Business climate risks

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Business climate risks are specific business risks , namely the hazards and hazards caused by climate change and human actions to prevent it or to adapt to it.

Climate change manifests itself primarily through changes in long-term atmospheric mean values, the increase in climate variability and the increase in extreme weather conditions. Its consequences are climate risks, i.e. risks or dangers caused by it that can influence the systems of nature and humans. There is a risk of losses in economic, social and ecological values, for example through storms, floods and heat waves .

In their role as investors, polluters, inventors, experts, producers, lobbyists and employers, companies are exposed to many of these risks. They are a special case of entrepreneurial risks. In addition to the physical risks from the immediate physical consequences of climate change, companies face regulatory and legal risks, reputational risks as well as competition and strategy-related risks.

Quantitative Risks

Macroeconomic Risks

Climate risks have different effects in different parts of the world. This is due on the one hand to the climatic and geological conditions on site, and on the other hand to the fact that differences in the actions of the respective government influence and shape the behavior of companies, which in turn influence this action through lobbying or participation in interest groups . The requirements for corporate responses to potential climate risks vary greatly. The multinational setup of many companies with production and marketing in numerous countries around the world is proving to be a challenge in today's globalized world.

Industry-specific risks

In several economic sectors there is a direct link between climate and economic activity. The sectors particularly affected by climate change include agriculture, forestry and water management. In addition, the energy and transport industries are particularly affected. The most important points that influence companies in the coal, oil, automotive, energy, aviation, paper and aluminum industries, for example, are the tendency towards rising fuel, raw material and energy prices and the falling demand for energy-intensive products and services.

The agricultural sector is particularly sensitive to the climate, as all fluctuations in weather and climate changes can be felt directly in yields and losses. Agriculture is particularly dependent on the water supply, which can lead to problems, especially in underdeveloped regions.

The water supply is also the most serious problem in forestry . In addition, the increase in severe storms and forest fires as well as the spread of pests can lead to high levels of damage in the future.

Changing temperatures and the availability of water also play a major role in water management . Due to lower rainfall and higher evaporation in summer, supply problems can arise in many regions. This leads to a long-term change in the regional water balance.

The energy industry will also face a water supply problem in the future, especially during hot and dry summers. The water is for cooling of power plants needed. Low water levels can also affect the generation of electricity in hydropower plants. In addition, the frequent occurrence of other extreme weather events such as storms can expose the infrastructure (e.g. overhead lines) to greater wear and tear. Oil supplies can be adversely affected by hurricanes in the Gulf of Mexico , which in turn trigger or intensify short-term price fluctuations on the commodity markets . In the long term, the opportunities to extract energy resources may improve in high latitudes.

The transport industry depends on a functioning infrastructure and therefore reacts sensitively to extreme weather conditions. The navigability of waterways can be impaired in the event of drought or storm. In addition, during strong heat waves, the transport of people and goods is made more difficult due to the overheating of the vehicle interior.

Another climate-sensitive industry is the tourism sector . Due to climate change, significant regional and seasonal shifts in tourist flows are to be expected.

For the finance industry , especially the insurance industry , calculating risks is becoming more difficult. However, a variety of new business options are also opening up, such as sustainable investment. According to a survey of institutional investors published in 2020, more than 50% of those surveyed have already seen regulatory climate risks, and less than 10% believe that it will take more than 10 years for such risks to materialize. The majority of investors were of the opinion that climate risks have not yet been fully factored into the valuation of systems. For them, climate risks had a relatively low priority compared to other risk categories. The risk of stranded assets was considered by a majority to be greatest when investing in coal and oil producing companies.

Qualitative risks

Regulatory Risks

Political efforts to reduce the costs of climate change have a direct impact on the economy . For example, the goals set out in the Kyoto Protocol are to be achieved by implementing a market for emission certificates for greenhouse gases . With the help of these certificates, the value of emissions can be quantified in monetary terms; they should approximately reflect the value of avoiding substances that are harmful to the climate. This value should be internalized by the companies causing the problem and taken into account when making investment decisions. If the regulatory requirements are uncertain and vague, this leads to cautious or one-sided project and investment decisions.

