Adaptive Capability

  • Home
  • Services
    • Net Zero Roadmap & Delivery
    • Climate Risk & Opportunity Assessment
    • Strategic Adaptation Consulting
    • Adaptation Business Case
    • Adaptive Capability Maturity Model
    • Adaptation Program Management
  • Resources
    • Useful Links
    • Glossary
  • News
    • Blog
    • Press Releases
  • About
    • Team
    • Clients
  • Contact Us
You are here: Home / Archives for Risk management

18 November 2020 By David McEwen

Climate Litigation – An Expanding Risk for Business

With compelling evidence that even 1.5 degrees of global warming will mean suffering for millions, climate activism is heading to the courtroom.

Photo by Bill Oxford on Unsplash

Climate activists are on the prowl. Armed with not for profit law firms they are becoming increasingly creative in their attacks on governments and business. During 2020 in Australia alone, there have been dozens of cases lodged, often aimed at halting or challenging government approvals of private sector projects. Indeed, Australia has one of the highest rates of climate litigation outside of the United States. [1]

As legislative compliance avenues have been exhausted, activists have increasingly moved to human rights and common law challenges. A good example of the latter is Sharma et al v. the Minister for the Environment, which invokes the Minister’s duty of care for young people to attempt to prevent approval of a thermal coal mine extension. Another is O’Donnell v. Commonwealth, which alleges that the Australian government has “…breached its duty of disclosure and misled and deceived investors in failing to disclose” climate risks related to its issuance of government bond. And one of the most famous is the Urgenda case in the Netherlands, which has forced the government to significantly up the ante on its emission reduction targets. 

Of course, a growing number of fossil fuel firms have been directly sued for their projects’ environmental harm. Not for profit law firms such as the Environmental Defenders Office, Environmental Justice Australia and Equity Generation Lawyers have been busy progressing such cases. This includes a landmark case applying new Queensland Human Rights legislation, challenging the state’s Land Court to reject Clive Palmer’s proposed Waratah coal mine near the Adani Carmichael project in the Galilee Basin.

It’s not just governments facing the brunt of the law. Superannuation funds and banks have found themselves under attack for failing to consider climate risks in their investing and lending activities. Similar to the O’Donnell case, McVeigh v. Retail Employees Superannuation Trust (REST, lodged in 2018) involved a member of the fund challenging the manager on its failure to disclose or address climate risks. In early November it was settled just before court proceedings were due to commence, with REST agreeing to improve its climate risk assessment and disclosure, along with measurement of the emissions intensity of its portfolio and a realignment to achieve carbon neutrality for the fund by 2050. While not creating a legal precedent, the settlement nevertheless sends a clear signal to the influential sector, which controls substantial holdings in all listed companies and can exert its influence to pressure carbon polluting companies to clean up their acts and transition to clean energy alternatives.

And a number of progressive governments have themselves got in on the act, with jurisdictions such as the state of New York suing fossil fuel firms (in this case Exxon Mobil Corporation) for their complicity in misleading their investors with regard to the deleterious impacts of their products on the global climate. Thus far such cases have failed to stick in court.
Conversely, local governments have come under attack from residents when they have attempted to amend development plans to limit coastal developments subject to erosion due to sea level rise. While it’s a natural response from a well heeled owner of waterfront property wanting to avoid value loss or have their , a number of back downs have eroded local governments’ authority to assert prudent controls. In turn this raises risk for purchasers of vulnerable property, while insurance affordability is progressively reduced. As long ago as 2011 the Australian Local Government Association commissioned a report to help councils prepare for this risk.

What has been less common in Australia — thus far — is the practice of companies suing governments (or other companies) on climate grounds. 2014 marked one of the first such examples: filed as a show case and later withdrawn, perhaps as a warning shot above the bows. In it, the Illinois Farmers Insurance Company challenged Cook County (covering greater Chicago) over its failure to implement effective stormwater management capacity in light of increasing extreme inundation events as a result of climate change, which was leading to increased payouts by the insurance company.

The insurance industry has a great deal to lose from climate change as acute physical climate risks in the form of extreme weather events become more intense and/or frequent over time. It is perhaps surprising that insurers have not been more active in pursuing stronger government action on emissions reduction. And the impacts cascade: as insurers retreat from coverage in vulnerable areas (initially by raising premiums), the proportion of under- and un-insured assets increases. Vulnerable property values decrease, resulting in losses for owners when selling. Banks face default risk in the case of asset damage to uninsured properties. Some of the burden passes to government social services, as mortgage holders are forced from their homes.

