RISK TO COMPANIES FROM CLIMATE CHANGE

Background: 

• Climate change is already impacting economies around the world. Several reports by the Intergovernmental Panel on Climate Change (IPCC) warn of risk to economies but so far there’s been no specific assessment of how companies can account for such risks. 
  
  
• In this background, this investor guide was made in line with recommendations by the Task Force on Climate-related Financial Disclosures (TCFD), a 32-member board formed as a result of an agreement at a G20 summit in London, 2009. 
  
  
• This board consisted of representatives from large banks, insurance companies, asset managers, pension funds, large non-financial companies and credit rating agencies. 
  
  

Key findings of the report: 

• The 1.5°C scenario, exposes companies to a significant level of transition risk, affecting as much as 16% of overall portfolio value of investors which would represent a value loss of $10.7 trillion. 
  
  
• Utilities, transportation, agriculture as well as mining and petroleum refining sectors are at high levels of policy risk. 
  
  
• On the bright side, there was potentially $2.1 trillion as ‘green profits’. However, green revenues generated from the sale of low carbon technologies, which support the transition, will help companies offset costs from complying with greenhouse gas (GHG) reduction policies. 
  
  
• Finally, if governments delay action to enact climate policies that reduce greenhouse gas emissions, the 30,000 companies in the universe faced a further cost of $1.2 trillion.