Authors: Silke Goldberg, Ben Rubinstein and Dr Matthew Burnell
In a 2019 global survey, 1,250 CEOs rated environmental / climate change risk the single biggest threat to business growth.1
The race is on for businesses to understand their environmental impact and to manage the legal risks to succeed in a lower-carbon future.
Our report, which gathers insights from our global experts, considers the political, regulatory and commercial pressures arising from climate change, looks at the steps for ensuring that risk management practices measure up to the climate change challenge, and examines the benefits for businesses in all sectors that lead the transformation and innovate toward a lower-carbon future.
Mitigating risk, and the rapid rise of climate change-related litigation
The risks associated with climate change exceed the purely environmental, with the shift to a lower-carbon economy seemingly inevitable. Across geographies and sectors, stakeholders are judging businesses by both their perceived contribution to climate change and their efforts to mitigate its effects. Areas such as financing, contracts, human rights, and adequate disclosures and government action/inaction are also under greater scrutiny than ever before.
Claims against corporations as well as from shareholders or other private claimants, either relating to climate damage or the inadequate or misleading disclosure of the impact of activities on the climate, are also on the rise. For institutional investors, there is also a growing threat of legal challenge from activist groups, policyholders and savers.
Transitioning to a lower-carbon future
Addressing climate change impacts can bring efficiencies and new sources of revenue for those who embrace innovation.
Across all industries ranging from financial services to natural resources, businesses are responding to demand for lower-emission products and services by innovating their operations to adhere to higher standards, and factoring carbon pricing into their strategic planning as evidence of their commitment to combat climate change and comply with emerging regulations. This enhances their attractiveness not only to consumers but to investors – giving them further access to funding with which to drive innovation.
With agility fundamental to success, it is clear that businesses need to futureproof their operations, engage with governments, regulators and NGOs, practice strong governance, integrate climate change legal risks into their wider risk management activities and measure their impact in order to thrive in a lower-carbon environment. A low-carbon future won’t happen overnight, but traditional companies and funds have a vital role to play in the transition, helping governments meet ambitious clean targets while maintaining economic growth.
This is relevant in respect of Africa as many countries on the continent suffer from weak adaptive capacity. In particular, the risks of climate change on agriculture, water resources and infrastructure are likely have severe impacts on the health and wellbeing of the population and sustainability of many projects. To manage these risks, business and government needs to integrate mitigation and adaptation strategies in all decision making processes. In doing so, there are numerous opportunities for Africa to thrive in a low-carbon future.
- Agile or irrelevant, Redefining resilience, 2019 Global CEO Outlook, KPMG International 2019.
For more information please contact Silke Goldberg, Ben Rubinstein and Dr Matthew Burnell or your usual Herbert Smith Freehills contact: