Climate change as a business risk

By Michael Kramer

Michael’s latest GreenBiz.com column is out, and it’s a good one, looking at a wide range of ways that climate change is coming on to the radar as a clear and explicit business risk that needs to be addressed.  Read the whole thing at GreenBiz; here’s a teaser:

Shareholders and managers understand that managing risk is an important aspect of running a company. Elected officials who may disallow the rebuilding of homes on hurricane-prone coastal lands are, in essence, determining that the risks outweigh the benefits. In the corporate world, there is a need to understand that the unprecedented risks we’re facing can serve as a tremendous impetus for strategic planning that averts or mitigates climate change risk.

The SEC agrees. In 2010, it issued its Commission Guidance Regarding Disclosure Related to Climate Change, which states that increases in storm intensity, sea-level rise, thawing permafrost, temperature extremes, changes in the availability or quality of water or other natural resources, floods, and decreased agricultural production capacity can materially affect companies in the areas of personnel, physical assets, and the supply and distribution chains. It also affects the prices of raw materials, particularly ores, agriculture, food, energy, and clothing. Travel and tourism is highly vulnerable to climate impacts as well.

Last year, Calvert Investments, Ceres, and Oxfam America issued a guide to disclosing and managing Physical Risks from Climate Change, and offers specific suggestions to companies specifically in the areas of food, apparel, electric power, insurance, mining, oil and gas, and tourism. Questions are posed in various categories: value chain; climate resistant and resilient systems and policies; vulnerable regions; disaster strategies; water risks; impacts on prices, capital, markets, and opportunities; and impacts on stakeholders and communities.

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Michael Kramer

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