As the extent of business and individual losses due to climate inaction becomes more apparent, there is likely to be a boom in climate litigation. To the extent that your business is not seen to be taking genuine action to reduce emissions in line with science based plans aligned with the IPCC’s 1.5 degree target, it could be vulnerable. While governments and major emitters associated with the fossil fuel industry will remain the major targets (and are fertile territory given evidence of their long term knowledge and suppression of information about the risks of climate change), other sectors are not immune. Airlines, shipping, steel, cement, petrochemical derivatives and meat based agriculture are amongst industries that could have actions brought against them, particularly as science-aligned emissions reduction targets are legislated by states and countries.

Is your business next? Talk to Adaptive Capability today to understand the risks and opportunities of climate change to your business.

[1] Columbia University’s climate litigation database http://climatecasechart.com/ tracks cases globally.
[2] 
https://equitygenerationlawyers.com/wp/wp-content/uploads/2020/11/Statement-from-Rest-2-November-2020.pdf
[3] 
https://www.environment.gov.au/system/files/resources/d9b2f9cf-d7ab-4fa0-ab0e-483036079dc7/files/alga-report.pdf

Filed Under: Climate Change Adaptation, Legal Services, Risk management Tagged With: Climate change, Climate Litigation, Climate Risk, Decarbonisation, Human Rights

11 August 2020 By David McEwen

Applying Climate Scenarios – A Balance of Assumptions

TCFD guidelines recommend stress testing the resilience of corporate strategy against different climate scenarios. In practice this is easier said than done.
The Taskforce for Climate-related Financial Disclosures [1], an initiative of the global Financial Stability Board, has established as the de facto global standard for corporate disclosures about the impacts of climate change. While it’s certainly an improvement to have guidelines, one of the more difficult aspects to operationalise is the development and application of future “climate scenarios.”

Another issue is that, while various supra national organisations are beginning to publish descriptions and assumptions for potential scenarios that could be adopted, they tend to deal with impacts at a decidedly macro-economic level: implications for GDP and other high level metrics. Unpacking that into micro-economic implications for a particular company (or even an industry) involves a multiplicity of assumptions.

To make matters worse, the economic modelling makes use of integrated assessment models, which authors of scenarios, such as the Network for Greening the Financial System (a global group of central banks) admit are either producing wide ranges of potential outcomes for a given scenario, or are under-estimating likely impacts, potentially by a wide margin [3]. Both of which makes there usefulness at the corporate coal face somewhat compromised.

So what to do?

Each climate scenario needs to articulate two sets of assumptions  across short, medium and long time horizons:

1. What is likely to happen to the climate (physical)?

2. How are governments, consumers, the economy, society, competitors, etc. likely to respond (transition)?

Applying those assumptions can then yield specific risks to a particular organisation. Typically (though not necessarily in a linear fashion), the likelihood and in some cases the impact of physical risks, such as asset damage or supply chain disruption due to extreme weather, will increase over time as global heating and its associated effects worsen. To the extent that countries collectively achieve or don’t achieve the emissions reduction targets inherent in the objectives of the Paris agreement, and within what time frames, will dictate the severity of the physical risk. Projected regional impacts based on climate models have been published over various time horizons and emissions reduction trajectories to inform scenarios.
Transition risks follow a less certain path and are dependent on the collective actions of governments, companies and individuals. The extent to which they affect a particular business (negatively or positively) depends on what that business does, how and where it sources, manufactures and sells its products or services, and what strategies it adopts with regard to climate risk.

However, a company that decides to switch to a low emissions path could be penalised if local government policy and customer sentiment is not aligned, particularly if its products are not cost competitive with incumbent alternatives or close substitutes.

This phenomenon can be seen most clearly with electric vehicles. When charged from renewably generated electricity they have no operational emissions, and no tail pipe pollution. In markets where government and popular opinion have embraced them, such as Sweden, uptake has been rapid despite the initial cost premium and perceived disadvantages such as range anxiety and the time it takes to charge, achieving over a quarter of new car sales by early 2020 [4].


