The corporate response to climate change is at an inflection point. A new report by RBC captures the moment perfectly. Historically, corporate initiatives have focused on stopping climate change from getting any worse. Yet the fiscal hit from climate-related disasters continues to rise. Consequently, businesses are putting extraordinary pressure on lawmakers to invest in mitigation and preparation measures.
As the RBC report makes clear, it’s not just a matter of rising temperatures increasing expenditures. As a result, climate change is the new normal conversation in the boardrooms across North America and Asia. As the business community faces the very real prospect of climate risks, the business case for adaptation is growing. References to physical climate change risks exploded in Canadian earnings calls beginning in the latter half of 2020. By the middle of last year, this trend reached an extreme apex. These mentions have suddenly dried up over the past few months.
Sara Mahaffy, RBC’s head of global sustainability strategy research, commented on the evolving landscape of business responses to climate change.
“We are also seeing discussions of extreme weather impacts during earnings calls hit new highs this year.” – Sara Mahaffy
Mahaffy went on to explain how companies are beginning to accept higher financial risks, but at the same time, they’re beginning to realize new opportunities.
“Companies have not only been citing higher financial impacts (risks), but also increased tailwinds for their products and services that are helping customers prepare and respond to extreme weather events and natural disasters (opportunities).” – Sara Mahaffy
The RBC report reveals that every dollar invested in adaptation and resilience can generate over ten dollars in benefits over the span of a decade. This staggering statistic highlights both the opportunity and the economic return on investment for companies that can quickly shift focus to adaptive solutions.
Under these projections, average global temperatures are on track to increase by 2.7 degrees Celsius by the year 2100 if we continue with business as usual policies. Concurrently this has generated an acute need for adaptation. In a more hopeful alternative, this rise could be constrained to 1.9 degrees. All doom and gloom aside, forecasts like these underscore the need for action now and smart planning moving forward to reduce risks in the future.
Public funding, including federal support in the wake of disasters, has been the lifeblood of many adaptations. It represents roughly two-thirds of the climate spending in this package. The report shines a light on a major gap. Lower-income countries need $387 billion a year for adaptation, but international public finance flows are at just $28 billion annually.
The market for climate change adaptation that has been gradually but consistently expanding — at a rate of seven percent year-over-year since 2015. It’s on track to surpass $50 billion in the next few years. This new surge is a testament to just how far the private sector has come in realizing that adaptive strategies are necessary.
Mahaffy also pointed out a critical opportunity for developing nations.
“According to the World Bank, 70 percent of infrastructure that will exist in developing countries by 2050 has yet to be built, presenting a huge opportunity to integrate adaptive solutions early on.” – Sara Mahaffy
