Climate change does not appear on a company’s cash flow statement, but it is still a significant financial risk for many businesses. From severe weather damages to supply chain disruptions to the availability of many commodities, changes in the environment can negatively affect a business’s operations. A Business Forward report, using the auto industry as an example, showed that weather-related disruptions can add substantial costs.
Businesses that are planning for their long-term outlook need to be able to quantify these risks to guide their investment decisions. An increasing number of large companies have are using carbon prices in their business. Carbon pricing is an internal measure of the cost of releasing a specific amount of carbon dioxide into the atmosphere. According to the CDP, more than 150 companies from around the world use carbon prices in their businesses, including two Business Forward members, Google and Microsoft. The list includes a number of major financial leaders including Lloyds Bank, Deutsche Bank and EY.
Carbon pricing is just one of the strategies that businesses are using to address climate change. Leaders in business and finance are joining government officials at United Nations Summit this week in New York. Businesses and governments can work together to reduce carbon pollution while maintaining and even accelerating economic growth.
The recent proposal from the Environmental Protection Agency is an opportunity. Earlier this year, the EPA proposed standards for existing power plants that will result in a nationwide 30 percent carbon intensity reduction by 2030. States will have their own targets and be able to develop a unique plan to accomplish the reductions. Carbon pollution from existing power plants will be regulated similarly to mercury, arsenic and a range of other pollutants.