In Australia on the other hand, where governments have actively resisted their uptake and fanned negative consumer sentiment by stressing their disadvantages [5], penetration has been tiny, with less than 0.5% of new car sales being electric models [6]. 


Defining climate scenarios with sufficent clarity to assess the sensitivity of a particular company’s P&L requires a clear process of considering, documenting and testing a range of macro and micro-economic, government policy and social assumptions (overlaid with regional climate projections relevant to the company’s sourcing, operating and market locations), within a broad scenario definition (such as implications of achieving a global heating limit consistent with the Paris Agreement, or exceeding that).


Suffice to say, whatever assumptions are made will most likely not materialise as expected. However, the strength of the scenario planning exercise is to help the organisation consider contingencies that may fundamentally change its operating environment and its customers’ appetite for its products. The bottom line is that the world is, quite literally, changing. More than ever before, past trends are no guarantee of future conditions.


As such, climate scenario planning should be seen as a process of continuous improvement, not a one off workshop. Leading companies are embedding climate considerations into day to day decision-making, striving to improve the analysis behind their scenario assumptions, and continually assessing the rapid shifts that are taking place.
Talk to Adaptive Capability today to understand the risks and opportunities of climate change to your business.


[1] https://www.fsb-tcfd.org/

[2] https://theicct.org/sites/default/files/publications/Combustion-engine-phase-out-briefing-may11.2020.pdf

[3] https://www.ngfs.net/en

[4] https://cleantechnica.com/2020/03/25/sweden-reaches-26-electric-vehicle-market-share/

[5] https://reneweconomy.com.au/lets-talk-about-electric-vehicles-australias-policies-are-an-embarrassment-35863/

[6] https://www.caradvice.com.au/855020/electric-car-sales-australia-2020/

Filed Under: Climate Risk, Climate Scenarios, Risk assessment, Risk management, TFCD Tagged With: Climate change

1 July 2015 By David McEwen

Legal innovators profit from changing climate

JusticeThe legal fraternity is often good at spotting opportunity. So it comes as no surprise that innovative practices are developing practice specialities around carbon markets and climate change, appealing both to major greenhouse gas emitters and the parties that are affected by their emissions.

According to DLA Piper, for example, climate legal risk accompanies a decision that is either affected by climate change, or a decision that will affect climate change.

We’ve identified a number of opportunities for legal services in this area and predict there are plenty of fees to be made over the next couple of decades. For example:

  • Helping corporates around compliance with carbon mitigation legislation such as emissions reduction and trading schemes (as such policies are applied in different jurisdictions) and carbon footprint reporting obligations.
  • Supporting insurers and other aggrieved parties launching legal actions against governments (or corporates) for failing to adapt their infrastructure to deal with extreme weather events that are becoming more frequent/severe as a result of climate change. An early example was a suit by a U.S. Insurer against Cook County municipalities for failing to take action that would have reduced flooding around Chicago in April 2013 (later retracted, but an interesting PR exercise none the less).
  • Plaintiff and defendant representation as individuals and companies face property devaluation or other costs due to governments’ actions or inaction around preparing for sea level rise. There are potentially good fees from well heeled coastal property owners attacking new development restrictions aimed at reducing the risk of property damage from coastal inundation as well as from local governments attempting to defend such regulations.
  • A nascent class action market against persistent GHG emitters, particularly those found to have actively funded the climate denial campaign or hindered the enactment of sensible legislation to avert CC. Low lying island states whose very sovereignty is at risk from rising sea levels are one such example. One group has recently won a court action against the Netherlands Government for its failure to do enough in terms of emissions reduction.
  • Actions by investors against companies (particularly in the resources sector) in the event that valuations fall due to legislation aimed at limiting their ability to exploit fossil fuel reserves. A similar risk may apply to credit ratings agencies whose assessments fail to take account of the possibility of stranded assets.

Talk to Adaptive Capability to find out how your business may be affected by climate risks and where the opportunities lie.

Filed Under: Climate Change Adaptation, Governance, Legal Services, Risk assessment, Risk management, Strategic Adaptation, Uncategorized

12 May 2015 By David McEwen

How resilient is your supply chain?

How resilient is your supply chain?With supply chains increasingly complex and global, it’s difficult to manage the risks effectively.

