Updated guidance for U.S. power companies and investors assessing the risks and opportunities related to climate change was released Thursday by Ceres, a sustainability non-profit organization.
The climate scenario analysis framework, an update to a 2018 report, also underscores the need for the U.S. power sector to completely decarbonize before 2050 to limit global warming to less than 1.5 degrees Celsius, as recommended by the Intergovernmental Panel on Climate Change.
The framework, Climate Strategy Assessments for the U.S. Electric Power Industry: 2019 Update, was developed by M.J. Bradley & Associates for Ceres.
Dan Bakal, senior director of electric power at Ceres, said in a statement that the Intergovernmental Panel on Climate Change recommendation was "a clarion call across the economy and set off alarm bells for many investors concerned with the long-term viability of their holdings in the power sector." The new analysis framework "makes clear that total decarbonization is the only path forward for electric power companies," he said.
Since Ceres published its 2018 framework and investors have engaged with power companies over climate change, more than 10 electric power companies published climate scenario assessment reports and several have committed to deliver 100% carbon-free electricity to customers no later than 2050, according to Ceres.
Case studies from electric power companies included in the updated framework shows how companies are assessing the business implications of climate change.
The framework covers the limits of clean energy resources and energy efficiency measures on companies' profitability, along with risks related to supply and demand changes, higher insurance premiums, reduced access to capital due to recurring costs from extreme weather events and other costs.
Business growth opportunities covered in the analysis include electrification, renewable energy and low-carbon services and the need for new transmission lines to connect renewable energy resources.
Investors have grown increasingly concerned with how climate change and regulatory responses to it could impact their holdings in the electric power sector, and many are raising these concerns through direct engagement with power companies and by filing shareholder resolutions, Ceres said. The updated framework "reflects the growing urgency of the climate crisis" and provides valuable information for investors, New York state Comptroller Tom DiNapoli said in the same statement.