In 2007, the Intergovernmental Panel on Climate Change (IPCC) affirmed that warming of the climate system is unequivocal, with effects such as increasing land and ocean temperatures, rising global average sea level, and reduced snow and ice already being observed. These changes—which are linked directly to human activities producing greenhouse gases—are already causing changes in ecosystems, water supply and availability, and patterns of extreme events, with (in many but not all cases) consequent damages to human health, buildings, livelihoods, and infrastructure. The question is no longer, “Is there human-caused climate change?” but “What can be done to react and adapt to it?” Adaptation does not preclude steps to reduce greenhouse gas emissions, but recognizes that we are unavoidably committed to some amount of climate change, and that changes are already occurring. The business community has for some time been aware of the risks and opportunities associated with greenhouse gas mitigation and current and future climate change policies. Many businesses have taken steps to reduce greenhouse gas emissions voluntarily. Many are taking into account some of the impacts of climate change—potential state and federal regulations, shareholder perceptions, and changes in consumer and supplier markets, for example—on the cost of doing business now and in the future. Fewer businesses, however, are incorporating the risks and opportunities associated with the physical effects of climate change in their business planning. As trends in climate become clearer and the uncertainty surrounding future changes is reduced, more businesses will want to consider whether to adapt to projected changes by taking action now. This, in turn, involves reacting to and managing risks as well as taking advantage of opportunities. Section I of this paper offers context on the broader risks and opportunities presented by climate change. Sections II and III summarize the case for business action to adapt to the physical effects of climate change, and the pathways by which climate can affect business. Section IV describes a screening process that businesses can use to assess whether they are likely to be vulnerable to the physical risks associated with climate change. If the screening indicates that climate change may pose a significant risk, a business can decide whether to undertake a more detailed financial risk assessment, and then, if indicated, take action. Section V presents case studies of three companies that have begun to look at climate risks. These case studies highlight the very different circumstances that motivated each company, and how the companies may be moving towards different conclusions about the appropriate response to the changing climate. Section VI concludes with a summary of key points. Contents Introduction
I.Climate Change: A Range of Risks and Opportunities
II. The Case for Business Adaptation: What is at Risk?
III. The Risk Disk and The Adaptation Challenge
IV. Meeting the Challenge: Screening for Climate Impacts and Adaptation Question 1. Is climate important to business risk?
Question 2. Is there an immediate threat?
Or are long-term assets, investments, or decisions being locked into place?
Question 3. Is a high value at stake if a wrong decision is made? V.Case Studies: Three Business Responses to Climate Risks Entergy Corporation: A Climate Wakeup Call—
The First Step Was Admitting There Was a Problem
The Travelers Companies, Inc.: An Ounce of Prevention—
Linking the Interests of Homeowners, Business, and Insurance Providers
Rio Tinto: Reappraising “Normal”—
Designing to Weather, Climate, and Climate Change VI. Conclusions
Endnotes
References
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