Major risk or rosy opportunity: Are companies ready for climate change?

This report analyzes responses from companies to CDP’s questionnaire in 2018 and focuses on what companies are reporting about the risks and opportunities they may face from climate change and its potential financial implications. With 2017 and 2018 seeing significant losses from extreme weather incidents in parts of the world, financial regulators and investors are becoming increasingly focused on ensuring the private sector is ready for the risks and opportunities of climate change.

CDP’s questionnaire is aligned with the recommendations of the Task Force on Climate-related Financial Disclosure. The group was concerned with the financial stability ramifications of climate change resulting from the potential mispricing of assets and misallocation of capital, and so created the industry-led taskforce to assess how the private sector could provide stakeholders in financial markets with decision-useful, climate-related information.

The analysis is based on two groups of companies: 1) all companies who disclosed to CDP’s climate change questionnaire in 2018 (6,937 companies); and 2) the world’s 500 biggest companies by market cap (G500), 366 of whom reported to CDP in 2018.

The report’s key findings are: 

• Companies are identifying significant risks but need to expand their analysis
• The biggest companies report major financial implications
• The opportunities are bigger than the risks
• Differences are striking across countries and regions
• The finance sector is seeing more implications than the real economy
• The wins far outweigh the costs of management
• Companies and investors need to learn lessons from the power sector