Speaking the language of risk: climate change and the future of business

Greener Horizons Toronto

Impacting almost every industry, climate risk now includes an organization’s direct environmental impact, reputation and brand risks, financial risks—and even the risk of being unprepared for the realities of the emerging carbon-constrained economy.

The good news is that more businesses than ever are taking action on climate change by doing a thorough inventory of their exposure to these climate-related risks. Implementing a strong CSR platform can help organizations anticipate and respond to climate risk by demonstrating consistent, credible and goal-directed action.

But how are some of today’s leading businesses speaking the language of risk to motivate action within the business community on climate change? And what can you do to ensure that your organization is prepared for the challenges ahead?

At our Greener Horizons event in Toronto, Bullfrog Power brought together a panel of business leaders for a discussion moderated by John Coyne, Vice President of Legal and External Affairs for Unilever Canada with panellists that included: Tania Carnegie, Leader, Impact Ventures, KPMG; Deborah Wilson, Vice President, Communications and Public Affairs, PortsToronto; and Chris Ouellette, Head, Corporate Citizenship, Manulife.

Below is a summary of our panellists contribution to what was a fascinating discussion on climate change and risk.

John Coyne, VP, Legal and External Affairs
Unilever Canada

To frame the debate, John Coyne proposed that the discussion surrounding risk and climate change is accelerating. And yet, that discussion is not yet a mature one because it doesn’t fully reflect the relationship between businesses and the communities and societies in which they operate.

Centring on the role of business in measuring and accounting for climate risk, questions included: How can ESG (environmental, social, governance) factors be more fully integrated into CSR profiles? What is the leadership role for business in general and the c-suite in particular? And, how do we create the frameworks for what we think we need to be concerned about in relation to climate risk? Throughout the discussion, Coyne put into focus the need for business to act on climate change and helped to frame the ways in which business can be motivated to do so in ever shorter time frames.

Tania Carnegie, Leader, Impact Ventures

Tania Carnegie stressed that alongside the risks that climate change poses to business there are also business opportunities to contribute to climate action. The existing conversation around climate risk and investment has traditionally centred around identifying exposure to climate risk or universities considering divestment.

The size of the investment opportunities surrounding climate change are huge. The effort to keep the global temperature rise below 2 degree centigrade is a $12 trillion dollar investment opportunity over the next 25 years, with much of that going to emerging markets. But under the business as usual scenario it’s about a $7 trillion opportunity.

Within the investment community there are many players that can in their own ways do more to drive solutions:

  • Employees are important stakeholders who want to understand how their employers are contributing to climate action.
  • If you are issuing debt, you can analyze your risk profile in relation to a warming climate.
  • Investors can do more by being active owners, asking questions about climate risk that help to mainstream those concerns about what makes a good investment.
  • Government has an important role to incentivize climate action.
  • And everyone can do more to avoid short term thinking in capital markets. Long term thinking is now part of the conversation.

Deborah Wilson, Vice President, Communications and Public Affairs

PortsToronto is a government business enterprise that owns and operates the Port of Toronto and Billy Bishop City Airport. That means that they operate like a private company, receive no public money but have a public mandate. For PortsToronto, the risks from climate change are twofold:

  1. Operational: Rising sea levels and extreme weather can impact infrastructure and disrupt business operations.
  2. Reputational: Operational impacts through delayed flights can affect their reputation. There is also the expectation that businesses need to do their part.

To deal with climate risk, PortsToronto has developed a climate change program that involves:

  • Mitigation by reducing GHG emissions through initiatives including choosing green energy with Bullfrog Power, adopting hybrid vehicles and LED lighting.
  • Adaptation by preparing for and preventing the impacts of climate change. For example, the recently constructed pedestrian tunnel isn’t impacted by extreme weather to the same degree as the ferry.
  • Optimization by focusing on Port Operations to determine how behaviour changes can be accomplished by optimizing the Port’s assets.
  • Communication by using PortsToronto’s new Sustainability Report to identify successes and set priority areas for future improvements.

In addition, Wilson stressed the importance of ports in general as an opportunity in finding more environmentally friendly ways of moving goods:

  • A truck can travel 30 km on a single litre of fuel, but a ship can travel 240 km.
  • In 2015, the Port of Toronto imported almost 2 million tonnes of cargo. It would have taken 50,000 40-tonne trucks to deliver the same amount of cargo.
  • A ship travelling from Guatemala to Toronto uses the same amount of fuel as trucking would use to move the same amount of goods from Windsor to Toronto.

Finally, ports must be leaders on climate change because, being local infrastructure, they suffer tangible impacts. For instance, the storm and resulting flood of the Don Valley in June 2014 left 300 tonnes of debris in Toronto harbour. It is the responsibility of the port to deal with these tangible impacts of climate change.

Chris Ouellette, Head, Corporate Citizenship

Manulife is a health and life insurer. Selling life insurance products involves making a commitment to its policyholders that Manulife will pay claims and other benefits far in the future and it does this by prudently investing the premiums it collects. Manulife’s investment fund is more than $300 billion and is invested in a variety of stable assets, such as government bonds, and alternative long duration assets, such as forests and properties.

Climate change can have regulatory and physical impacts. Three examples of assets that could be impacted by climate change are:

  1. Physical impacts in timber investments. A tree planted to be harvested 30 years from now needs to survive a changing climate. One way Manulife plans for this is by working with academic institutions to model impacts of drought, fires, etc. that may result from climate change.
  2. Physical and regulatory impacts in real estate investments. Manulife owns 62 million sq. ft. of real estate. Physical impact of climate change can include flooding. Regulatory changes are creating more opportunities for efficiency improvements.
  3. Regulatory impacts in renewable energy. The regulatory environment has created a significant market for renewable energy in Canada. Manulife has been investing in renewables since 2002 and now has more than $9.4 billion in renewable energy investments.

During the discussion, Ouellette also considered the challenges inherent in changing consumer behaviour. Outside of the members of the public who proactively make sustainable choices, consumers generally respond well to price incentives and product innovation. In the U.S., Manulife has a product called Vitality that combines life insurance with a Fitbit. To incentivize healthier living, the customer can achieve up to a 15% discount based on their level of physical activity. These types of health interventions  – particularly when walking or cycling to work is possible – often reduce reliance on forms of transportation associated with CO2 emissions.

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