Risk, Climate Change and Sustainability

Traditional risk management has extended to encompass the risks arising from climate change. What about the potential effect on production and business operations, regulatory and litigation risks and reputation risks?

Across the world, companies are addressing climate change utilizing a cross between traditional risk management and corporate sustainability efforts.

Climate change worries corporate decision makers, investors and insurers. How will the continually changing climate affect your company? Will there be a disruption to your business? Will you be impacted financially?

Investors are paying more attention to these issues more than ever. In a Ceres report, CEO of the California Public Employees’ Retirement System, Anne Stausboll wrote:

In light of our long-term liabilities, we need to understand the critical risks and opportunities faced by the companies in our portfolio.

Today, that includes the serious risks — financial, physical, and reputational — associated with issues such as climate change, natural resource scarcity, supply chain pressures and other global sustainability challenges. Any company that ignores these risks, and fails to develop a long-term strategy to address them, is diminishing its competitiveness in the 21st century. At the same time, there are enormous opportunities for businesses that fully embrace sustainability.

Ceres has outlined 20 key expectations that investors have in today’s business world that include the areas of governance, stakeholder engagement, disclosure and performance.These are meant to be utilized at guidelines.

Once your company has taken to its investors, a report by Marsh recommends that companies assess their exposure tat the board level as well, “so that directors can be aware of where climate change-related risks will appear on the list of the company’s biggest risks.”

There is still a long way to go in developing processes for managing climate risk. What approaches are your companies taking?

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