Some of the world’s biggest companies representing nearly $17tr in market capitalisation have valued the climate risks to their businesses at almost US$1tr - with many likely to hit within the next five years.

Revealed in a new report published by CDP, over 80 per cent of the companies asked now see major climate impacts, including extreme weather patterns, rising global temperatures and increased pricing of greenhouse gas emissions. Around $500bn of costs are rated as ‘likely to virtually certain’, with higher operating costs linked to legal and policy changes making up a significant risk.

Companies also report potential $250bn in losses due to stranded assets – these include fossil fuel assets that may no longer offer economic returns as a result of market shifts associated with the transition to a low-carbon economy, or companies that are significantly exposed to the physical impacts of climate change.

Conversely, the companies also report cumulative gains from realising business opportunities related to climate change at $2.1tr, with the majority on track as ‘almost certain’. These opportunities include increased revenue through demand for low emissions products and services, shifting consumer preferences and increased capital availability as financial institutions increasingly favour low-emissions producers.

On average, the potential value of climate-related opportunities is almost 7 times the cost of achieving them ($311bn in costs, $2.1tr in opportunities). Given this, investors and stakeholders could expect to see a significant shift in climate-friendly products and services from the world’s largest companies, with companies in the financial sector seeing the most potential revenue, followed by manufacturing, services, fossil fuels and the food, beverage & agriculture industries. The vast majority of risks are also concentrated in the financial services industry – the sector reported almost 80 per cent of all financial risk value.

The full report covers 6,937 companies who reported data to CDP in 2018, including a sample based on the 500 biggest global companies by market cap, 366 of which reported to CDP. It analyses the risks and opportunities related to climate change reported by companies in 2018 in line with the recommendations from Mark Carney’s Task Force on Climate-related Financial Disclosures (TCFD).

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