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WASHINGTON – A new analysis of information provided by companies suggests that many of the world's largest companies, ranging from Silicon Valley technology companies to major European banks, are preparing for the possibility that climate change will significantly affect their bottom line. next five years.
Under pressure from shareholders and regulators, companies are increasingly revealing the financial impacts they could face as the planet warms up, such as extreme weather conditions that could disrupt their supply chains or more severe weather regulations. the value of investments in coal, oil and gas. Early estimates suggest that billions of dollars can finally be at stake.
Nevertheless, analysts warn that many companies are still struggling to take into account all the plausible financial risks associated with global warming.
"The numbers we see are already huge, but it's clear that this is only the tip of the iceberg," said Bruno Sarda, North American president of CDP, an international non-profit organization that has wrote this new report and collaborates with companies around the world. the world to publicly disclose the risks and opportunities that climate change could create for their businesses.
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After analyzing submissions from 215 of the world's 500 largest companies, the CDP found that these companies could potentially face about $ 1 trillion in climate change costs around the world. decades to come unless they have taken proactive steps to prepare themselves. According to the companies' own estimates, a majority of these financial risks could come to fruition in about five years.
The information provided shows how business leaders are expecting climate change, and the measures taken as a result, to affect the four corners of the global economy.
Many companies are preparing for direct impacts. Hitachi Ltd., a Japanese manufacturer, said that increased rainfall and flooding in Southeast Asia could knock out its suppliers and that, as a result, it was taking defensive measures. Banco Santander Brasil, a major Brazilian bank, said increasingly severe droughts in the region could affect the ability of borrowers to repay their loans. Alphabet, Inc., Google's parent company, noted that rising temperatures could increase the cost of cooling its energy-hungry consumers. data centers.
Others are watching closely for potential public responses to climate change. Total, a French energy company, fears that countries' ambitious efforts to limit global warming and limit the use of fossil fuels make some oil and gas reserves "Imbrûlable." BASF, a German chemicals company, said it had a "significant carbon footprint" that could scare away environmentally conscious shareholders unless it takes action to tackle the problem. climate change.
In total, the world's largest companies have estimated that their assets may need to be written off or withdrawn by at least $ 250 billion as the planet warms. These assets include buildings in high-risk flood zones or power plants that may need to be closed due to stricter pollution regulations.
The information provided only provides a partial overview of the potential price of the climate change. At present, only a fraction of companies worldwide report its climate risks and many large companies, including the energy giants, Exxon Mobil and Chevron, have not communicated information to CDP last year. Companies that disclose information often find it hard to explain exactly how high temperatures could hurt them or help them financially.
For example, said Mr Sarda, it is relatively simple for companies to calculate the potential costs of an increase in taxes to reduce carbon dioxide emissions, one of the main greenhouse gases that contributes to global warming. Indeed, this is one of the most common climate-related risks that companies are now disclosing. But It is more difficult to take scientific reports on rising temperatures and extreme weather conditions and to say what these broad trends could mean for specific companies located in specific locations.
Previous studies, based on computer models of climate, had estimated that the risks of global warming, if they were not managed, could cost the global financial sector between 1.7 and 24.2 billions of dollars in net present value. A recent analysis published in Nature Climate Change warned that companies only report these risks "sporadically and inconsistently" and often have a narrow view of potential hazards.
Pacific Gas and Electric, California's largest utility, offers a case study of how business information may be less than perfect.
In its report to the CDP last year, PG & E said that the rising risk of forest fire in the Western US, due in part to global warming, could spawn outbreaks. significant financial costs if the utility were held responsible for the fires. PG & E has estimated the potential financial impact of wildfires at around $ 2.5 billion, based on claims by the utility provider in 2017.
However, this proved to be excessively optimistic: last January, PG & E filed for bankruptcy protection and said its fire debts were $ 30 billion soon after its power lines sparked what became California's deadliest fire at the time. last autumn.
According to the CDP report, many companies also see a monetary potential in climate change. Some 225 of the world's largest companies have USD 2.1 billion of possible opportunities in a warming world, the majority should materialize in the next five years.
Eli Lilly, a drug manufacturer in the United States, cited a study suggesting that rising temperatures could lead to the spread of infectious diseases – a problem that society was well placed to help solve. "This could then increase the demand for some of the drugs we produce," the firm said. (At the same time, the company also warned that climate change could have adverse financial consequences if floods and more severe storms disrupted its manufacturing facilities in places like Puerto Rico, as was the case after Hurricane Maria of 2017.)
And any move towards clean energy sources offers a chance to make a profit. ING Group, a Dutch financial services company, estimates that the transition to a low-carbon economy could require $ 30 billion in new investments in clean energy and energy efficiency around the world. As a result, ING aims to double its "climate finance portfolio" by 2022, the company said in its statement.
The report comes as financial regulators worry more and more that markets are not yet fully aware of the potential financial consequences of climate change. Last month, the European Central Bank warned that a wave of severe weather causing heavy losses for insurers or a quick and unexpected change in investors to move away from fossil fuels could hit the balance sheets of unprepared banks and potentially destabilize the financial system .
"The risks of climate change could become systemic for the euro area," the bank said, "especially if markets do not properly assess risks."
In 2015, the Financial Stability Board – an influential group of finance ministers, central bankers and regulators from the world's largest economies – created a working group aimed at convincing banks and other companies to be more transparent about their climate risks. But progress has been slow.
The CDP report revealed that companies with headquarters in the European Union are much more likely to detail the potential financial effects of global warming, in part because local regulations often require it. In contrast, firms in the United States, China, Brazil, and Mexico were much less likely to report significant financial risks.
In the United States, the Securities and Exchange Commission has not mandate that publicly traded companies consider potential impacts on the climate, although the agency has provided guidance on how companies can do this. Some large institutional investors, such as mutual fund company Vanguard Group and the New York State Pension Fund, have begun asking companies to be more transparent about their exposure to the climate, a trend that has contributed recent increase in disclosures.
Mr. Sarda of CDP said that he expected companies to offer "more clarity" and "more sophistication" in their disclosures. like the pressure to make it go up. But, he said, "it's certainly an important process."
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