Conservation International-Led Study Finds Companies Are Underestimating Climate Change Risks

December 10, 2018

Survey of 1,630 Corporate Disclosures to Investors Finds Only 21 Percent Disclosed Financial Risks From Climate Change

The study, by Conservation International scientists Allie Goldstein, David Hole and Will Turner, and CDP Senior Manager Jillian Gladstone, was based on responses to CDP’s annual climate change questionnaire, which asks companies to report on climate risk management strategies.

The study also analyzed the companies’ stated adaptation strategies — making it the largest private sector adaptation study to date — and found that despite evidence that climate change will have wide-ranging impacts for businesses, most companies have focused their adaptation strategies on a small set of impacts to direct operations, not taking into account supply chain, customer, employee, and wider societal impacts.

The study comes out as global climate leaders gather in Poland for COP 24, the annual United Nations Framework Convention on Climate Change negotiations, and on the heels of the most recent IPCC report, which warned the impacts and costs of climate change will be far greater than expected.

The study’s findings and recommendations include:

  1. While 83 percent of the companies surveyed disclosed that they faced physical risks from climate change, only 21 percent quantified these risks in financial terms.
  2. As a result, the 1,630 companies, representing 69 percent of global market capitalization, are collectively underreporting climate risks to investors by at least 100 times.
  3. The paper finds that while many companies are trying to incorporate climate change into their risk management practices, five key “blind spots” are preventing businesses from adequately preparing for its impacts.
  4. To address risks beyond direct operations and across larger geographic areas, the authors recommend that companies give greater consideration to ecosystem-based adaptation strategies such as sustainable agriculture, watershed protection, and reforestation.
  5. Finally, the paper recommends that companies adopt the 2017 Task Force on Climate-related Financial Disclosures (TCFD) recommendations which urge companies to report on the financial implications of climate change to business.

“The mismatch we’re seeing here between what climate science tells us to expect and what companies are preparing for shows that there is clearly a large and underappreciated climate risk embedded in companies’ strategies and assets,” said Will Turner, Senior Vice President, Global Strategies, Conservation International.

“Many companies are trying to factor climate change into their risk management practices, but we see significant blind spots — meaning they may be doing too little, too late to prepare for these risks,” said Allie Goldstein, Scientist at Conservation International. “We urge companies to consider nature and its services, which contribute US$125-145 trillion to the economy annually. Nature is the biggest asset manager of all, and the largest untapped resource for building resilience to climate change impacts.”

“This new research shows that while many companies are already investing in robust climate adaptation strategies, others have struggled with gaps in their awareness of climate risks — leaving them potentially unable to prepare for a low-carbon future and take advantage of opportunities. To remedy this, in 2018 CDP has aligned its reporting with the TCFD recommendations, meaning that companies can more clearly communicate their risks and management approaches to their investors and customers,” said Jillian Gladstone, Senior Manager, CDP.

About Conservation International

Conservation International uses science, policy and partnerships to protect the nature that people rely on for food, fresh water and livelihoods. Founded in 1987, Conservation International works in more than 30 countries on six continents to ensure a healthy, prosperous planet that supports us all. Learn more about Conservation International, the groundbreaking “Nature Is Speaking” campaign and its series of virtual reality projects: “My Africa”, “Under the Canopy” and “Valen’s Reef.” Follow Conservation International’s work on our Human Nature blog, Facebook, Twitter, Instagram, and YouTube.

About CDP

CDP is an international non-profit that drives companies and governments to reduce their greenhouse gas emissions, safeguard water resources and protect forests. Voted number one climate research provider by investors and working with institutional investors with assets of US$87 trillion, we leverage investor and buyer power to motivate companies to disclose and manage their environmental impacts. CDP, formerly Carbon Disclosure Project, is a founding member of the We Mean Business Coalition. Please visit or follow us @CDP to find out more.