Climate change is increasing the frequency of extreme climate events that will have direct, negative consequences for all businesses.

One certainty is that climate change will increase the risk for companies and delay investments.

Climate change will disrupt every sector of the global economy

Climate change refers to the long-term alteration of temperature and weather patterns. Contemporary climate change is caused largely by human activity and the United Nations (UN) has designated climate change as a global climate emergency.

Climate scientists overwhelmingly agree that the global economy must reach net-zero greenhouse gas (GHG) emissions by 2050 to ward off the catastrophic effects of climate change. Despite this scientific consensus that climate change will disrupt every sector of the global economy, governmental action has not been sufficient to establish a path to net zero.

The same experts who accurately predicted such consequences decades ago say today’s disruptions will not only continue but will accelerate for decades to come, even if we could halt further GHG emissions immediately. This is because of the amount of GHGs already in the atmosphere. CO₂ persists in the atmosphere for 300 to 1,000 years, while methane, with more than 80 times the warming power of CO₂  persists for about 12 years. In other words, environmental issues such as pollution, biodiversity, and natural resources, while important, pale compared to climate change.

The World Bank estimates that 140 million people will be affected by extreme droughts, floods, and storms by 2050. In addition, research has found that climate change has boosted heat-related deaths in warm seasons by an average of 37%. By 2050, the rise in sea levels could affect much of the US east coast, while islands such as the Bahamas and low-lying cities such as Jakarta and Mumbai could be catastrophically submerged.

To avoid such consequences, scientists overwhelmingly agree that there is just one meaningful course of action: halting the increase in GHGs, primarily from the burning of fossil fuels but also from gases such as methane.

Greenhouse gas emissions are a key contributing factor to climate change  

GHGs are gases that trap heat in the Earth’s atmosphere. The main GHGs are carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), and fluorinated gases. GHGs from human sources strengthen the greenhouse effect and are the largest contributor to climate change. In 2022, concentrations of carbon dioxide, methane, and nitrous oxide were 150%, 264%, and 124% higher than pre-industrial levels, respectively, according to the World Meteorological Organisation.

What must companies do to mitigate the impact of GHGs?

Companies can take the following actions to reduce the impact of GHGs

  • Set a science-based carbon reduction target through a widely recognised scheme (e.g., the Science-Based Targets initiative (SBTi)).
  • Invest in low-carbon technologies such as wind turbines, solar panels, and biomass systems that produce less pollution than traditional energy counterparts.
  • Switch to renewable energy sources such as wind power, solar power, bioenergy, and hydroelectric.
  • Undertake energy efficiency projects.
  • Consider setting an internal carbon price, which helps management assess climate-related risks and make sustainable investment decisions.
  • For unavoidable emissions, commit to credible carbon offset schemes, purchase carbon credits, or invest in carbon capture and storage (CCS) solutions.