial risks - direct impacts arising from the anticipated introduction of a carbon price signal and indirect exposure arising from supply chain sensitivity, the ability to maintain access to capital and the prospect of rising cost of insurance
- Market risk - decline in demand for carbon intensive products and investment as customers, shareholders, investors and other stakeholders become increasingly conscious of the "carbon profile"of businesses and their products
- Reputational risks - impact on brand value and reputation
- Regulatory risks - the potential for more onerous disclosure requirements and the emergence of minimum performance standards linked to energy consumption and greenhouse gas emissions in foreign and domestic markets
- Legal risks - the potential for legal action by a variety of parties, including shareholders. Directors need to be mindful of their fiduciary responsibilities
Opportunities
Effective climate change risk management also represents an opportunity to build competitive advantage and to realise costs savings from efficiency gains:
- Building brand and sustainability credentials can maintain license to operate and lead to supplier/employer of choice
- Clearly communicating to key stakeholders including financial analysts can ensure access to capital and reduced credit risk
- Accessing new markets for products and services
- Differentiating products based on carbon efficiency
- Identification of efficiency improvements
- Variations in weather patterns can lead to new business opportunities
