[eBook] Understanding Climate Change Risk to Business: Getting Started
The financial toll of potential climate change risk to businesses and the global economy is projected to be sizable. The European Risk Management Council estimates that climate change could place anywhere from 2% to 10% (in a worst-case scenario) of global financial assets at risk by 2100.
Based on recent findings from the world’s leading climate scientists at the Intergovernmental Panel on Climate Change (IPCC), there’s a clear call to action for business leaders. Understanding and safeguarding against climate change risk to the business needs to be a top priority. In the IPCC’s Sixth Assessment Report (AR6), released in March 2023, the organization issued a “final warning” on climate change and announced that the “window of opportunity to secure a liveable and sustainable future” is “rapidly closing.”
Getting Started: Understand Climate Change Risk to Business
C-suite leaders, risk and asset management professionals, and supply chain and logistics leaders need to be able to assess the likelihood of certain types of weather events occuring. It’s also imperative that they understand how climate change might impact not only their owned assets, but also the businesses and infrastructures they depend on to operate. Further, they need to determine how often these perils—such as extreme flooding, wind, heat, cold, wildfire, hail, drought, and precipitation—might occur and what the financial burdens could add up to for the business.
The problem is, many organizations don’t know where to begin. That’s why our experts at Jupiter Intelligence, the trusted leader in climate risk analytics, created The Climate Resilience Maturity Index. This framework is designed to help organizations not only understand their climate change risk but use these insights to best support their business longevity. In addition, it presents the steps required to move from a surface level understanding of climate risk to gaining a deeper level of understanding, becoming climate resilient and gaining a competitive advantage over the competition.
The Climate Resilience Maturity Index consists of five levels. At the earliest stage of maturity are “novices” with a limited understanding of the risks of climate change to the business. At the most advanced stage are data-driven “cutting edge” companies that have incorporated climate risk into their overall business strategy and are using climate data for value creation, a competitive advantage, and growth strategies.
Organizations that are beginning to understand climate change risk to the business fall into the novice or intermediate levels of The Climate Resilience Maturity Index.
Understanding Climate Change Risk to the Business: Novice and Intermediate Stages
Novices and intermediate companies might have some climate-risk-related practices and processes in place, but they typically lack a deeper understanding of their own climate risk. As leaders begin to recognize the urgency of business and supply chain vulnerability to extreme weather, some at this level are starting to consider making climate resilience a strategic priority.
Challenges for companies at the novice and intermediate stages include not having enough internal champions recognizing the importance of adopting climate risk management practices, concerns about costs of climate risk management, and ultimately having limited insight into the organization’s likely future chronic and acute physical climate risk vulnerabilities.
Still, internal and external motivators often push these organizations to adapt and advance. These pressures include satisfying regulatory requirements and meeting demands from institutional and individual investors concerned about climate change’s impact on financial, operational, liability, or reputational risk. Rising insurance costs, financial losses from unexpected climate-caused interruptions to operations, and competitive pressures also play a role in driving progress.
Steps Novice and Intermediate Organizations Can Take to Manage Climate Change Risk to Business
Noticeable change begins when companies at the early stages of The Climate Resilience Maturity Index develop an internal, strategic commitment to climate risk management and resilience. This includes building out risk committees focused on physical and transitional climate risk and documenting processes for assessing climate risk vulnerability.
Additionally, seeking guidance from expert climate risk analytics providers with climate scientists on staff can help novice and intermediate organizations identify owned and partner assets that are at risk and progress toward climate resilience.
How to Embrace Climate Resilience to Minimize Climate Change Risks to the Business
Get your copy of the new eBook from Jupiter, The Climate Resilience Maturity Index, and find out how to protect your business against climate-related loss and what cutting-edge companies are doing to adapt, protect their investments, and drive value.