A recent Hepatitis A outbreak from frozen berries labelled as Australian but sourced from China shone a spotlight on several aspects of supply chain risk, predominantly product liability. Around the same time the 2015 FM Global Resilience Index prepared by Oxford Metrica showed Australia slipping 10 places since 2014, with perceived supply chain risks increasing markedly.

Supply chains are exposed to a wide variety of risks ranging from corruption, counterfeiting and safety concerns to the ethicality, sustainability and provenance of sourced products and, critically, the resilience of both producers and the logistics methods used to move goods. Customers depending on your products want to ensure they can obtain them when required, with consistent pricing, known quality and compliance with applicable standards and laws. However, business’ efforts to make supply chains lean (efficient and cost effective) may also compromise their resilience.

With many supply chains highly complex and spanning multiple borders, the risks are growing. It’s not sufficient simply to talk to your organisation’s direct suppliers. For example, Japan’s entire automotive industry was crippled following a relatively minor 2007 earthquake in Kashiwazaki in Niigata Prefecture after a single specialised supplier that produced piston rings for every brand – some seven layers down the supply chain – was knocked out. In that classic case of concentration risk the impact was limited to about a week as the industry rallied to help this critical supplier recover their operations, but it’s not always that simple.

Information Technology giant Hewlett Packard was not immune when floods ravaged Thailand in 2011/12, knocking out key suppliers’ manufacturing facilities, causing production delays and a reported 20% spike in input costs. While most organisations’ enterprise risk assessment processes consider the impacts of a loss of a key supplier, in many cases the analysis of supply chain risks is relatively superficial. Unless an organisation has considerable buying power it may be difficult to implement cost effective risk treatment measures.

The effects of a changing global climate are beginning to exacerbate supply chain resilience risks in the following direct ways:

  • Extreme weather events are becoming more frequent and/or intense in many regions. Depending on the area this may include devastating storms, flooding rains, droughts and heat waves, the latter also triggering bush fires.
  • Many coastal areas are exposed to storm surges, the impact of which is being magnified by higher wind speeds and rising sea levels.
  • The overall warming of the atmosphere and oceans is increasing average temperatures and changing rainfall patters, affecting agricultural and forestry production.
  • Marine food supplies are also under threat as a lot of the excess carbon dioxide being emitted into the atmosphere from the burning of fossil fuels (coal, oil and gas) dissolves into sea water and forms carbonic acid, increasing acidity and threatening krill and other crustaceans at the bottom of the food chain.

Some countries are significantly more exposed to these impacts than others given their geography and economic capacity to adapt their infrastructure accordingly.

Costs may also increase if the jurisdictions within which suppliers operate impose new regulations or taxes. Carbon taxes are a current case in point, and for products that are energy intensive or whose production results in other forms of greenhouse gas emissions, their imposition could materially affect pricing. If alternate suppliers exist whose goods are not subject to such taxes, their pricing could become preferential. The same goes for water intensive industries in regions where supplies are in decline.

In another case, food suppliers already grapple with periodic droughts and storms that cause supply shortages and consequent price hikes. Retail prices for bananas, for example, have soared over 500% in the months following several recent Queensland cyclones.

And paying a closer eye to local conditions can also pay dividends for a range of businesses whose demand and product range is correlated to the weather. This includes categories such as fashion, gardening and even fast food. As local climates change this will in turn affect longer term product range and market geography decisions.

Meanwhile, responding to changing consumer sentiment regarding climate change and environmental protection, corporate, government and individual purchasers are increasingly interested in ensuring that the products they consume are sourced and produced in ways that minimise their environmental impact.

To inform purchasers and provide product differentiation, a sub-industry of so-called “eco-label” schemes has sprung up in the past decade or two. There are currently over 450 such labels covering dozens of categories and thousands of products, on top of existing labels for quality management, food nutrition, standards compliance and so on.

The problem is that the quality of such schemes varies considerably and even corporate procurement professionals are often bamboozled by the sheer range of environmental certifications. Some only cover a fairly narrow aspect of environmental impact, some may cover a particular stage of processing but not the full supply chain or lifecycle impact, some lack independent assessment or verification, while others are little more than marketing fluff. Notwithstanding that in many cases corporate purchasers don’t prioritise environmental considerations in their product evaluation process to the extent that it has a material influence on supplier decision-making.

