SDG Knowledge Weekly: Climate Risk and Action, and Society’s Responses
Photo by IISD/ENB | Kiara Worth
story highlights

On climate risk and disclosure, Michael Bloomberg issues “a wake-up call on financial risks of climate change,” while the Climate Risk Index 2019 analyzes which countries and regions have been most heavily impacted by extreme weather events.

The Natural Capital Finance Alliance published a guide to help financial institutions conduct rapid risk assessments of how environmental change might affect their portfolios.

A CDP study examines cities’ and businesses’ attitudes towards the risks and opportunities posed by climate change.

A report by Positive Luxury identifies climate change as one of the most disruptive conditions for business, along with retaining talent and consumers, while NYU and IRI’s Sustainable Share Index finds that consumer packaged goods marketed for their sustainability attributes were responsible for more than half of market growth in the sector over the five-year period studied.

On 15 March, youth demonstrations and “climate strikes” took place in over 100 countries, on every continent, affirming the next generation’s commitment to fighting climate change. The movement highlights that stakeholders across society are becoming increasingly aware of the risks that climate change poses to both present-day and future development. These risks and varying levels of awareness and knowledge about them serves as the focus of this SDG Knowledge Weekly brief.

An op-ed in The Los Angeles Times by Michael Bloomberg issues “a wake-up call on financial risks of climate change.” Using the example of Pacific Gas and Electric (PG&E), which has filed for bankruptcy in the wake of recent fires in California because it cannot afford the increasing liability costs driven by “the hotter, drier weather that climate change is bringing to California,” Bloomberg calls for better disclosure and management of climate risks so that businesses can avoid businesses becoming “the next PG&E.” He urges companies to “measure the financial risks they face from climate change… [in order to] reduce their exposure to those risks,” and identifies several cost-saving efficiency measures that businesses can quickly implement.

Within the UN system, Ulrika Modéer, UN Development Programme (UNDP), explains why the UN focuses on climate-related security risks. She notes that the financial cost of climate disasters is equal to that of all development cooperation, with 2018’s droughts, floods, storms, landslides and fires damages totaling approximately USD145 billion. Going beyond dollar amounts, however, the blog points to climate change-induced competition for land and water in already drought-stricken areas, which have contributed to civil unrest in areas such as the Lake Chad Basin. Modéer highlights that, together with the UN’s Department for Political and Peacebuilding Affairs and the UN Environment Programme, UNDP launched the Climate Security Mechanism, a joint effort to increase knowledge and management of climate-related security risks. Related coverage of the Mechanism is available on the SDG Knowledge Hub.

Germanwatch’s ‘Global Climate Risk Index 2019’ analyzes which countries and regions have been most heavily impacted by extreme weather events through a review of weather-related loss events from 1998 to 2017. The briefing paper finds that the Caribbean and southern and southeast Asia rank highest, as was found in a previous index, along with the finding that less developed countries are generally more affected than industrialized countries. The index measures impact by death toll, deaths per 100,000 inhabitants, absolute losses (in USD purchasing power parities), and losses per unit Gross Domestic Product (GDP) as a percentage.

Understanding climate risks—whether physical, financial or in terms of peace and security—demands measurement, as stressed in the LA Times op-ed by Michael Bloomberg. On the finance side, the Natural Capital Finance Alliance (NCFA) published a step-by-step guide to help financial institutions conduct rapid risk assessments of how environmental change might affect their portfolios. The report notes that conducting broad natural capital risk assessments, rather than assessing individual transactions, can expose systemic risks in bank portfolios that otherwise would not have been detected. The four-step approach to a rapid assessment includes: 1) frame (why the assessment should be conducted); 2) scope (determine what will be include); 3) assess (understand the bank’s key sources of natural capital risk); and 4) apply (take stock of findings and identify follow-on actions).

The report is the second output from the NCFA’s ‘Advancing Environmental Risk Management’ project (the first report, released in November 2018 on natural capital risk assessments and the ENCORE tool, is available here). The NFCA Secretariat is led by the UNEP Finance Initiative (UNEP FI) and Global Canopy.

Too few companies are “future proofing” themselves to prepare for a low-carbon economy.

At both the corporate and city level, a CDP study shows US cities’ and businesses’ attitudes towards the risks and opportunities posed by climate change. Titled, ‘Bracing for the impacts of climate change,’ the report reviews findings across seven US states. It finds that “environmental regulations remain a reported risk,” but also that the absence of a coherent policy landscape puts companies at risk of climate impacts. The report highlights specific companies’ actions in the wake of such incoherence, from affirming that climate change is an important business issue, to insurance companies adjusting product pricing in risk-prone areas. The data also revealed investor and customer expectations regarding climate change and risk management, finding that too few are “future-proofing” themselves to prepare for a low-carbon economy.

A report by Positive Luxury identifies climate change as one of the most disruptive conditions for business, along with retaining talent and consumers. Titled, ‘Generation Less: 2019 Predictions Report,’ the paper argues that sustainability will become an increasing priority, driven by growing awareness about the importance of creating sustainable supply chain. Going beyond the youth taking part in climate strikes, “Generation Less,” the report describes, is an “ageless demographic” with a values-driven mindset. Members of this generation, it says, value experiences, personalization, work-life balance and convenience; are environmentally and socially conscious; and express themselves by making ethical choices, “buying less but buying better” and working for companies that can prove positive impact. A more detailed write-up is available on the SDG Knowledge Hub.

The values and buying power of Generation Less appear to be driving growth in the consumer packaged goods (CPG) market, as revealed by a study from The NYU Stern Center for Sustainable Business and IRI, a data and analytics company. The Sustainable Share Index delves into purchasing data from 2013-2018, assessing the extent to which purchases of “sustainable” products have increased over time and whether there are specific product categories where sustainable product options outperform or underperform less sustainable alternatives. The results show that products marketed for their sustainability attributes were responsible for more than half of market growth in the five-year period studied, grew 5.6 times faster than conventionally marketed products, and represented 16.6% of the CPG market (in dollar sales) in 2018. A write-up on Sustainable Brands is also available.

The Business 20 (B20) Tokyo Summit, convened 14-15 March 2019 in Japan, as part of the G20’s presidency of the G20 in 2019. The theme of the B20 summit was ‘Society 5.0 for SDGs.’ Noting that human society is moving into a fifth stage (the “Creative Society,” following the Hunting, Agrarian, Industrial, and Information societies), the Summit website emphasizes that “the B20 should take the lead in sharing with the world concepts that will build towards the future, and use the digital transformation to create a bright society.” To this end, the Joint Recommendations issued at the close of the Summit articulate increasingly apparent risks and challenges, including climate change, which is discussed throughout the document. However, the recommendations lament that human, financial and intellectual capital cannot be fully mobilized in the current context of unpredictability arising from trade conflicts and geopolitical tensions. The B20 was established in 2010 as the first “engagement group” of the G20, and represents the business voice in G20 countries.

Additional issues of the SDG Knowledge Weekly can be found here.

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