UNSW - Ebony Stansfield
The lessons we have learnt from the impact of COVID-19 may help businesses manage climate risk in the future.
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There are two main types of climate risk: the physical risks and the economic and financial risks they cause. Image: Shutterstock
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The COVID-19 pandemic has had far-reaching consequences, changing society as we know it.
Before
the crisis hit, Australia was facing a climate emergency with the worst
fire season to-date – taking lives, devastating
towns, decimating forests and wildlife, and causing widespread fear
about the future.
There
has been a push for governments and companies to continue their focus
on sustainability. But is it appropriate to be talking about climate
risk during a global pandemic that is barely contained?
The
impacts of climate change will be far-reaching for organisations, both
government and private, but the repercussions of COVID-19 show that many
are not ready to manage the climate risks.
Throughout
May, UNSW Business School’s Responsible Business Program coordinator,
Dr Louise Fitzgerald, with Tanya Dellicompagni presented four online
discussions titled 'Future-Proofing Business', bringing together
researchers, academics, business leaders and practitioners.
For
the first discussion, four experts spoke about what can be learnt from
the impact of COVID-19 about the capacity of business to manage climate
risk.
What climate risk means for businesses
Honorary
Associate Professor Mark Diesendorf, a scientist from the Environment
and Governance Group at UNSW Sydney, says there are two main types of
climate risk – the physical risks and the economic and financial risks
they cause.
The
physical climate risks include natural disasters, which are increasing
in frequency and have direct impacts on tourism, agriculture,
infrastructure and more.
These
impacts impose economic and financial risks in the insurance sectors
and banks, cause stranded assets, impact credit ratings and reputation.
A/Prof. Diesendorf explains COVID-19
is connected to these risks as the pandemic reduces imports and
exports, impacts employees and the global oil and gas sectors.
“As far
as imports are concerned, there is a reduced availability of products
and components and a disruption of our supply chains, reduced overseas
earnings,” he says.
A/Prof. Diesendorf says
there has been a huge drop in global demand of oil with an
international price war which has seen prices plummet.
“Some would say that might be a good thing to assist the transition to renewables.”
Challenges in addressing climate risk in Australia
Professor
Jeremy Moss from the Climate Justice Research Program at UNSW Sydney
says one of the challenges businesses face is how to decarbonise their
operations and switch to renewable energy or cease operating
altogether.
“The climate transition in Australia is operating with one hand tied behind its back because of the way in which
fossil fuels are subsidised and treated favourably in Australia,” Prof. Moss says.
A recent report by the International Monetary Fund noted that Australia spends around $47 billion every year on
subsidising the fossil fuel industry, for example through the diesel fuel rebate scheme and accelerated depreciation of assets.
“This poses all sorts of challenges for businesses who aren't directly receiving those kinds of subsidies,” says Prof. Moss.
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Many businesses are responding to climate change and shifting to renewable energy. Image: Shutterstock
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What direction should businesses take?
“I
think we need to tell businesses and show businesses that there are
actually huge opportunities in responding to climate
change,” says A/Prof. Mark Diesendorf.
He
says the world's largest asset manager BlackRock (which controls about
$10 trillion in assets) has announced it is taking all active
investments out of the thermal coal industry. Mining companies such
as Rio Tinto, Fortescue Metals and BHP are shifting to renewable energy
for their mining processes.
However, Prof. Moss wonders if this change will occur in a way that is timely enough to avert disaster.
“It seems to me that’s not the case at the moment.”
He
says manufacturers or small business might be able to transition to
renewable energy, but he is not sure if bigger companies will make the
switch quickly enough.
Corporations such as BHP have committed $US400 million to deal with all the emissions that it produces.
However, he said the products that BHP produces would cause emissions greater than those emitted by 25 million Australians.
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Climate change can impose economic and financial risks. Image: Shutterstock
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What can we learn from the government’s response to COVID-19?
Prof. Moss said
the government framework has been crucial for what we do and cannot
do but now we need to have a clear analogy with our response to climate
change.
“We
need a clear framework for all of our governments and in particular in
relation to the supply of fossil fuels,” Prof. Moss says.
Professor
Martina Linnenluecke from the Centre for Corporate Sustainability and
Environmental Finance at Macquarie University says COVID-19 has made us
realise just how much we must cut in terms of our
own day-to-day trivial patterns to achieve emission cuts.
She
says there already is momentum gathering to get us back to where we
essentially were, without undertaking fundamental changes to the way
that we globally operate.
Australians
have been trained to see a political landscape that is very divisive
and combative but Denise Shrivell, founder of Mediascope, which maps the
Australia media and marketing landscape, says during the pandemic we
have witnessed both sides of government work together with more unity.
“Hopefully,
we'll see people start to reject that kind of combative politics on the
other side of this and they'll want to see agreement, and they'll want
to see evidence-based policy.”
Ms Shrivell says
during COVID-19 society has been encouraged to pull together and
to download the app but when faced with climate change “we’re a little
more encouraged to be 'well … what can we do?' ”
She
says it has been quite a significant difference in the way the
government and the media are both trying to manage and
sell both issues.
Note: This content was created from UNSW Business School’s Future-Proofing Business Series webinar.
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