Physical risks

Direct risks from climate change are expected in particular for industries that are heavily dependent on natural resources, such as agriculture, fishing , forestry , healthcare , real estate and tourism . For example, storms and floods damage buildings and infrastructure, and hot summers with little rainfall cause crop failures. Furthermore, the insurance industry is severely affected by extreme weather events.

Legal Risks

In particular, energy-intensive industries with high greenhouse gas production are exposed to the risk of increased lawsuits in the event that damage can be directly linked to emissions , for example in the event of floods and poor harvests.

Reputational Risks

If companies are publicly reprimanded for their environmental attitudes or their high emissions rate, they risk losing their reputation ( reputational risk ). You run through u. a. Risk of losing customers. The relevance of this risk is now increasing in perception.

Competitive Risks

If companies do not try to reduce climate risks or do not try to reduce them sufficiently by means of various measures, they have a competitive disadvantage. This could lead to rising production costs due to outdated technologies and changing supply chain structures and thus to falling profits .

Identification of the risks

As already shown above, a strong influence on business activities by climate change is to be expected in many regions. Timely identification of one's own impact and the expected risks is therefore essential for future-oriented corporate planning. For example, there are options to counteract the financial risks through timely hedging or a change in location or by taking precautions against expected location-related failures. The integration of climate risks into all decision-making processes, especially before the impairment occurs in the respective areas, must therefore form a cornerstone of corporate policy.

Reporting on climate risks

Due to legal obligations or voluntarily or under pressure from outside, companies can report to various circles (authorities, investors, the public) about the climate risks they are exposed to and how they deal with these risks.

Legal Regulations

Companies that take part in EU emissions trading must report their greenhouse gas emissions (→ CO 2 balance ). To this end, the European Commission issued guidelines for the monitoring and reporting of greenhouse gas emissions.

Investor requirements

The requirements of the stakeholders also drive the climate protection reporting of companies. Customers, non-governmental organizations and, above all, investors are increasingly demanding disclosure of climate risks, as they are increasingly paying attention to the financial risk of disregarding climate change as a strategic focus. In the course of the increasing importance of climate aspects as a basis for decision-making for investments, more and more collective investor initiatives are being launched.

Voluntary action

Companies can also voluntarily report on climate risks. This includes the creation of an environmental report that follows the guidelines of the Global Reporting Initiative (GRI) for sustainability reporting. The aim of the GRI guidelines is to promote responsible corporate decisions and to provide information to interested parties in order to support both internal and external target groups.

An analysis of the Global Top 100 , i. H. of the 100 largest companies in the world in terms of market capitalization, based on their reports in the GRI database and their answers to questions about climate risks in a questionnaire by the Carbon Disclosure Project , showed that little was reported about climate risks. While only ten companies did not provide any information on climate risks, most of the responses were brief. Almost half of the responses contained statements on regulatory risks, followed by physical risks (32%) and other risks (21%).

Climate risk management

Climate risks are environmental risks. Climate risk management is accordingly environmental risk management with a focus on climate risks , their identification, analysis, evaluation and management. In an analysis published in 2009, the Institut der deutschen Wirtschaft came to the conclusion that every second of the companies examined includes climate risks with a risk management system.

literature

  • C. Kind, J. Savelsberg, O. Lühr, J.-P. Kramer, J. Lambert: Climate check. Guide to the management of climate risks in industrial SMEs . BMWi. Berlin 2014. PDF
  • Hermann E. Ott and Caspar Richter: Adaptation to Climate Change - Risks and Opportunities for German Companies: Brief Analysis for the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety as part of the project "Economic Opportunities of International Climate Policy" (=  Wuppertal Papers . Volume 171 ). Wuppertal Institute for Climate, Environment, Energy, Wuppertal 2008, urn : nbn: de: 101: 1-200911102012 .
  • Edeltraud Günther: Ecology-oriented management - Environment (world-oriented) thinking in business administration. Lucius & Lucius, Stuttgart 2008.
  • Philipp Hasenmüller: Corporate Risk Climate Change: Managing Risks and Using Opportunities Strategically . Springer Gabler, 2009, ISBN 978-3-8349-1617-4 , doi : 10.1007 / 978-3-8349-9454-7 .
  • Eric Heymann: Climate change and industries: some like it hot! Deutsche Bank Research, 2007, Current Issues 388. Energy and Climate Change, PDF

