The business cost of climate change: what the science says

Massive loss from extreme weather in recent years abound, and new research indicates climate risks aren't leaving any time soon.

Honda lost more than $250m in 2011, when car assembly plants in Thailand flooded during an especially heavy monsoon season. The next summer, US utility Domonion Resources had to shut down part of its Millstone nuclear planet in Connecticut because water from the Long Island Sound grew too warn to be used for cooling. And reinsurer Munich Re saw its quarterly profit decline 38% after paying our more than $350m in claims from Australia's 2010 - 2011 floods.

These numbers illustrate the losses many companies have experienced in recent years from extreme weather events. Worldwide, more than 800 weather-related disasters in 2012 - the most recent year discussed in the report - caused $130bn in losses, the third-costliest year on record after 2011 and 2005, according to the data.

Ninety per cent of companies on the S&P Global 100 Index identify climate risk - such as extreme storms, flooding, coastal erosion, drought, sea level rise, wildfires and supply-chain disruptions - as a current or future threat to business.

The cost of catastrophe

Among the businesses that are most sensitive to the climate impacts already happening are insurance companies, and especially reinsurers, which essentially provide insurance for insurers.

Risks from climate change are often better assessed at a small geographic scale, said Kate Gordon, executive director of the Risky Business Report. "By looking at how climate affects specific regions and sectors, rather than at national averages that mask local conditions, our research found that the degree to which any single business may be harmed by a changing climate will depend largely on where that business is located."

The most severe risks are still avoidable

Because greenhouse gases stay in the atmosphere for many years, "there's a certain amount of climate change baked into system because of our past actions," Mastrandrea said. Even if all human-caused emissions stopped immediately, pollution already emitted will continue to warm the Earth and the oceans for decades or longer.

On the bright side, the findings also show that businesses can still avoid the most severe risks by making early investments in resilience, as well as taking immediate action to reduce the pollution that causes global warming. "The longer we wait to address the growing risks of climate change, the more it will cost us all."


Compliance365 is an independent energy consultancy. We provide advice and guidance on all our services; how to save energy; how to save money on your energy bills; and ultimately how to become more energy efficient. Our aim is to be as cost effective and flexible as possible for our clients.

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