Why it is an issue
Climate indicator data gives clients a good understanding of which assets may be impacted by flood events, but not necessarily the financial impacts of such events.
Clients may not have necessarily considered the financial impact pathways of physical damages to facilities and interruptions to business operations explicitly, as opposed to flooding as a general hazard.
Clients may be generally aware that flood risk may be aggravated by climate change but may not have assessed how much more costly this exposure may be in financial terms.
Example company experience quantifying the issue:
Qualitative analysis revealed a supply chain disruption risk from extreme weather events, but we could not determine the type of weather event that presented the greatest risk, quantification enabled a better understanding based on precise location and information on type of weather event so we could better understand the supply chain impact of physical climate risk.
Physical
Flooding
Why it is an issue
Clients may be aware that carbon price regimes such as Carbon Border Adjustment Mechanisms (CBAMs), carbon taxes, and Emissions Trading Schemes (ETSs) may impact them, but they have not systemically mapped current or potential carbon prices to their emissions.
Clients may be exposed to potential imposition or increases in carbon prices based on the countries and regions where they operate and may not have considered how the geographic distribution of their operations relates to a carbon price implication.
Many clients include the policy risk of carbon pricing in disclosures such as the CDP questionnaire or in their financial statements but may not have quantified the magnitude of the potential cost associated with this risk.
Example company experience quantifying the issue:
The process followed depends on the extent to which a company has operations covered by a relevant carbon pricing mechanism. For example, Genuit Group, a manufacturer based in the UK, does not have operations included in either the UK and EU Emissions Trading Scheme (ETS) and, as a result, is not currently involved with direct carbon pricing. However, Genuit recognized that the future of those and potentially other carbon pricing mechanisms could impact its operations in the future. The business is impacted by pass-through costs related to carbon pricing schemes such as the UK and EU ETS. In both cases, having greater clarity over future changes to direct or indirect carbon pricing schemes is crucial to medium- and long-term business planning.
Transition
Carbon pricing
