J466335—Resilience Campaign - Climate Change Post-Event Rep…


Counting the commercial cost of physical and transition risk

Setting the scene on the physical risks of climate change, Hélène Galy, Willis Research Network Director of Willis Towers Watson put the issue into sharp business (and environmental) perspective. In addition to the clear damage to biodiversity and human populations from extreme heat, for instance, critical transport routes such as the Rhine are at risk of becoming impassable, planes may be grounded, and productivity is likely to suffer. If extreme weather events, such as last year’s “Beast from the East” or recent severe flooding in Asia become regular occurrences, the implications for sectors like retail or for the supply chains servicing any industry could be significant. “All continents will be affected,” she said, “but there will be winners and losers. Some areas can adapt, but others can’t. It’s existential.” While acknowledging that uncertainty makes decision-making difficult, Hélène advised looking at how risks develop over time, rather than taking too narrow a snapshot, and utilising frameworks that are currently being developed by regulators, standard-setting bodies and others to help identify and report on risk. Focussing on the transition to “net-zero” emissions, Michael Liebreich, CEO of Liebreich Associates, an adviser on clean energy and transport, climate finance and sustainable development, looked ahead to

the “three-third world of 2040”. This is when, based on current trends, he argued, we will see one-third of electricity being wind or solar-generated, one-third of vehicles will be electric and the economy will be one-third more energy efficient. Getting there will certainly not be hurdle- free, however. Though the cost of solar and wind power are falling exponentially, their variability makes them problematic. “Regulators are struggling to re-write the rule book to ensure that markets are benefitting from these cheap technologies but also that other systems are in place to keep the lights on,” he said. “The structure of power supply will have to evolve.” For Michael, the answer lies in new technologies such as pumped storage, biomass/biogas and demand response as well as batteries, based on fully digitised systems into which AI or Blockchain could be integrated. Similarly, green engines could revolutionise transportation – not just electric cars, but trucks, ships and planes. He’s confident that individual sectors can move quickly – citing the rapid shift to LED light bulbs that happened in just a few years as an example. Themessage: forward-thinkers can take the lead in whole new markets – those that don’t may get left behind or simply make the wrong strategic decisions, with value-destroying results.

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