Many companies will soon have to deal with the economic effects of climate change and take into account unforeseen costs for a billion, or one thousand billion dollars, over the next five years. This is what a new study by CDP, a non-profit organization that helps companies to measure, manage and publicly share their impact on the environment, provides.
CDP reached this figure by analyzing 215 of the 6937 reports presented by as many international companies between February and June or 2018 as part of a transparency operation.
In fact, every year the non-profit organization asks as many bodies as possible to fill out a very detailed questionnaire to estimate and mitigate the ecological footprint of each one.
The calculation was possible because in 2018, for the first time since registering the results of the questionnaire, Cdp asked companies, including Alphabet, Nestlé and JPMorgan, to also estimate the risks and possibilities linked to the effects of climate change.
The figures are not to be taken at face value: as Bruno Sarda, president of CDP in North America, points out, the starting data, as well as the result, are based on estimates; it is not known exactly what will happen from here to the next few years and what this will entail for companies. However, they are useful in giving an indication of the costs and expenses that various companies could be forced to face.
Economic losses and unexpected expenses
As several studies have revealed, climate change will profoundly transform the Earth in the coming years: the temperature will rise, the glaciers will melt, the sea level will rise by several centimeters – if not even two meters – and catastrophic events will increase more and more. All this will have a considerable economic impact in the industrial sector: some companies could be forced to move offices, to rebuild buildings and systems that have been destroyed or even, or even to review their business plans.
Banco Santander, one of the largest and most important lenders in Brazil, fears for example that those who have requested and obtained a loan in recent years may not be able to repay it due to economic difficulties related to periods of drought. Alphabet has already taken into account the need to spend more money than it does now to cool its data centers which, due to the increase in temperature, will overheat more and more. The Japanese Hitachi Ltd, on the other hand, is concerned about the effects of rain and floods in Southeast Asia.
These cost items could be joined by other items related to environmental policies . In this regard, Bruno Sarda cites the carbon tax , already in force in some states. Another example could be a restriction on drilling and the use of gas and oil reserves: a possibility that the French Total is already preparing for.
The exceptions to the rule
Cdp underlines in the report that, for some companies, climate change will not be a problem at all. It will indeed prove to be a resource . This is the case of Eli Lilly , an American pharmaceutical company. The company has many production facilities in Puerto Rico, a territory prone to flooding and tropical storms. Climate change could aggravate these phenomena and damage structures. Economic losses would however be mitigated by an increase in the demand for drugs. When the temperature increases, infectious diseases spread more easily and people run to the pharmacy to get treatment.
Climate change could also be beneficial for the Ing Group. The Dutch bank estimates that the transition to sustainable policies will require investments of 30 billion dollars and more and more groups will request loans, especially over the next five years.