How to evaluate and manage exposure to climatic risks in order to take advantage opportunities

The intensification of events and phenomena related to climate change are now clearly visible to everyone, and in the last five years they have been hitting harder than expected; it is not surprising that for the first time in the survey on the perception of global risks (The Global Risks Report 2020 - World Economic Forum) the so-called climatic and environmental risks have been placed among the main, and top six, long-term risks term for more probabilities.

It is important to underline, especially in a difficult situation such as that faced in recent months due to the COVID-19 pandemic, how the correct assessment and greater commitment and transparency in risk management can act as a real guide when systemic risks are to be addressed like these, and above all to help mitigate their risk for the future.

Businesses certainly in recent years has shown greater commitment and awareness on the issue of mitigation and adaptation to climate change, showing once again how the private sector can play a leadership role in the transition to climate neutrality; this also emerged from the first Carbonsink study published in 2019 dedicated precisely to the "perception of the climatic risk of companies listed on the FTSE MIB" where the materiality analysis revealed that climate change was considered an important element for three quarters of the sample companies.

Despite the growing attention devoted to environmental risks, and in particular to climatic ones, the treatment of these risks remains complex and sometimes difficult to integrate into the normal corporate Risk Management process. Carbonsink has chosen for this to deepen this important issue with the main objective of being able to provide some practical ideas, concrete support to companies, to ensure that the management of risks and opportunities related to the climate can become one of the prerogatives of the Board of a 'company.

In fact, very often still the issues of Environmental Social Governance (ESG) tend to be considered as less "relevant" than the usual economic - financial reporting, it is necessary instead to have a risk management and opportunity system integrated into the general one of one's own company. : the perception of the climatic risk cannot be considered only in a distant time horizon.

Through the contribution of the Carbonsink experts, some case studies have been presented to help companies understand what are the possible steps necessary to identify, evaluate, manage and report the risks and opportunities related to the climate: emphasizing first of all the importance of analyzing the activities already in place in a company at Risk Management level with particular reference to the risks associated with climate change; understand and analyze consequently the physical and transition risks related to its sector and national / international benckmark to then be able to define the relevance of possible risks considering the materiality of climate change for the company's business.

The scenario analysis remains a very useful tool to support business decisions that allows you to identify and evaluate the various risks related to climate change to be considered in the company's strategic choices. The mapping of risks and opportunities will allow the company to disclose the financial impacts related to climate change, reporting effectively serves companies to be transparent and to inform investors about the capacity the company has, and will have in the long run, to be able to face and manage new climate-related situations.

From CDP analyzes, it emerged that among the 500 largest companies in the world by market capitalization, 225 reported potential financial impact figures for climate-related opportunities, for a total of over 2.1 trillion dollars. Encouraging data that testify that the value of climate-related opportunities is far greater than the investment made.

As an Italian CDP partner since 2017, Carbonsink helps and supports companies in assessing and quantifying climate risk both at a strategic and operational level, and not only for reporting purposes, in the belief that companies can be an important driver of change for mitigation of climate change and the transition to a zero-emission economy.


SOURCE: Carbonsink CDP 2020 WS Series Webinar | 06/18/2020


Camilla Pollini, Communication Officer Carbonsink









Photo by Javier Allegue Barros on Unsplash
How to evaluate and manage exposure to climatic risks in order to take advantage opportunities