The research, which was conducted by AICPA & CIMA (The Association of International Certified Professional Accountants & The Chartered Institute of Management Accountants), found that those companies subject to EU regulation are far more likely to view climate risk as a top concern than their global peers.
The global survey of 436 board members, C-suite executives, and risk managers found that 49% of organisations with headquarters or operations in the European Union view climate risk as a top 10 concern, compared with just 24% of non-EU organisations.
Further, almost one in six (57%) of those businesses with EU headquarters or operations were of the opinion that investor expectations related to climate risk have increased in the past two years, compared with 28% for non-EU organisations. It highlights the impact that regulation is having, with those operating within the European Union facing increased regulation from the EU’s Corporate Sustainability Reporting Directive (CSRD), as an example. Notably, whilst 49% of EU organisations have a management-level risk committee overseeing climate risks, the same cannot be said for non-EU entities, where just 14% have such measures in place. Likewise, whereas just under half of EU organizations have designed and implemented systematic processes to manage climate risk, only 19% of non-EU organisations have done the same.
“This research study demonstrates that managing climate-related risks is a high priority for EU companies, catalysed by reporting under the CSRD,” said Jeremy Osborn, AICPA & CIMA’s global head of sustainability. “Non-EU companies have some catching up to do and their EU counterparts provide a strong role model for the appropriate governance arrangements for managing such risks.”[i]
In January the WEF (World Economic Forum) warned that firms which fail to address climate risks could face substantial financial losses in the near future. They suggested that businesses failing to act could see up to 7% of annual earnings wiped out by 2035, an impact the WEF argues is akin to COVID-19-level disruptions every two years[ii].
In its research, The WEF went on to argue that climate risks are no longer a distant threat; climate-related disasters have inflicted over $3.6 trillion in damage since 2000, and the organisation expects this to accelerate. It found that climate hazards, such as extreme heat, are expected to cause $560–610 billion in annual fixed asset losses for listed companies by 2035, with telecommunications, utilities, and energy companies most vulnerable.
Despite these risks, the WEF noted that substantial growth opportunities exist amongst the evolving climate landscape, where green markets are forecasts to grow from $5 trillion in 2024 to $14 trillion by 2030. Here early adopters are expected to gain competitive advantages in sustainable solutions and adaptation offerings.
Further, their research stresses that direct climate risks, coupled with wider impacts on supply chains, employees, and wider communities, underscore the critical need for resilience strategies. They find that those businesses who are already investing in adaptation, resilience and decarbonisation are seeing tangible returns. For example, research published by the Alliance of CEO Climate Leaders found that every dollar invested in climate adaptation and resilience can generate up to $19 in avoided losses[iii].
[iii] With climate risks set to slash earnings, what can CEOs do? | World Economic Forum
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”
