SDIM24: How businesses can become more resilient to the physical impacts of climate change

Climate Change Impacts on Businesses and the Role of Risk Managers

The physical impacts of climate change are already affecting businesses across sectors and geographies, causing disruptions to operations, supply chains, and employee well-being. Extreme weather events such as heatwaves, floods, and storms are becoming more frequent and intense, leading to various consequences for businesses. These impacts align with the Sustainable Development Goals (SDGs) set by the United Nations to address global challenges.

SDGs Emphasized:

1. SDG 8: Decent Work and Economic Growth
2. SDG 9: Industry, Innovation, and Infrastructure
3. SDG 11: Sustainable Cities and Communities
4. SDG 13: Climate Action
5. SDG 17: Partnerships for the Goals

The Marsh McLennan Flood Risk Index highlights the increasing vulnerability of global airport capacity and trade outflows to flooding due to climate change. The index reveals that 18% of global airport capacity and 26% of trade outflows through international ports are currently at risk of flooding. With a projected 2 degrees Celsius warming, these proportions are expected to double to 41% and 52%, respectively. This emphasizes the urgent need for businesses to adapt to climate risks.

Adapting to Climate Risks: Challenges and Opportunities

A recent Marsh survey shows that 50% of corporate respondents have already experienced the impacts of extreme weather events in the past three years. This highlights the importance of taking significant action to increase resilience and adapt to climate risks. Risk managers play a crucial role in understanding and addressing these challenges.

Key Areas for Adaptation:

• Business continuity planning and testing (49%)
• Investing in asset engineering to withstand extreme events (41%)
• Adapting climate-adjusted working patterns (33%)

However, many businesses struggle to establish a clear business case for adaptation and quantify the impacts of climate risks. Only 29% of companies consider adaptation and resilience in their insurance planning cycle. It is crucial for businesses to understand their vulnerabilities and integrate climate considerations into their strategic planning.

The Role of Risk Managers in Corporate Adaptation

Risk managers are well-positioned to implement dynamic risk management approaches and drive corporate adaptation. They can contribute to effective adaptation strategies through the three As: Ambition, Analysis, and Action.

The Three As:

• Ambition: Setting corporate resilience goals and preparing for climate change impacts
• Analysis: Mapping risks across assets, operations, and stakeholders and identifying adaptation interventions
• Action: Selecting and prioritizing adaptation measures, securing funding, and supporting implementation

Addressing climate risks requires considering wider systems-level factors, including capital providers, government regulators, suppliers, infrastructure, customers, ecosystem services, and local communities. A holistic approach is necessary to effectively manage physical climate risks and build a resilient and responsible adaptation strategy.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 13: Climate Action
• SDG 9: Industry, Innovation, and Infrastructure
• SDG 6: Clean Water and Sanitation
• SDG 11: Sustainable Cities and Communities
• SDG 8: Decent Work and Economic Growth

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 13.1: Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters
• Target 9.1: Develop quality, reliable, sustainable, and resilient infrastructure
• Target 6.4: Increase water-use efficiency and ensure sustainable withdrawals and supply of freshwater
• Target 11.5: Reduce the impacts of natural disasters on cities and human settlements
• Target 8.8: Protect labor rights and promote safe and secure working environments

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

No, the article does not mention or imply any specific indicators that can be used to measure progress towards the identified targets.

4. SDGs, Targets, and Indicators

Source: preventionweb.net