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Who suffers the most? The Unequal Impacts of Climate Change Across Business Sectors

Updated: Sep 5, 2023

Impacts on businesses across the globe are among the most critical challenges of climate change and associated uncertainties. A lack of capabilities and appropriate information makes the situation worse resulting in manifold consequences.

Changing patterns in weather and its influence on climate-related conditions pose dramatic risks to companies regardless of their scale of operations, as climate change alters consumer/customer behavior—resulting in the detriment of some and benefits of others.

There is an increasing agreement that climate change may bring about systemic risk to financial markets as shared by, for example, the Network for Greening the Financial System, the Bank for International Settlements, the Task Force on Climate-Related Financial Disclosure (TCFD), and the Market Risk Advisory Committee to the Commodity Futures Trading Commission, among others. The global GDP would be reduced by 18% by 2050 if no mitigation actions are taken (3.2 degrees increase in temperature), which could be limited to 4% if the targets of the Paris Agreement are met (below 2 degrees increase). In this view, while companies strive to rightly focus on the management of their impact on the climate (i.e., emissions, clean energy etc.), they should not forget the climate’s impact on them.

Climate Change Impacts on Business Sectors, chart
Climate Change Impacts on Business Sectors

While climate change progresses, its impacts remain unequal across different business sectors:

  1. Forestry, agriculture, and fishing sectors are among the most at risk of climate change consequences because most of the operations of these sectors depend on the natural environment;

  2. Tourism, trades, and manufacturing industries are also among the highly exposed sectors to climate change risks;

  3. Insurance providers are at higher risk due to larger uncertainties in climate change risks globally—as it results in much larger payouts after the disasters;

  4. The construction industry and transport sectors are vulnerable as the majority of their workforce are highly exposed to climate extremes, such as heat stress.

All of these sectoral risks can compound in the stock exchanges (i.e., the financial sector) over time. The industry lost USD7 billion in the immediate aftermath of Hurricane Sandy, which forced the New York Stock Exchange to shut down business for two days.

The intensity of these climate risks, however, is very much dependent on the actual locations of the abovementioned businesses and their assets as climate change varies across space. Therefore, the actual climate change risks could be location-specific and should be treated as such.

Intensel with its location-based climate risk assessment capabilities, provides insights into the nature and intensity of risks under different climate scenarios. This information can be integrated into disclosures that align with global standards, such as the Taskforce on Climate-related Financial Disclosure (TCFD) recommendations.

Contact us to learn more about climate risk assessments for your sector and climate risk disclosures!


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