Climate risks to some of the world's largest companies could be as much as $1 trillion and be realized within the next five years, according to a report released late Tuesday by CDP, a non-profit that manages the global disclosure system for environmental information.
In CDP's Global Climate Change Analysis 2018, the companies reported potentially $250 billion in losses due to the write-offs of assets, but they also calculated opportunities from likely climate business opportunities at $2.1 trillion, with the potential value of sustainable business opportunities almost seven times greater than the cost of realizing them, CDP said.
Financial companies represent a large part, $1.2 trillion, of the potential revenue from low-emissions products and services; followed by companies in the manufacturing, service, fossil fuels, food, beverage and agriculture industries.
The financial services industry also represents the highest concentration of risks, nearly 80% of all financial risk value, according to the report.
More than 80% of the companies expect major climate effects such as extreme weather patterns, rising global temperatures and increased pricing of greenhouse gas emissions. An estimated $500 billion of costs were rated as likely or virtually certain, with significant risk due to higher operating costs linked to legal and policy changes. The companies also reported as much as $250 billion in losses due to stranded assets such as fossil-fuel assets affected by market shifts to a lower-carbon economy, or exposure to the physical effects of climate change.
When it comes to governance of climate risk, 73% of companies said they have board-level oversight of climate-related risks, with 60% of U.S. companies reporting board-level oversight despite being the largest proportion of the reporting sample by region. The lowest level of oversight, less than 50%, was among Brazilian companies, according to the report.
CDP, formerly the Carbon Disclosure Project, runs the global disclosure system used by companies and the public sector to measure and manage environmental impacts. The report is based on the recommendations of the industry-led Task Force on Climate-related Financial Disclosures. It covers 6,937 companies reporting data to CDP in 2018, plus a smaller subset of the 500 biggest global companies by market cap.