Supply Chain Risk Heat Map

At Adaptive Capability we specialise in helping businesses manage risks and capture opportunities arising from the manifold emerging impacts of a changing climate and other macro-environmental issues. Our risk assessment process helps our clients assess multiple levels of risk and opportunity across existing suppliers or as part of selection processes. Benefits include:

  • improved supply chain resilience;
  • reduced cost variability;
  • better control of reputational risk;
  • a more sustainable supply chain; and
  • increased market attractiveness of your products or services.

Talk to Adaptive Capability to enhance and safeguard your business.

Filed Under: Climate Change Adaptation, Operational resilience, Risk management, Supply Chain

23 April 2015 By David McEwen

#SydneyStorm a wake up for a global city

#SydneyStorm a wake up for a global cityWhat are the implications of a new climate normal? Sydney, Australia has just been pounded by what has been hailed by some as the storm of the century. Three days of heavy rain and sometimes cyclonic strength winds, produced by a low pressure system off the East coast of the continent, has caused damage and disruption over a 300km section of coastline centred on the global city. Coming in mid April it was unseasonably early for this type of event. With the full damage bill still to be counted and hundreds of thousands of homes and businesses still without power, the insurance industry is already bearing the brunt with tens of thousands of claims amounting to hundreds of millions of dollars. While the level of damage is small compared to some recent weather related catastrophes, it nevertheless provides a salutary reminder of the types of events, which globally are expected to become both more frequent and more intense over the coming decades*, as shown in the illustrative figure below: Physical effects of climate change There are several initial take-aways from the recent storm when considering the business impacts of future events:

  1. Coastal property is exposed. A government wave buoy off Sydney recorded the largest off-shore wave in the area since such record-keeping began, at 14.9 metres. The winds whipped up a storm surge, which encroached to near record levels in some areas, coming within metres of homes. The level of beach and dune erosion increases the risk of property damage from the next storm. Increasingly, councils and insurers will be forced to reassess the risks of further coastal development, putting values at risk.
  2. At some point governments may also take action on flood plain exposures. Properties on flood plains were literally swept away causing tragic loss of life, with images reminiscent of the Lockyer Valley tragedy in 2011.  In that case the community chose to rebuild on higher ground. As the Brisbane floods showed, however, thousands of homes and businesses are built on exposed land, significantly increasing damage and disruption levels.
  3. Major cities are far from immune. Considerable surface-flooding was experienced in several parts of Sydney, with road closures and dozens of vehicle rescues. Ageing storm water infrastructure needs to be expanded significantly to cope with extreme precipitation events, a process municipalities such as Chicago, Illinois and Miami Beach, Florida have already commenced following major or repeated inundations.
  4. Disaster response, hazard reduction and recovery is a growing business opportunity. For example, disaster warning aggregator, Aeeris (AER.AX) floated on the Australian Exchange in late 2014. While its debut has been modest it is a sign of growing innovation and demand in the sector.
  5. More storms equals lower business productivity. For example, to ease the stress on the transport system the state Premier urged employers to show flexibility and allow employees to stagger their commutes or go home early. Multi-day electricity supply disruptions are also taking their toll on businesses.

Global environmental shifts are disrupting business-as-usual, with a range of direct and indirect impacts. Talk to Adaptive Capability today to find out how to manage these risks and identify value creation opportunities for your business.

*Note: it is not yet clear whether the particular East Coast Low conditions responsible for this week’s storm will in future lead to an increase in the frequency or severity of such events. Future climate predictions exhibit a high degree of regional variation and further research is required. This link provides further discussion of some of the forecasting challenges.

Image credit: Prudkov/ShutterStock

Filed Under: Climate Change Adaptation, Governance, Risk assessment, Risk management, Strategic Adaptation

22 April 2015 By David McEwen

Healthcare to feel the Heat

Healthcare to Feel the HeatWith growing evidence that our climate is changing, we predict the key health challenges arising from a warmer climate:

