Risk Management
ESG Consultants can help you to identify, quantify, and offset environmental and climate risks!
Environmental and climate risks have been ignored for a long time. Companies preferred to focus on the widely known categories of financial risks, such as credit and market risks, as well as operational risks. The reasons are that not all countries and industries are affected by climate change to the same extent; as a consequence, some will tend to emphasise the urgency of coping with climate change while others will feel less concerned.
Another issue is the so-called “tragedy of the horizon”, a term coined by Mark Carney, Governor of the Bank of England, to reveal the fact that climate change is perceived as a long term development – thus most companies believe they have “plenty of time” and don’t feel concerned about the immediate future.
Finally, there is still a great deal of uncertainty over the consequences of climate change, and thus of the magnitude of climate risk. Even though scientific evidence linking CO2 emissions to the greenhouse effect is astounding, the rate of increase in average temperatures over the next years and its effects on climate change remain uncertain. This is also the case for the so-called “tipping points” beyond which catastrophic events may take place.
Climate risk includes several categories, and in fact is quite complex to analyse: physical risk, regulatory risk, and liability risk, and even reputational risk, and “stranded assets” risk.