Blake Lapthorn's Climate Change team held a breakfast seminar on building business resilience to inevitable climate change during October 2009.

1. Building business resilience to
inevitable climate change
Dr Richenda Connell, CTO & co-founder Acclimatise
Green Breakfast
Blake Lapthorn
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14 October 2009

2. About Acclimatise
Acclimatise is the market leader in climate risk management consultancy and
intelligence services. We help businesses and governments assess and manage the
risks and opportunities of inevitable climate change by:
• Bridging the gap between the scientific community and the corporate world, reviewing the
latest climate change science, providing clear guidance on the potential business and
financial impacts.
• Working with our clients to understand the direct and indirect climate change
implications for their strategies and business models.
• Assessing the implications for financial performance, as well as for issues including brand,
reputation and litigation risk.
• Advising on the climate change positions being taken by our clients' key stakeholders,
including governments, regulatory agencies, investors, banks, insurers, analysts and NGOs.
• Advising on robust strategies to manage risks and uncertainties and realise business
opportunities.
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3. Who we work with on climate risks
Netherlands Government
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4. ‘Physical’ drivers
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5. Inevitable climate change
• Climate change is underway
• Unless the risks are managed appropriately,
climate change will increasingly impact
business performance
• A wide range of business stakeholders,
including governments, investors, banks and
insurers are developing climate change
adaptation policies
• Climate risk management should be integrated
into core business risk management
processes by companies with large fixed
assets and their financial services partners.
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6. Two climate change challenges:
mitigation and adaptation
“Adaptation is the only response available for the climate change
impacts that will occur over the next several decades before
mitigation measures can have an effect.”
Sir Nicholas Stern
"Ten years ago we were talking about these impacts affecting our
children and our grandchildren. Now it is happening to us. Even if
we achieve a cap at two degrees, there is a stock of major impacts
out there already and that means adaptation. You cannot mitigate
your way out of this problem. The choice is between a damaged
world or a future with a severely damaged world."
Professor Martin Parry, Co-chairman of the IPCC
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7. Decisions based on historic climate
data are no longer robust
Observed changes in climate, physical and
biological systems from 1970-2004
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Source: IPCC AR4 SPM, 2007

8. Climate costs business
• Hot summer 2003 across Europe • Agricultural production fell by 10%
was a 1 in 500 year event – Financial impact estimated at
• By 2040 this will be a 1 in 2 year €13 billion
event, i.e. ‘normal’ • EDF had to shut down ¼ of its 58
nuclear power plants
– Lost €300 million
Summer 2003
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[Stott et al, 2004]

9. Business risks from unmanaged
climate risks
• Changes in market demand • Lower profit margins
• Business becomes less competitive • Lower asset values
• Reduced output, productivity, efficiency • Reputational damage
• Increased CAPEX & OPEX • Unable to repay debts
• Asset deterioration & reduced asset life • Equity growth not
• Increased insurance costs / lack of availability realised
• Increased risks of environmental damage & litigation
• Increased risks of community conflict
• Decommissioning liabilities
Alaskan infrastructure:
Extra wear and tear
costs
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10. Regulatory, financial
and legal drivers
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11. Adaptation regulation
UK Climate Change Act includes:
• Statutory requirement on Government to report
regularly on risks
• National risk assessment plus cost-benefit
analysis
• Powers to require organisations to undertake risk
assessments
European Commission White Paper:
• “Objective of EU’s Adaptation Framework is to
improve EU’s resilience to deal with the impact of
climate change”.
• 4 pillars including “Integrating adaptation into EU
key policy areas”
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12. Institutional investors are asking difficult
questions of companies
Universities Superannuation Scheme, Railpen, Hendersons, Insight
Investment released a report earlier this year,
“Managing the Unavoidable: Understanding the investment implications of
adapting to climate change”
• Peter Moon, Chief Investment Officer, Universities Superannuation Scheme
– “We need more and better information about how companies and other
assets will be affected so that we can make better informed decisions
as to how we allocate our long-term capital.”
• Rory Sullivan, Head of Investor Responsibility, Insight Investment
– “Adaptation has been the poor relation in the climate change debate.
This project will provide us and other investors with a framework within
which to analyse all of the risks - and opportunities - that a changing
climate brings.”
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13. Banking sector action
• “EBRD considers that climate change may
pose a range of risks to its investments ….
This assignment will develop guidance and
practical tools for integrating climate risk
assessment and climate change adaptation
into EBRD’s project cycle management.”
• “These impacts may be valid considerations
in credit risk analysis for lending banks.”
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14. Insurance company concerns: Some now
refuse to insure in vulnerable locations
• “Insurance is in the front line of climate change…. it is insurance
companies that will have the responsibility of dealing with many of its
consequences. And it is insurers who must be equipped to analyse
the new risks that flow from climate change, and to help customers
manage these risks.” (Association of British Insurers)
Weather related catastrophes and insured losses
Source: ‘Financial risks of climate change’ ABI, 2005.
Report prepared by Acclimatise
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15. Legal risk: Climate change is now
‘reasonably foreseeable’
• A leading law firm has stated that:
– “The effects of climate change can now be
regarded as being reasonably foreseeable at
every stage – from initial instruction, through the
design and planning process to construction and
beyond. It must be incumbent upon professional
advisors to ensure that appropriate steps have
been taken.”
• This has consequences for all those with legal duties
for decision making and those providing advice:
– Regulators and government agencies
– Accountants
– Lawyers
– Company directors
– Engineers, architects etc.
– Banks and financial services companies
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16. Increasing legal liabilities
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17. Calls for climate risk disclosure
• Japanese Institute of Certified • A commissioner at the US SEC said
Public Accountants have proposed they are preparing to launch “a very
that companies disclose climate serious look” at requiring
risks to investors covering: corporations to assess and reveal
the effects of climate change:
• Information on exposure to climate – Physical damage
change risk
– Financial loss
– Effects of regulations – Legal liability
– Physical effects of climate
change July 2009
• Current status of GHG emissions
• Current status of climate change
policies
January 2009
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18. Business opportunities
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19. Adaptation benefits business and its
stakeholders
• Climate-resilient private
sector development can:
– Ensure returns to
lenders and investors
– Avoid environmental,
social and reputational
risks
– Help improve the
adaptive capacity of
local communities
Proactive adaptation can save money: The World Bank and the US Geological Survey
estimate that economic losses worldwide from natural disasters in the 1990s could have been
reduced by $280bn if $40bn had been invested in preventative measures
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20. Opportunities for investment in
adaptation
• Estimated investment and financial flows for adaptation are 0.2% to
0.8% of global investment flows by 2030 for just 5 sectors:
– water; human health; agriculture, forestry & fisheries; coastal
resources; infrastructure
• Private sector investment has important role:
– US$33 billion invested in transport, water & sanitation projects in
low & middle income countries in 2007
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21. Thank you
Richenda Connell
Acclimatise
r.connell@acclimatise.uk.com
www.acclimatise.uk.com
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