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We all need to be thinking about climate risks and opportunities impacting our businesses today and in the future, and the need for a clear climate change narrative.

In summary:

  • Climate risk is not just a regulatory issue but a boardlevel strategic issue. Failure to take appropriate steps now is likely to leave an organisation exposed to material business risks. 
  • Transformational change across environmental, social and governance (ESG) is being driven by a combination of investor, regulatory, employee, peer, customer and supply chain pressure. 
  • It will be mandatory for all UK listed companies and large asset owners to report on their risk exposure and management, as well as the risk mitigation and resilience strategy, governance and metrics in respect of climate change by 2022 at the latest. 
  • The UK is hosting and chairing COP26 in Glasgow in November 2020. The UK Government will need to present a coherent plan on how to meet its legally-binding targets for emissions reduction, which in turn will present risks and opportunities for business. 
  • The potential impacts of climate change on companies will manifest in the short term as well as long term, and so are directly relevant to business decisions taken today. 
  • Taking the time now to think about climate risks, running appropriate impact scenarios and making the relevant changes to business models and strategies gives companies the opportunity to take advantage of the new technologies and market opportunities these changes present. 
  • Mark Carney, who was recently appointed as Special Envoy to the UN on Climate Change and Finance, has warned that “Companies and industries that are not moving towards zero-carbon emissions will be punished by investors and go bankrupt”.1 However, responding to climate risks effectively has the potential to achieve the opposite, resulting in a positive impact on profitability. 
  • New regulations on financial institutions mean that they will ask for more detailed information on ESG factors before deciding whether to invest in, lend to or insure a corporate. This presents an opportunity for companies to be ahead of their competitors in meeting the new requirements. 
  • These new regulations could have significant implications for the share value or fundraising ability of listed corporates, private enterprises and infrastructure projects.

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