  • Heat related illnesses and mortality from exposure to extreme temperatures. This will particularly impact on people who work outdoors or in non-air conditioned environments, plus infants, older people, the ill and obsese, who are more susceptible to heat stress and dehydration. Heatwaves are already a leading cause of death compared to other types of natural disasters (particularly in developed nations where preparedness levels for violent storms and earthquakes generally lead to significantly fewer fatalities than those affecting developing nations). For example, excess mortality of up to 70,000 people was associated with the severe European heatwave of 2003. More broadly, higher temperatures may also provide excuses for some people to exercise less, potentially increasing rates of health conditions associated with a more sedentary lifestyle.
  • Water supply contamination during extreme precipitation and flood events.  Flooding in Brisbane in 2011 led to the temporary closure of one of the main water treatment plants as the incoming water was too muddy to be treated. On that occasion water supply interruptions were avoided on that occasion by re-routing supply from other treatment plants and implementing demand reduction strategies. However, there are likely to be increasing situations where extreme weather jeopardises fresh water supplies or people are otherwise forced to drink untreated water, potentially leading to a range of illnesses.
  • Exposure to flood waters and the after-effect of floods. It is not uncommon in many areas for sewage systems to overflow during significant flooding, raising infection rates. Receding flood-waters can become breeding grounds for mosquitos and other potentially harmful insects. Mould in buildings resulting from exposure to flood waters can in turn cause a variety of health conditions. And of course the murky and often fast moving water presents public safety issues for people unfortunate or unwary enough to find themselves trapped or engulfed.
  • A rise in the frequency and/or intensity of extreme weather events may also result in greater injuries / illnesses and demand for emergency services.
  • The spread of tropical, insect-borne diseases to areas in higher altitudes and higher latitudes as it becomes warmer.  Insect carriers of such diseases thrive in the tropics because it is warm overnight and all year round, meaning no die off in cooler months as is common in temperate climates. Meteorologists are already observing milder winters and warmer nights in many areas as the atmosphere retains more heat.
  • Additional health risks arise from the greater expected incidence of bush fires (not to mention an increase in lightning strikes). For example, during the summer of 2010 an estimated 55,000 people died in Russia from a combination of a severe heat wave and respiratory illnesses exacerbated by a resultant series of major bush fires.

Given these challenges, risks abound in the healthcare and public safety arena, but so do opportunities. Throw in our ageing and growing population plus the increase in non-communicable diseases and it seems that growth in demand for healthcare services is assured, though affordability may be a key consideration given reduced public sector capacity.

Key opportunities to reduce these impacts include:

  • Prevention:
    • training and education of at risk groups;
    • risk assessments;
    • preventative pharmaceuticals and related interventions;
    • water purification;
    • waste water infrastructure;
    • specialist clothing;
    • air filtration and cooling systems;
    • personal and networked health monitoring technologies;
    • other hazard reduction.
  • Relief:
    • increasing demand for existing and new drugs and forms of treatment for conditions related to heat, water contamination and tropical diseases and other exposures.
  • Health Infrastructure:
    • increasing demand for health professionals and emergency workers;
    • associated infrastructure, hospital beds;
    • education;
    • hospitals located in regions exposed to extreme weather will need to be made more resilient.
  • Sustainability:
    • sustainable medical procurement;
    • medical waste recycling;
    • energy and water efficiency improvements in medical practice;
    • other technologies and innovations to reduce environmental impact of healthcare.

On the flip side, there are a number of significant health benefits associated with a switch from fossil fuel dominated energy systems to renewables, principally a likely reduction in a range of respiratory illnesses given reduced particulate matter pollution. Given a warming climate, less severe winters in some regions may also reduce cold-related morbidity.

Adaptive Capability assists businesses in and servicing the healthcare sector to assess the risks and opportunities arising from climate change and environmental issues. We help our clients position their businesses to capture sustainable growth over the medium to long term. Our unique diagnostic tool, the AdaptiveCMM, baselines your organisation’s capabilities and delivers a roadmap of initiatives to control risks and identify new or enhanced revenue streams.

Talk to Adaptive Capability today to future proof your business.

Image credit: Rob Bayer/ShutterStock

Filed Under: Governance, Healthcare, Operational resilience, Risk assessment, Risk management, Strategic Adaptation

12 March 2015 By David McEwen

An Intergenerational Moment

An Intergenerational Moment
The Australian Government’s latest Intergenerational Report was released last week but misses an opportunity to start a key conversation. Looking 40 years into the future – what used to be two generations but is now closer to one given that the average age of parents having their first child birth is now over 30 – it is updated every five years or so.

In this case the report predicts the Australian population will have grown to around 40 million (from just under 24) – not unlikely given the current net growth of 1 person every 90 seconds or so. The average person will be older, with relatively fewer of working age and many people living longer into retirement. We’ll need a lot more healthcare and pension costs will soar, which will need to be funded from a relatively smaller tax base due to the reduced overall labour participation rate.

