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Companies Disclosing to CDP Reveal Risks, Opportunities and a Troubling Reality

While companies acknowledge they are facing significant financial risks from climate change impacts, cumulative gains from realizing business opportunities are also likely, according to a new report published by CDP. Financial organizations appear to see the most opportunities, as well as the most climate risk, but a more concerning story may sit behind this statistic, warns Nicolette Bartlett, Director of Climate Change for CDP.

The Report

With climate change impacts already hitting companies around the world, organizations are facing growing scrutiny. They need to show their stakeholders that they are integrating the risks and opportunities from these potential changes into their business strategies and are focusing on the long-term. The CDP report covers nearly 7,000 companies. It analyzes the risk and opportunities related to climate change companies are facing, based on data reported to CDP in 2018.

Climate Change Opportunities

The 215 biggest global companies report that cumulative gains from harnessing business opportunities could be as high as $2.1 trillion – nearly all of which are highly likely or virtually certain, according to the report. Businesses estimate the  potential business gains at $2.1 billion, nearly seven times the cost of realizing them (at $311 billion).

These opportunities include increased revenue through demand for low emissions products and services (such as electric vehicles), shifting consumer preferences and increased capital availability as financial institutions increasingly favor low-emissions producers.

“It is hugely encouraging that companies are reporting that the potential value of climate opportunities far outweighs the costs of investing in the transition,” says Bartlett.

Businesses in the financial sector see the most potential revenue from new sustainable products and services at $1.2 trillionfollowed by manufacturing ($338 billion), services ($149 billion), fossil fuels ($141 billion) and the food, beverage and agriculture industries ($106 billion).

Climate Risk

More than 80% of companies expect major financial impacts from climate change effects such as extreme weather patterns, rising global temperatures and increased pricing of greenhouse gas emissions. Around $500 billion of costs are rated as likely to virtually certain, with higher operating costs linked to legal and policy changes making up a significant risk.

The vast majority of risks are concentrated in the financial services industry – the sector reported almost 80% of all financial risk value.

Mounting Concerns

While the research shows that financial organizations are seeing the most opportunity – and risk – from climate change, this may be a result of increased scrutiny from regulators and stakeholders aimed specifically at the financial sector. If such scrutiny is part of the reason for the growing awareness of climate risk and opportunities in the financial sector, potential gaps in awareness elsewhere in the economy could present real risks, according to Bartlett.

All companies, from all industries – not just those in the financial sector – need to show their stakeholders that they are integrating these potential changes into their business strategies and focusing on the long-term. And regulators and investors should take note, Bartlett says.

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