Thought leadership

Introduction

Economic models indicate that the cost of unmitigated climate change is expected to run into the billions of dollars every year, affecting businesses and livelihoods. Climate change is an existential issue and developing countries will be disproportionately affected. Governments and businesses therefore need to continuously develop new policies, tools and products to prevent the worst effects of climate change.

How can corporates respond? Corporates can create more climate resilient business models by understanding how climate related risks and opportunities intersect with strategy and potentially affect future business performance. This helps in planning adequate responses.

Climate change risks

Climate change risks to businesses can be categorized into three broad categories:

1. Physical risks – Extreme weather events, rising sea levels and wild fires attributed to climate change present physical risks to the business, its personnel and surrounding communities.
2. Transition risks – Transition risks refer to a horizon of new and emerging regulations on carbon emissions, increasing consumer preference for low carbon products, new disruptive technologies in energy efficiency and renewable energy and increasingly vocal stakeholder expectations.
3. Financial risks – Climate change is now increasingly regarded by corporates as a component of financial risk. Climate risk affects investment decisions. The physical effects of climate change and new climate change policies have negatively affected company balance sheets resulting in stranded assets and also caused increases in insurance premiums.

What opportunities exist?

The transition to a low carbon society presents many opportunities for businesses in all sectors to ensure their business and operating models remain resilient. Some of the opportunities include:

• Improving resource efficiency and cutting costs by implementing circular economy strategies and improving efficiencies in water, energy and natural resource use.
• Pursuing investment opportunities in renewable energy, low carbon energy technologies and climate resilient infrastructure.
• Taking advantage of changing customer preferences by developing new products that appeal to these new market segments.

Corporates seen as leaders and early adopters in developing and implementing adaptive climate change solutions are in a unique position to enhance their reputation, attract new investors and maintain a loyal customer base.

How Seven Levers LLP can assist

At Seven Levers LLP, we have developed solutions that assist our clients capture opportunities and ensure resilience in a low carbon society. Some of our climate related services include:

• Climate change risk assessments – We assess climate risks to your business as a result of emerging regulations, changing consumer preferences and new stakeholder expectations. We help you design risk management structures and put in place pragmatic climate change risk responses aligned to your business strategy.
• Climate change scenario analysis – Through our scenario analysis toolkits, we quantitatively assess how resilient your business model is under different future climate change scenarios.
• Carbon footprint assessments – We compute your carbon footprint to help you map out greenhouse gas hot spots and identify opportunities to cut emissions through process redesign, improved energy efficiency, investments in renewable energy and purchasing carbon offsets.
• Setting science based targets – We facilitate setting science based targets that align your emission reduction efforts with global targets and ambitions.
• Climate finance solutions– We assist you capture green financing opportunities by designing Green Bond frameworks consistent with leading practice and guidance on green and climate bonds.
  
  

For more information on how we can assist, contact us on info@sevenlevers.co.ke

Bernard Kiore, Director at Seven Levers LLP