How climate scenario analysis helps firms assess impact of global warming on assets - South China Morning Post
How climate scenario analysis helps firms assess the impact of global warming on their assets | South China Morning Post
Hong Kong’s Victoria Harbour on a hot day recently. Climate scenario analysis is a process where both companies and investors can test business strategies and portfolio outcomes against different levels of implied temperature rises, according to an expert. Photo: Sam Tsang
Explainer | How climate scenario analysis helps firms assess the impact of global warming on their assets
- Such analysis ‘allows companies to better prepare and allocate resources to plan for a range of future scenarios’, EY analyst says
- Regulators in Hong Kong have been urging firms to become familiar with the TCFD and ISSB reporting standards before they become mandatory by 2025
Hong Kong’s Victoria Harbour on a hot day recently. Climate scenario analysis is a process where both companies and investors can test business strategies and portfolio outcomes against different levels of implied temperature rises, according to an expert. Photo: Sam Tsang
Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”