Business may have to pick up the bill for climate change, warn analysts

By Madeleine Cuff 

Litigation risk from climate change joins corporate disclosure and tougher supply chains scrutiny as Verisk Maplecroft’s top environmental risks for business in 2018

Businesses are under increasing threat of being sued for their role in causing climate change, according to environmental analysts at Verisk Maplecroft.

As extreme weather events become more common, and more expensive to manage, victims of intense typhoons, droughts, hurricanes and storms are increasingly turning to the courts to secure damages for clean-up costs.

It is a trend that is partly driven by the failure of the global community to agree a framework on compensation for climate change impacts, according to Will Nichols, report author and senior analyst for environment and climate change at Verisk Maplecroft.

Obviously, climate change means spiralling operational costs to business from an increase in extreme weather,” he said. “But with international compensation payments for the impacts of climate change lagging, companies face the prospect of courts deciding whether they should pay for contributing to climate change – and who knows what sums they’ll come up with.”

For example, New York City is in the midst of suing fossil fuel companies for the cost of its climate adaptation works, following a $19bn economic hit from Superstorm Sandy.

The 2018 Outlook also warns companies must be prepared for increasing pressure from investors to publish assessments of their vulnerability to climate change.

“In 2017 we saw investor action force many emissions-heavy companies to take serious steps towards understanding how climate change will impact their operations and profitability,” Nichols explained. “As the TCFD recommendations roll out over 2018, we expect a groundswell of pressure to trigger greater corporate action across key markets.”

Firms including BlackRock and Aviva have already indicated they are prepared to vote against firms which fail to apply climate risk disclosure guidance.

The report also warns of risks for firms that are not prepared for China’s shift towards a greener economy, and growing investor pressure on companies to prove their supply chains are not fuelling deforestation.

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