Imfino News

December 12, 2018, New York — A new analysis of CDP disclosure data shows that some of the largest U.S.-based corporations view climate change as an increasing risk to their bottom line and reputation among consumers and investors. It highlights business readiness for a low-carbon transition and reveals major climate-related risks but also opportunities facing their operations. The analysis is a follow-up to the ‘U.S. State by State 2014’ report surveying similar companies, including Google, McDonald’s, United Airlines, John Deere, Goodyear, eBay, and Sears.

The U.S. economy faces significant perils from unabated climate change, and more companies are reporting environmental risks, financial implications of these extreme weather events and how they go about seizing new opportunities. A new ‘ State by state: An analysis of U.S. companies and cities across seven states ‘ report from environmental non-profit and investment research provider CDPreleased today, presents findings from the past four years about U.S. corporate reactions to the impacts of climate change upon business in four U.S. regions, with emphasis on Texas and Florida, Arizona and Colorado, California, Ohio, and Illinois.

CDP's analysis highlights include:

• 88 percent of U.S. real estate companies cited operational risks related to hurricanes, flooding, storm surges, sea level rise, which could translate into higher costs to businesses;
• 2017 Atlantic hurricane season ranks as one of the costliest disaster years for the insurance industry. A record amount of $215bn, including a record uninsured loss roughly amounting to $120bn; insurance companies Allstate and American International Group are managing risk by adjusting pricing and terminating coverage in areas prone to natural disasters;
• Californian companies reported in 2017 more opportunities from environmental regulation than companies headquartered in any other state, 81 percent of Californian companies disclosing inherent benefits to their business from climate-related regulation;
• In 2017, over half of Californian companies pointed to corporate reputation and changing consumer behaviors as drivers of business opportunities, with 69 percent reporting either or both drivers in their responses to CDP; Alphabet, Google’s parent company recognized reputational benefits in the form of potential brand equity gains amounting to at least $133 million from addressing climate change risks;
• In 2017, companies in the Southwest operating within the Colorado River Basin have reported more than 70 serious water risks to their operations and more than 70 percent of these risks were linked to expectations of higher operating costs and plant disruption. One of the world’s largest defense contractors Raytheon reported that 11-20 percent of their global revenue could be affected by water risk;
• Climate presents a risk to the ice cream industry, which contributes more than $39bn to the national economy. Unilever’s dairy facility in the Western seaboard, producing brands such as Breyers, Ben & Jerrys, Klondike, and Good Humor, could likely see disruptions in production if water levels continues to drop in Lake Mead;
• Ohio-based companies have consistently reported fuel and energy regulation as a top risk since 2015. American Electric Power with over five million customers across 11 states, including Texas, West Virginia, Virginia, Louisiana, and Kentucky, is one example of a company grappling with uncertainty around the regulatory direction of the U.S.

Due to the increasing concern about climate risk, U.S. companies are stepping up on climate change at a pace never before seen. Driven by wind and solar sector growth, investments in U.S. renewable energy industry exceeded $40 billion in 2017 and cumulative U.S. private investment in renewable energy could reach $1 trillion in the near future.

Companies, cities, and states are calling upon the government to take bold action at the United Nations Climate Change Conference of the Parties (COP 24), which is currently being held in Poland. The conference aims to deliver on the Paris climate agreement to put the world on track to a low-carbon, sustainable future while keeping in global temperature to 1.5 degrees Celsius.

Sara Law, Vice President of Global Initiatives, CDP commented,"A climate of policy uncertainty in the U.S. is a distraction for companies and cities that see the problem of climate change and want to be focused on handling these costly and material risks. The good news is CDP's data shows that these real economy participants have remained committed to action, bracing for impact despite distractions”.

CDP’s analysis demonstrates best practice, how companies are successfully managing risks and building resiliency, and unique paths for companies and investors to take part in the transformational change. Our research reveals a growing awareness of climate-related policies as well as an understanding for the various drivers of increased risk perception and value creation.