For companies around the world, the financial impacts of climate change are on the horizon

June 13, 2019

According to a new analysis of corporate disclosures, companies around the world foresee climate change as a negative effect on their bottom lines and acknowledge the effects could be seen in the next five years.

Stakeholders and regulators are increasingly pressuring companies to disclose specific financial impacts they could face as climate change continues to worsen. Estimates suggest that trillions of dollars may be at stake.

Analysts at international nonprofit CDP, the organization responsible for the new report, are concerned that companies are lagging behind in considering the financial risks they face.

CDP works with companies around the world to publicly disclose the risks that climate change could create for their businesses. In 2018, more than 7,000 companies submitted reports to CDP, and for the first time the nonprofit explicitly asked firms to calculate how a warming planet might affect them.

CDP analyzed 215 of the world’s 500 largest corporations and found that these companies potentially faced $1 trillion in costs related to climate change in the decades ahead. The companies estimate a majority of those risks could start to emerge in the next five years.

The disclosures show how companies expect climate change, and the policy responses to it, to affect the global economy.

Companies like Alphabet Inc., Google’s parent company, noted that rising temperatures could increase the cost of cooling its data centers. Hitachi Ltd., a Japanese manufacturer, said increased rainfall and flooding in Southeast Asia could knock out suppliers and is taking defensive measures as a result.

However, entities like Indiana’s Eli Lilly pharmaceutical company see climate change as a possible moneymakerˆ. The company suggested rising temperatures could drive the spread of infectious diseases for which they produce medicines.

Despite their optimism, Lilly still raised concerns about fierce storms and flooding disrupting manufacturing facilities in places like Puerto Rico.

This report provides a price tag for the consequences of climate change, and the CDP report shows that companies everywhere are beginning to prepare for them. Scientists hope the pressure on companies’ pocketbooks will inspire changes to combat environmentally destructive behaviors.

For companies around the world, the financial impacts of climate change are on the horizon