As of late, it is almost impossible to overstate the grave threat of climate change. Several South African businesses are directly affected by weather and will, without doubt, be affected by climate change. However, in the face of compelling scientific proof, organisations as well as governments have been slow to respond.
The effects of climate change can be felt throughout an organisation as a result of new reporting requirements, changing taxation, carbon trading, different management needs, formulating adaptation policies, or changes required in governance. Increasingly, ACCA affiliates need to understand how the climate change crisis will impact businesses. For that reason, ACCA has collaborated with Trucost to develop content for the ACCA Investment: climate change brief paper. Trucost enables investors to understand how environmental issues could affect companies’ future earnings. The briefing paper covers topics such as adaptation, governance and management, investment, mitigation and taxation and provides essential information to assess the changing environment ahead.
Individuals and organisations that are dependent long-term investment are highly likely to have longer impacts because the consequences of climate changes increase over time. More and more investors are beginning to price climate change into investment decisions and allocate capital to companies that are fully integrating climate change considerations into their strategies, values and operations. According to the briefing paper, investors are starting to consider climate change in investments, focusing mainly on opportunities such as energy efficiency, clean technology and renewable energy providers. Climate change will eventually have physical effects on equity markets in the short, medium and long term.
Climate change is an urgent challenge that affects long-term corporate profitability. If climate change impact is not fully understood, organisations will encounter great challenges. Investors have a major role to play in promoting energy efficiency, alternative technology and reduction targets in the emission of harmful greenhouse gases. In the same breath, corporate leaders need to ensure that necessary steps are taken towards appropriate solutions and should steadily integrate climate change into investment analysis. Corporate leaders must rethink their business models, business priorities, and business sustainability, and to consider what climate change may mean for their objectives. The pace of climate change is accelerating. Acknowledging climate change as an inevitable factor, and recognising the need to adapt, involves bold decisions by business.