Most business leaders have an understanding of what global climate change could mean for our surroundings, but not everyone realizes how the climate shift could affect their business’ finances. And unfortunately, one recent survey found that 80 percent of CEOs and CFOs say their companies aren’t completely prepared for the adverse impact that global climate change will wear their bottom lines.
That’s the word from a replacement report from insurance provider FM Global, which analyzed survey results from 150 CEOs and 151 CFOs at companies with over $1 billion in revenue to make the 2021 CEO/CFO Climate Risk Survey.
Financial Risks might be high
Stakeholders who aren’t sure exactly how global climate change might impact them should note of this startling figure: Last year, it had been estimated that over 200 of the world’s 500 largest companies face about $1 trillion in costs associated with global climate change within the future decades if they don’t take steps to organize.
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Among the impact generators are the physical risks related to more severe (and more frequent) weather events, bookkeeping services for small business required to realize a greener economy. As business leaders work to mitigate these risks, they also face questions on the way to make change happen, and who should be liable for taking charge.
Most Leaders acknowledge a problem
While 76 percent of the CEOs and CFOs surveyed acknowledge that their companies are exposed to climate risk, they haven’t prioritized addressing it, the study noted. Most classify addressing climate risk as a “medium priority,” while nearly 15 percent say it’s either not a priority in the least or it’s ranked quite low.
When ranking the most important climate risks that concern business leaders, flooding is cited at the highest, followed by drought and wildfires, the report noted.
Their lack of action in addressing these factors, however, could also be thanks to the very fact that the majority CEOs and CFOs feel powerless to mitigate the adverse impact of climate risk on their business’ finances. While 62 percent of survey respondents said they feel they need “somewhat” control over the risks, 20 percent said they believed they need no control or small or no.
Here’s who’s managing the Risks
When asked who should be accountable to handling the potential financial risks of global climate change, most respondents said the buck stops with board of directors and executive management. Additionally, however, 74 percent of survey respondents said their companies have employees with explicit responsibility for addressing climate risk.
“The combination of being underprepared for natural catastrophes, volatility in accounting services for small business, and therefore the threat of an economic recession couldn’t come at a worse time for several companies,” said FM Global’s Katherine Klosowski during a statement about the findings.
“Fortunately, most losses stemming from climate-related events are preventable, and loss prevention can help preserve a company’s value and resilience, especially during the pandemic,” she said. “However, the challenge many companies will face is satisfactorily preparing for such events if stay-at-home orders remain in situ, which could exacerbate the impact climate-related events wear an already fragile bottom line.”