$1 Trillion: The Cost Of Climate Change For Corporations

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By Alex Kimani, a veteran finance writer, investor, engineer and researcher for SafeHaven. Originally published at Safehaven

The United States is poised to take a powerful economic hit with the real cost of a disturbed climate beginning to become abundantly clear. Rising sea levels, wildfires, heat waves and extreme weather events are set to cost trillions of dollars over the next couple of decades in crumbling infrastructure, reduced crop yields, health problems and lost labor.

According to Bruno Sarda, president of the Carbon Disclosure Project (CDP) North America, climate change is no longer the distant threat it used to be, but a phenomenon that’s adversely impacting whole economies in the here and now.

Sarda says that climate change is very much underpriced risk in financial disclosures with boardrooms underestimating its full impact. According to a recent CDP report, companies across the globe expect climate change to cost them a staggering $1 trillion dollars over the next five years.

An even more alarming fact: U.S. corporate heads appear to be sleeping behind the wheel more than most, with corporate America more ill-prepared for such an eventuality than others. According to the CDP report, companies in the U.S. are lagging behind their overseas peers with only 65 percent integrating climate risk into their business strategies compared to the global average of 72 percent.

Source: CDP

CDP is a UK-based nonprofit that encourages organizations, companies and cities to disclose the impact of climate change on their establishments. The organization’s environmental disclosure concept piggybacked on the 2002 Global Reporting Initiative (GRI) that focused on individual companies rather than whole nations. CDP has proven to be a success, with nearly 20 percent of global greenhouse gas emissions reported through the platform.

The True Cost of a Disturbed Climate

The real cost of climate is beginning to be keenly felt by companies, cities and governments everywhere in the world.

In 2018, the United States sustained an estimated $91 billion in damages resulting from climate-related disasters, including severe storms, inland floods, tropical cyclones, droughts and massive wildfires. Related: What To Expect As Driving Season Kicks Off

CDP has revealed that 215 of the world’s largest companies, including global icons such as Apple, Chase, JPMorgan Chase, 3M and Nestlé now consider climate change a very real threat that’s likely to negatively impact their business within the next five years to the tune of a trillion dollars.

In January, climate change claimed its first major corporate victim. San Francisco-based Pacific Gas & Electric Company (PG&E Corp.), a $17-billion (annual revenues) utility that serves more than 16 million people, was forced to file for Chapter 11 bankruptcy protection after facing billions of dollars in liabilities thanks to some of California’s deadliest wildfires.

For two consecutive years, the company’s power lines were blamed for sparking deadly wildfires, especially during windstorms. PG&E Corp.’s equipment was blamed for no less than 17 of 21 major fires in 2017 alone, with 5,600 people suing the company leading to liabilities worth $30 billion. Fearing the threat of being implicated in last November’s Camp Fire that devastated Paradise Town and claimed 86 lives, PG&E Corp. decided to file for bankruptcy protection to pre-empt even more lawsuits.

This spring, flooding in the Midwest caused severe damage to grain fields, silos and farm infrastructure. Consequently, Archer Daniels Midland, an agriculture conglomerate, reported that it would incur $50-60 million in damages during the first quarter of the year alone.

Companies have identified a wide range of physical risks arising from climate change including the impact of flooding or rising sea levels on warehouses and distribution centers. They have also enumerated indirect costs including transitioning to a lower-carbon environment including updating facilities and infrastructure to withstand floods and storms while complying with carbon-tax policies that, for instance, are likely to raise the cost of fossil fuels.

Further, they have recognized how failing to address climate change would impact their businesses, with Google’s parent company, Alphabet, saying such an oversight would likely result in lower demand for the company’s goods and services due to a negative public image.

Climate Change Opportunities

The specter of having to adapt to a rapidly changing environment is not all doom and gloom though, with the CDP reporting that companies acknowledge that there are real benefits to this transition.

Indeed, corporates estimate that opportunities related to climate change could even outstrip the costs, with growth of low-emission products, new fuel sources and energy-efficient cars creating a $2.1-trillion market for a climate-conscious customer base.

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  1. Ignacio

    I won’t critisize this study for focusing in the trillion dollars caused by CC because in this case it makes sense. The objective public of CDP’s survey are corporations and this kind of message migth have an impact. The way I try to convince companies to do something is through corporate social responsibility and image. I try to work with small companies but the problem I find is that these are mainly renting office space and the owners of the buildings don’t give a damn on social responibility.

  2. Svante

    But, I thought this was what the 2016 elections were all about, in the US? Socializing the risk off conglomerate corporate shoulders, while monetizing geo-engineering, carbon sequestration, “bridge” fuels & nuclear bail-outs, water theft and GE agriculture scams? Bloomberg, WaPo, Mother Jones & Guardian seem to typify greenwashing, the potential for cashing in on corporate climate catastrophe?

  3. rd

    Its hard to fix something when your official position is that it doesn’t exist and you are spending money lobbying government to ignore it.

    Besides, I think their goal is to have government or the insurance companies cover any costs.

  4. Jeremy Grimm

    The last paragraphs at the tail of this post describing all the happy opportunities “rapidly changing environment” promises, recalls to me the Bob Mankoff cartoon: [https://cartoons.bobmankoff.com/52630]. This exercise in costing the damages caused by Climate Chaos suggests a parody of the credit card advertisement: “Damages due to rapidly changing environment: trillions of dollars — collapse of human society: priceless.”

    If corporations are unwilling to pay for basic maintenance of their physical investments, why should we expect them to give any concern to the risks of Climate Chaos?

  5. sharonsj

    If the billionaires really cared, they wouldn’t be building fortified bug-out mansions in New Zealand.

    Previously, I used to wonder why the insurance companies weren’t screaming about climate change, since the costs would put them out of business. But then I realized they would just change the wording in the contracts so they weren’t liable for “acts of God.” Perhaps the other businesses think they too can find ways to avoid the costs? And if the government bails them out, like it bailed out the banks, but doesn’t bail out the average citizen, you’ll see blood in the streets.

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