Web links

Individual evidence

  1. Ott, Richter (2008), p. 7.
  2. G. Berz: Climate change: Small warming - dramatic consequences . In: Munich Re (ed.): Weather disasters and climate change . Munich 2005, p. 99-105 .
  3. ^ Edeltraud Günther: Keyword: climate risks. In: Gabler Wirtschaftslexikon. Springer Gabler Verlag, accessed December 27, 2016 .
  4. a b c CH. A. Jones and DL Levy: North American Business Strategies Towards Climate Change . In: European Management Journal . tape 25 , no. 6 , 2007, p. 428, 430 .
  5. Philipp Hasenmüller: Corporate Risk Climate Change: Managing Risks and Using Opportunities Strategically . Springer Gabler, 2009, ISBN 978-3-8349-1617-4 , doi : 10.1007 / 978-3-8349-9454-7 .
  6. ^ A. Griffiths et al .: A Framework for Understanding Institutional Governance Systems and Climate Change. The Case of Australia . In: European Management Journal . tape 25 , no. 6 , 2007, p. 416 .
  7. Ott, Richter (2008), p. 15.
  8. a b c d Marc Zebisch u. a .: Climate change in Germany: vulnerability and adaptation strategies of climate-sensitive systems . Ed .: Federal Environment Agency. 2005, p. 71-82, 91-97, 47-57, 150 ff . ( Umweltbundesamt.de [PDF; 201 kB ]).
  9. Federal Ministry of Education and Research (Ed.): Research for climate protection and protection against climate impacts: A contribution to the BMBF framework program 'Research for Sustainability' . 2004, p. 23–24 ( fona.de [PDF; 230 kB ]).
  10. Heymann (2007), p. 12.
  11. ^ J. Firth and M. Colley: The Adaption Tipping Point - Are UK Businesses Climate Proof? Acclimatise and UKCIP . Oxford 2006, p. 15 ( uk.com [PDF; 2.4 MB ]).
  12. Heymann (2007), p. 26.
  13. Heymann (2007), pp. 27-28.
  14. ^ Philipp Krueger, Zacharias Sautner, Laura T Starks: The Importance of Climate Risks for Institutional Investors . In: The Review of Financial Studies . February 2020, doi : 10.1093 / rfs / hhz137 .
  15. a b c d Edeltraud Günther, Martin Nowack and Gabriel Weber: Climate change: opportunities and risks for companies . In: Handelsblatt . August 21, 2007 ( tu-dresden.de [PDF; 90 kB ]).
  16. ^ A b c E. Günther, M. Nowack and G. Weber: Status of climate protection reporting . In: Environmental Economic Forum . tape 16 , no. 2 , 2008, p. 2-3 , doi : 10.1007 / s00550-008-0079-y .
  17. European Commission (ed.) (2007): Commission decision of July 18, 2007 laying down guidelines for monitoring and reporting on greenhouse gas emissions within the meaning of Directive 2003/87 / EC of the European Parliament and of the Council (monitoring guidelines) . In: Official Journal of the European Communities of August 31, 2007, L229 / 1-L229 / 85. PDF (PDF)
  18. ^ Daniel Kouloukoui et al. a .: Disclosure of climate risk information by the world's largest companies . In: Mitigation and Adaptation Strategies for Global Change . Section 5 Conclusions and implications , doi : 10.1007 / s11027-018-9783-2 .
  19. Scientific Advisory Board of the Federal Government on Global Change (Ed.): World in Transition - Strategies for Overcoming Global Environmental Risks . 1999 ( wbgu.de ).
  20. Mahammad Mahammadzadeh: Risk Management: Coping with Climate Risks in Companies - Importance and Opportunities . In: uwf UmweltWirtschaftsForum . 2011, doi : 10.1007 / s00550-011-0203-2 .
  21. Hasenmüller: Corporate Risk Climate Change: Managing Risks and Using Opportunities Strategically . 2009, p. 82 .