Step 1: Identify Climate Risks

• Physical Risks: Assess the likelihood and potential impact of climate-related events, such as floods, droughts, storms, and heatwaves, on your business operations, assets, and supply chains. Some relevant data to collect may be:
  • Locations and types of offices, warehouses, manufacturing sites, and participants in the supply chain
  • Historical and forecasted data on physical hazards for these locations
  • Business resilience information, including disaster recovery plans, backup power solutions, remote work capabilities, supplier dependencies, and alternative suppliers
  • Community resilience data, detailing the infrastructure’s ability to handle climate-related hazards, such as airports, road connectivity, nearby hospitals, and services for gas, electricity, supplies, and food
• Transition Risks: Consider the impact of policy changes, evolving market expectations, and technological advancements on your business. For example, new regulations might require changes in your production processes or products. Some relevant data to collect may be:
  • Changes in government policies, industry regulations, or risk reporting requirements
  • Effects on the supply chain
  • Rising costs of insurance
  • Financial and political risks
  • Risks to reputation
  • Greater competition for resources
  • Influence on marketing strategies

Step 2: Assess the Impact on Your Business

• Conduct a risk assessment to understand how identified risks could affect your business. This can include direct impacts (like damage to property) and indirect impacts (such as supply chain disruptions or increased insurance costs).

Step 3: Develop Risk Mitigation Strategies

• Adaptation Strategies: Develop plans to protect and reduce risk to your business from identified physical risks. An adaptation plan could evaluate various adaptation strategies and the decision-making needed, considering factors like timescale, available resources, and potential benefits. Strategies could include investing in more resilient infrastructure, diversifying supply chains, or implementing emergency response plans.
• Mitigation Strategies: Reduce your exposure to transition risks by aligning your business with low-carbon policies and market trends. This might involve adopting more sustainable practices, reducing carbon emissions, or investing in green technologies.

Step 4: Report and Communicate Transparently

Transparent reporting is not only critical for compliance and trust-building but also presents a strong business case for securing funding. Effectively communicating your exposure to climate risks and your proactive adaptation strategies can position your business as a forward-thinking, resilient investment opportunity. Investors, lenders, and insurers are increasingly seeking businesses that understand and manage climate risks, as these companies are perceived as lower-risk and more likely to thrive in a transitioning economy.

By clearly outlining the steps you’ve taken to assess and mitigate risks—such as investing in resilient infrastructure, diversifying supply chains, and adopting sustainable practices—you can demonstrate how your business is not only protecting itself but also capitalizing on new opportunities in the low-carbon economy. This can lead to improved access to financing, as many financial institutions prioritize funding businesses with strong environmental, social, and governance (ESG) credentials.

Additionally, aligning your reporting with frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) can further enhance your credibility, making it easier for investors to evaluate your business’s long-term resilience. This transparent and strategic communication will help build confidence among stakeholders and unlock opportunities for growth, even in the face of climate-related challenges.