The Financial Stability Board (FSB) is an international group set up to encourage businesses to assess and disclose their climate related risks and many are doing so including PepsiCo and Morgan Stanley.
Guidelines produced by the FSB though are voluntary and those businesses most at risk are unlikely to voluntarily disclose their risks.
There are two threats related to climate change.
The first is the cost of damage due to extreme weather and climate change, insurance costs may become too high or cover won’t be available for certain scenarios. Properties are becoming unsellable, this is already starting to happen in Florida where properties are vulnerable to sea level rise.
The second threat is the value of oil companies being dependent on known reserves. To stay under climate change targets which keep the world from catastrophic warming we cannot burn the known reserves so they risk becoming stranded assets and the perceived value of the oil companies diminishes. This would affect you personally if you have a pension with investments in fossil fuel companies. The financial industry still works on a “business as usual” scenario where the fossil fuel industry is worth trillions but this is dependent on their assets being realised.
Oil companies are currently investing $100 million into extreme extraction – tar sands, the Arctic and deep offshore. These are high risks projects that have already encountered many problems. China has stopped building coal fired power plants. Since 2010 three of the top five coal mining companies the USA have filed for bankruptcy, due to cheap gas. Renewables are also disrupting the market. To deny the issues may precipitate a financial crash. Performance of fossil fuel free (ethical) funds can perform just as well as non –ethical and are less risky. Speak to your financial advisor about your options.
As a business do you know your vulnerability to climate change? Our experts are on hand to help if you need further advice on this. By knowing your risk you can plan for the future and manage the changes to your business. Call us on 01746 552423 or email firstname.lastname@example.org.