The Private Sector Must Lead on Climate Change

This recent opinion piece from Phys.org (https://phys.org/news/2023-10-opinion-climate-isnt-emissions-huge.html) is just another wake-up call for our need to understand and address the compounding risks generated by climate change. However, like most, it emphasizes the importance for state and national governments to establish a comprehensive strategy. While that is certainly true, I'd like to see the conversation shift to the existential requirement for the private sector and financial services industry, in their own self-interest, to mobilize to lead a shift in the economy to internalize these risks.

The private sector is responsible for the vast majority of global greenhouse gas emissions. At the same time, it is also the most vulnerable to the impacts of climate change. Extreme weather events, rising sea levels, and disrupted supply chains are all posing a serious threat to businesses of all sizes.

Just one example

The Phys.org article highlights the compounding risks of climate change by discussing how the recent heat waves and droughts have disrupted food production and supply chains, which could lead to higher food prices and social unrest. That's worrisome enough, but it's only a subset of the total risk these companies are dealing with, which includes non-linear supply chain impacts from rapidly changing changes in flobal growing patterns, port and trade lane access, regional conflict, climate migration, and the resulting shift in geopolitical alignments and priorities. And this is just one example of how climate change is interconnected with other global challenges, such as the continued degradation of critical ecosystems, poverty and inequality.

Financial Performance

A growing body of evidence shows that companies that are taking action on climate change are outperforming their peers financially. For example, a recent study by McKinsey found that companies with high ESG ratings generated higher returns and lower volatility than their peers.

A Call to Action

With all this in mind, we need the private sector and financial services industry to step up and lead the way on climate change. It is in their own self-interest to do so. It should be obvious to everyone by now, but were are two fundamental questions that every CFO, CEO, Board member, and investor must consider and answer with complete transparency and integrity:

1. What are the material risks and opportunities associated with Climate and Nature in our company and value chain, and how are they changing in time?
2. What is the most credible strategy for our enterprise to navigate these challenges and compete in an increasing climate and resource-constrained future?

By answering these questions and taking action accordingly, businesses can help to create a more sustainable and prosperous future for all.

Share your thoughts:

What are some specific steps that the private sector and financial services industry can take to lead the transition to a low-carbon economy? What are the challenges and opportunities that you see?

Digital Gaia can help

These are not easy questions to answer, and unfortunately multinationals are spending 10's of miliions on data and consultants to make sensr of it all – millions that are better spent on solutions. If you need help with these questions, Digital Gaia is building the AI infrastructure and toolkit to get you on the path to answers and to build defensible strategies for your specific context.

#climatechange #privatector #financialservices #sustainability #ESG #transition