Companies still oblivious to climate costs

Research conducted by State Street Global Advisors finds a worrying trend among global businesses

Nearly 90% of companies exposed to the agricultural sector have no idea how climate risks such as drought or warmer temperatures will impact their business operations in the future.

That’s the finding of a newly released research report from State Street Global Advisors which assessed the quality of climate related financial disclosures from 60 major companies across 12 sectors around the world.

The report found that just 12% of companies explicitly disclosed the actual and potential impact of climate risks on their business and detailed financial plans to manage these risks.

“Companies need to address the strategic implications of climate change,” said Rakhi Kumar, head of ESG investments and asset stewardship at SSGA. “Management should be ready to articulate the link between climate risk and strategy.

“Companies may consider disclosing how a company’s assessment of climate change is impacting capital allocation decisions, investments in research and technology, diversification of the supply chain and the hardening of physical assets.”

Kumar said that such disclosures enable investors to understand how sustainability issues are being managed and show that the organisation is aware of any future threats to the business.

The research identified two ‘industry leading’ examples where companies were on the front foot in monitoring sustainability risks relating to climate change.

A food manufacturer identified the top ten raw ingredients that represent its total raw material purchases and drew up plans to sustainable source all of these ingredients by 2020. Similarly, an Australian food retailer assessed how changes to weather patterns and fluctuations in water supplies may impact its wider supply chain.

The full report is available here.