Meanwhile, by 2055, atmospheric carbon dioxide concentrations are expected to be anywhere between 480 and 580 parts per million, up from around 400 today (a 20-45% increase) and from about 320 when formal records began around 60 years ago. Average global temperatures, in turn, are likely to rise by a further 1-1.5 degrees C over current levels. Mean sea level rise is likely to be between 5 and 30cm. In these projections, the lower level of each range assumes deep cuts are made urgently to global greenhouse gas emissions.* To borrow a cricketing term, the “required run rate” involves cuts of around 6% per year, versus actual performance last year of an estimated increase of about 2.5%**

While it does contain a brief section on climate change, the 2015 Intergenerational Report is largely silent on the effects of these impacts of climate change on Australia’s future population and economy. In terms of its use as a facilitator of hard conversations between governments and the people, it fails to ask critical questions such as:

How will we keep our elderly (and outdoor workers such as farmers and construction personnel) safe from searing heat waves, which are expected to increase in intensity and frequency and exacerbate our health spending crisis?

How will we ensure fresh water security for a population base nearly 70% greater than today’s, particularly with rainfall patterns becoming more erratic?

How will we maintain a productive agricultural sector to feed Australians (and our export partners) with alternately parched, drenched and warmer farmlands?

And how will we deal with exposed coastal property and critical infrastructure such as ports, key airports and roads from storm surges that will be significantly heightened by rising seas and cyclonic winds?

If our tax base is already weakened by changing demographics and private insurance may become unaffordable, how will we afford the level of investment necessary to adapt to climate change and the likelihood of more frequent and costly natural disasters?

Within these questions, however, lies significant opportunity for a range of industries to position both existing and new products and services to the next generation of government, consumer and private sector buyers.

Talk to Adaptive Capability today about safeguarding and enhancing your business’ future.

 

*Source: United Nations Intergovernmental Panel on Climate Change Assessment Report 5, released 2014; ranges are approximate and have been estimated from graphs appearing in the report.
**Source: CO2 Now

Filed Under: Australian Government Climate, Climate Change Adaptation, Federal Budget, Risk management, Stakeholder engagement

25 February 2015 By David McEwen

What’s your ESG Rating?

What's your ESG Rating?

A new breed of sustainability analysts is increasingly driving institutional investor decision-making. Find out more.

As a company director or senior executive you keep an eye on your company’s credit rating and – if you’re a listed entity – your investor relations team will track what market analysts are writing about your stock. But have you checked your ESG Rating lately?

Environmental Social Governance (ESG) is the umbrella under which a growing number of specialist analysts and index providers are tracking aspects of company performance other than its financial results.

In recent years buy side analysts such as Sustainalytics have emerged providing reports or rankings about companies’ ESG performance to fund managers and other major investors. New indices and tools have been developed by the likes of MSCI to help investors understand and manage the ESG risks inherent in their portfolios. And not for profits like the global Carbon Disclosure Project have been directly collecting environmental data from companies and cities to inform the investment community.

The growing influence of such data was highlighted late 2014 when the Australian National University’s endowment fund controversially announced it was dumping a number of fossil-fuel exposed stocks on the basis of analysis from Canberra-based CAER. It is not alone, with a global divestment movement spearheaded by environmental groups and aided by organisations such as the Asset Owners Disclosure Project convincing a growing number of institutional and individual investors to sell down their holdings in the fossil fuel industry and take business away from banks that continue to fund it.

Company directors and executives should ensure they understand what is being said about their organisations by the various ESG analysts and that the information being presented to investors is accurate, rather than simply scraped from public domain sources as is often the case. Otherwise they may unwittingly lose shareholder value if investors make divestment decisions on the basis of incomplete or misrepresentative data.

Talk to Adaptive Capability today about safeguarding your business’ future.

Filed Under: Risk management, Stakeholder engagement, Strategic Adaptation

8 November 2014 By David McEwen

Your Brand May be at Risk – Just Ask Lego

Lego Bricks
Environmental group Greenpeace hit a raw nerve in mid 2014 with its viral video targeting Lego’s cobrand deal with oil giant Shell. Racking over six million views and converting a substantial percentage to signatures on its on line petition, the video created guilt by association. It used Lego bricks and figures to create a vision of the Arctic wilderness being plundered by Shell in the pursuit of petro-dollars against the melancholy strains of the usually up beat “Everything is Awesome” song from the recent Lego Movie.

