Published 4 years ago.
About a 3 minute read.
Study finds that financial sector companies see the most potential revenue (US$1.2T) from sustainable products & services, while also being exposed to almost 80% of all financial risk value.
A group of the world’s largest companies — representing nearly US$17
trillion in market capitalization — have valued the climate risks to their
businesses at almost $1 trillion, with many likely to hit within the next five
years. This is revealed in a groundbreaking new
published today by CDP, which runs
the global disclosure system for environmental information.
Over 80 percent see major climate impacts, including extreme weather
patterns, rising global temperatures and increased pricing of greenhouse gas
emissions. Around $500 billion of costs are rated as likely to virtually
certain, with higher operating costs linked to legal and policy changes making
up a significant risk.
Companies report potential $250 billion in losses due to stranded assets —
these include fossil fuel assets that may no longer offer economic returns as a
result of market shifts associated with the transition to a low-carbon economy,
or companies that are significantly exposed to the physical impacts of climate
But the group also reported cumulative gains from realising business
opportunities related to climate change at $2.1 trillion, with the majority on
track as almost certain. These opportunities include increased revenue through
demand for low-emissions products and services (such as electric vehicles),
shifting consumer preferences and increased capital availability as financial
institutions increasingly favor low-emissions producers.
On average, the potential value of climate-related opportunities is almost 7
times the cost of achieving them ($311B in costs, $2.1 trillion in
opportunities). Given this, investors and stakeholders could expect to see a
significant shift in climate-friendly products and services from the world’s
Companies in the financial sector see the most potential revenue (US$1.2
trillion) from potential new sustainable products & services, followed by
manufacturing ($338 billion), services ($149 billion), fossil
fuels ($141 billion) and the food, beverage & agriculture industries
($106 billion). The vast majority of risks are also concentrated in the
financial services industry — the sector reported almost 80 percent of all
financial risk value[^1].
Nicolette Bartlett, Director of Climate Change at CDP, commented, “The
goalposts for climate action have never been clearer for companies. Our analysis
shows that there are a multitude of risks posed by climate change, including
impaired assets, market changes and physical damages from climate impact, as
well as tangible impacts to business bottom lines.
Following the recommendations of the most recent IPCC
report, CDP asserts that our collective response to
climate change is more urgent than ever, and it is clear that corporate action
cannot be delayed — so, it is hugely encouraging that companies are reporting
that the potential value of climate opportunities far outweigh the costs of
investing in the transition.
However, while CDP research shows that financial organizations see the most
opportunities and value at risk from climate change, a more concerning story may
sit behind this statistic. It is likely that this growing awareness is partly
caused by the increased scrutiny of regulators and stakeholders, and potential
gaps in awareness and disclosure elsewhere in the economy present real risks.
Regulators and investors should take note, and all companies from all industries
need to step up.
Only half of the fossil fuel companies in the Global 500 provided any
financial figures for the substantive risks and opportunities identified
Power companies represent one of the few industries where the costs to
manage risks, or realize opportunities, outweigh their impact on the
business. Disclosures centered around the substantial costs associated with
updating existing power plant infrastructure.
The full report covers 6,937 companies who reported data to CDP in 2018,
including a sample based on the 500 biggest global companies by market cap,
366 of which reported to CDP. It analyzes the risks and opportunities related
to climate change reported by companies in 2018 in line with the recommendations
from the Task Force on Climate-related Financial Disclosures (TCFD).
CDP has committed to align its information requests with the TCFD, which will
help drive the adoption of TCFD recommendations by reporting
View the executive summary of the report
[^1]: Financial Services companies represent the largest proportion of the
responding companies from the Global 500 sample set
Published Jun 4, 2019 1am EDT / 10pm PDT / 6am BST / 7am CEST