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Climate change risk: the new investment fundamental

01 March 2018

Until recently, climate risk was seen by most companies as a concern for governments and NGOs to worry about. Not any more.  

Today, that laissez faire view is rapidly changing as global political action, regional legislation, technology breakthrough and market disruption, extreme weather events, investor priorities and consumer sentiment have turned climate risk into an investment fundamental that directly impacts all of business. A new survey by ERM has revealed that few companies are ready to the bridge the gap between sustainability and finance.

Amid these growing concerns the way companies report on climate risk takes on new significance as investors look to accurately assess and measure the environment’s impact on their business models, assets and reputation, as well as the organizational preparedness to cope with these risks.

Increasingly then, climate related risk is becoming not just an environmental issue, but one that has a direct impact on a company’s financial standing and reputation. This is increasingly a real CFO/C-suite set of challenges and as a result has a trickle-down effect to environmental, health, safety and sustainability (EHSS) heads in the firm.

So how prepared are companies to understand the importance of climate related risk to their business and to put in place the strategies needed to transform risk into opportunity? And, in particular, how prepared are two parts of the business - finance and sustainability - to work together to achieve these goals?

To explore these important questions, ERM recently surveyed 120 Chief Financial Officers (CFOs) and Chief Sustainability Officers (CSOs) or equivalents, from medium and large companies around the world. The results reveal few companies are ready to bridge the gap between sustainability and finance in addressing climate risk to their businesses. We found:

  • Mainstream investors have ramped up pressure on companies to disclose in financial terms the business risks associated with climate change.
  • Most companies see the need to develop climate change strategies, but lack tools to shape and report accurately.
  • The finance function is lagging in awareness and prioritization of managing climate change risk.

Climate change risk: the new investment fundamental discusses the context of climate risk in the investment community, examines the full findings of ERM’s survey, and provides detailed insights on how companies can address these issues to bridge the gap between Sustainability and Finance.

Climate change risk: the new investment fundamental

With mainstream investors ramping up pressure on companies for disclosure about the risks of climate change to their business, a new ERM survey of 120 CFOs and Chief Sustainability Officers reveals few are well prepared to bridge the gap between sustainability and finance. Read ERM's insights on how companies can address these issues to bridge this gap.