In October, Lego announced that it would not be renewing its contract with Shell, which involved the toy maker selling a range of brick kits in Shell retail outlets featuring Shell branded petrol tanker trucks and stations.

Already the Internet is full of protesters’ distortions of the major oil companies’ logos. But this is a new development, where the activists are making it difficult for what we call “emissions neutral” companies like Lego to form bilateral business partnerships with fossil fuel firms.

This is an example of what we term a “Quadrant 3” risk associated with climate change, where negative reputational impact makes a certain course of business increasingly untenable.

A sustained attack on reputation can have a dramatic impact on revenue: just look at the fate of Malaysia Airlines, which suffered two devastating accidents in quick succession and has required government assistance to survive.

Many risks associated with climate change – like damage to property from extreme weather events – can be mitigated to an extent. More distant challenges like the decline of winter sports or coral coast tourism in some countries can be planned for and managed over a long time frame, though declining asset values will affect exit prices. Reputational risk, on the other hand, can and is striking companies with less warning and can have devastating consequences.

Our advice is to look carefully at your environmental impact sensitivity. Even if your business has a neutral footprint, can the same be said of your suppliers, the use of your products and services, or the businesses you finance, insure or partner with?

Talk to Adaptive Capability today about safeguarding your business’ future.

Image credit: Stefano Tinti

Filed Under: Reputation, Risk assessment, Risk management Tagged With: Greenpeace, Lego, Shell

14 June 2014 By David McEwen

Climate change – your business is at more risk than you think

Snowless Ski Slope
Climate change is already threatening entire regions and industries, and some businesses have greater risk exposure than others…

When people think about the risks of climate change, most focus on damage and disruption caused by the predicted increase in the frequency and intensity of extreme weather events.

However, there’s a lot more to consider in a comprehensive assessment of climate change and other environmental risks. Take shocks to input prices as governments introduce or expand the scope of carbon pricing schemes or impose costs on other environmental externalities. Or reputational damage – potentially accompanied by class action law suits – aimed at major polluters or plunderers of the earth’s natural capital.

Dying industries

How about the failure of whole industries or a regional collapse in demand? In Australia, coral coast tourism and alpine sports are likely candidates, with ripple effects along their supply chains. 2014 has already seen record autumn temperatures, and the traditional June start to the Snowy Mountain ski season has been scuttled by above freezing temperatures and still-grassy slopes.

Moreover, as water supply shortages bite in the face of prolonged severe drought, as has been occurring in the South Western United States, the future of water intensive agriculture and industry is also under threat.

Deserted towns

A lack of water in turn precipitates climate-related migration, adversely impacting businesses with a local customer base. This has already been seen in the abandonment of small towns across Nebraska, Kansas and nearby states as the area’s lifeblood – the over-exploited Ogalalla aquifer – has begun to run dry and the land has reverted to near-desert conditions.

Is any business immune?

While organisations with few long-term assets, low capital investment and no involvement in the energy industry may consider themselves relatively immune from climate risks for the foreseeable future, our research suggests this is not always the case. Undertaking a detailed, climate focused risk assessment covering short, medium and long term time horizons is critical to understanding your organisation’s likely exposures to the wide range of direct and indirect threats.

Talk to Adaptive Capability today about safe guarding your business’ future.

Filed Under: Climate Change Adaptation, Risk assessment, Risk management, Strategic Adaptation

  • 1
  • 2
  • Next Page »

Recent Posts

  • The Biggest Part of Achieving Net Zero Could be the Hardest
  • Climate of Care. A New Risk for Corporate Australia
  • Getting Off Gas – Commercial Buildings
  • Getting Off Gas
  • Climate Ambition is Rising – What Does it Mean for Your Business?

Search

Connect with us

Contact Details

Adaptive Capability
L20, Darling Park Tower 2
201 Sussex St
Sydney, NSW 2000
Australia
1800 CAPABLE (1800 227 225)

info@adaptcap.com

Join the conversation

Tweets by @AdaptCap

Copyright Adaptive Capability © 2023 All Rights Reserved