Identifying climate risks can help businesses become more resilient
Disclosing climate-related threats - and preparing for them - can build investor confidence.
(Photo credit: Keith Gallagher / Wikimedia)
Many investors are concerned about climate change, because it poses risks to companies.
For example, more extreme storms could cause factories along the coast to flood. And droughts can kill or damage crops, which can make certain foods more expensive.
If these events affect a company’s profits, investors can lose money, too.
But if companies are proactive about identifying climate-related risks, they can make plans to address them.
For example, if a food company learns that it’s going to face water shortages, it can revise its business plan to adapt.
“You make yourself more resilient as a business for the future,” says Mardi McBrien, managing director of the Climate Disclosure Standards Board.
The international group offers companies a framework for publicly reporting information about their climate risks and environmental impacts.
“Investors can use this information to help assess how the company is performing around climate and environmental issues,” McBrien says.
She says that builds investors’ confidence that their money is going to businesses that understand the future they face and are preparing for it.
“It helps to move capital to those businesses that will help us move to the sustainable transition and future that we need faster,” she says.