Key Ways How Climate Change will Impact Businesses

Firms manage climate resilience, and adaptation and climate hazards should be essential business risks and part of company strategy.

FREMONT, CA: Climate change affects people’s lives and jobs. Directly or indirectly, climate change threatens almost all industries. Climate change poses physical, transitional, and liability hazards for businesses. Energy is a transition-risky industry. Governments are transitioning to renewable energy sources and requiring net-zero carbon emissions from energy producers. Global warming can threaten the ability to grow food, live in safe and secure homes, and even do jobs.

People leave their homes due to climate change, which will increase in the future. Some are already more sensitive to climate consequences, such as people living in small island nations and impoverished countries. Prolonged droughts put people at risk of famine, while conditions like sea-level rise and saltwater intrusion have progressed to the point where entire towns have had to evacuate.

Physical risks

Climate change's physical impacts are acute environmental threats. Flooding, hurricanes, drought, and wildfires are all climate crisis symptoms that can harm people, property, and transportation. Warming has caused significant weather events. Major weather occurrences are affecting business. Agriculture has physical risks. Extreme cold and heat can also harm crops and livestock. Climate change also threatens the leisure industry. While tourism revenue is lost as wildfires render famous hiking regions hazardous, the COVID-19 pandemic demonstrates interconnected global hazards.

Risk transition

Transitional risk is the cost to businesses of implementing climate change policies, laws, and regulations. Changes in technologies and consumer trends can also lead to reputational risk as society's perception of ethical business practices shifts. As industries migrate away from climate-changing activities, they risk being left with stranded assets – land, property, or equipment with declining value. Transitional risk is present in mining. A carbon price could harm precious metal mining. The negative consequences of mining on the climate and environment constitute a reputational risk for mining corporations. Investors are wary of enterprises that could bring reputational loss by association.

Liabilities

Failure to reduce, adapt, disclose, or comply with changing legal and regulatory expectations creates liability risks. Climate litigation is rising globally, reflecting breakthroughs in attribution research, developing legal conflicts, and changing public attitudes. Regulators and investors want to guarantee businesses give appropriate information and comply with a growing regulatory landscape. But so are firms that ignore future climate change. Engineers or developers don't account for rising rainfall intensity while designing drainage systems.