Climate Risk is Investment Risk

In a Nov 2023 report, the S&P Global Sustainable1 Physical Risk Exposure Scores and Financial Impact dataset to companies in the S&P Global 1200 estimated that by the 2050s the costs of the physical hazards of climate change will equal an average of 3.3% per annum — and up to 28% per annum — of the value of real assets held by companies in the index, absent adaptation. That average per-annum figure rises to 6.0% by the 2090s. These costs are annual and cumulative over time, representing a material financial risk for many companies. 

The relative size of the financial impact in the 2050s and 2090s under this scenario is similar for the S&P 500.

The impacts on the environment of Greenhouse Gases (GHG) emitted by businesses, and the impacts of climate events on business financial risk are tightly coupled.   Disclosure of these impacts is essential as climate risk (as also the broader sustainability risk) is indeed investment risk, and market participants have a strong interest in understanding the size and scope of this risk. 

The European Union has already mandated sustainability reporting as of this year as per the recently released CSRD regulations.  The SEC will soon follow suit with similar regulations.

SELE Solutions can help your organization with its sustainability reporting and help you reduce your GHG emissions by a systematic execution of a customized sustainability strategy and by the adoption of innovative technology solutions.  www.selesolutions.com; info@selesolutions.com; +1(248)975-7353