Businesses That Ignore Climate Change Could Face 'Kodak Moment', Warns APRA

ABC NewsPeter Ryan

A 'Kodak moment" refers to the film giant that failed to see the rapid rise of the digital world. (Reuters: Stefan Wermuth)
Key points:
  • Senior APRA official Geoff Summerhayes says it is clear that climate change financial risks are now "orthodox economic thinking"
  • Mr Summerhayes says "government spending decisions may need to be reprioritised" to spread the costs of climate change
  • NAB chairman and former Treasury secretary Ken Henry says Australia will move to 100pc renewable electricity by mid-century, even without a carbon price
Climate change pain is inevitable with the only question being "how much and when", a top prudential regulator has warned.
Australian Prudential Regulation Authority executive Geoff Summerhayes said businesses that ignore climate change risks could confront their own "Kodak moment", referring to the film giant that failed to foresee the rapid rise of the digital world and went into bankruptcy protection.
"Companies that delay or avoid adjusting to new economic realities, no matter how famous or successful, can quickly find themselves on the verge of a Kodak moment," Mr Summerhayes warned an insurance conference in Singapore.
Mr Summerhayes said the warnings about foreseeable and potentially catastrophic climate change as a first-order economic risk were no longer limited to fringe groups and environmentalists but now include conservative bodies, such as the Reserve Bank of Australia, APRA and corporate regulator ASIC.
"When a central bank, a prudential regulator and a conduct regulator, with barely a hipster beard or hemp shirt between them, start warning that climate change is a financial risk, it's clear that position is now orthodox economic thinking," he said.
"Debate has largely moved on from whether there is a threat that requires a response to questions about the urgency of threat, who should carry the financial burden of addressing it, and whether the benefits are worth the cost.
"Regardless of their choice, some pain will be felt; the only questions being how much and when."
Mr Summerhayes said while businesses around the world were struggling to find the appropriate balance, data around how to best manage climate change "remains under-developed, making informed debate challenging … and decision-making difficult."

Local electricity sector will be '100pc renewables'
Mr Summerhayes told the International Insurance Society Global Insurance Forum that, while climate change debates exist around the world, they are particularly sensitive in Australia given the nation's exports of iron ore, coal, natural gas and crude petroleum.

Australian bosses have started
caring about climate change

"Government spending decisions may need to be reprioritised, and not every member of society will be able to bear these short-term costs equally comfortably," Mr Summerhayes said.
"The benefit of such an approach is a substantial reduction in the expected catastrophic physical risks of climate change in the long-term."
Earlier this week, outgoing National Australia Bank chairman and former Treasury secretary Ken Henry told The Business that the corporate sector was already moving ahead to confront climate change, rather than waiting for government or regulatory action.
"Australia's energy transition is going to happen anyway," he told the program.
"Almost no matter what the policy framework is, the decisions taken by business leaders today will ensure that by about mid-century Australia's electricity sector will be 100 per cent renewables. It's almost irrespective of what decisions are taken at a policy level."

Extended interview with outgoing National Australia Bank Chairman and former Treasury Secretary Ken Henry. The Business

Mr Summerhayes repeated earlier calls for the finance industry to disclose their climate risks to put themselves in the best position to adjust to "a new economic reality".


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