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Business Adaptation to Climate Change A systematic review of the body of research Prepared by: David Nitkin Ryan Foster Jacqueline Medalye.

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Presentation on theme: "Business Adaptation to Climate Change A systematic review of the body of research Prepared by: David Nitkin Ryan Foster Jacqueline Medalye."— Presentation transcript:

1 Business Adaptation to Climate Change A systematic review of the body of research Prepared by: David Nitkin Ryan Foster Jacqueline Medalye

2 Table of Contents SectionPages Study background3-8 State and shape of the literature9-17 Key findings18-23 Risks, opportunities, and barriers24-34 Leaders and laggards35-38 What you can do39-48 Future work49-53 Sector strategies54-80

3 STUDY BACKGROUND

4 Study Background: Guiding questions Are businesses incorporating climate change into their business models and strategies? If so, how? And are do differences exist across business units, in terms of risks, opportunities, processes, and outcomes? Are certain sectors ahead of others? If yes, what drivers account for these differences, and what lessons can leading industries offer the laggards? What tools and processes do businesses use to evaluate the opportunities to be gained from adapting to climate change? Are there any examples of businesses creating a competitive advantage by building adaptive capacity?

5 Study Background: Methods Systematic review (i.e., comprehensive, transparent search) of academic, practical, and teaching related sites (e.g. ABI Inform, Google, ECCH case studies) The universe of 2,455 eligible studies were culled to 201, based on relevance and uniqueness The 201 studies were rated and categorized by 2 PhD students Questions –What do we know? –What dont we know? –What are the stakes? –How to be a leader?

6 Study Background: Definition of Adaptation Adjustments in natural or human systems in response to actual or expected climate stimuli and their effects or impacts which moderates harm or exploits opportunities -IPCC Third Assessment Report

7 MITIGATION Cut GHG emissions Long term Global Causes focus Regulation Compliance themes Public good ADAPTATION Change practices Short term Regional/ local Consequences focus Voluntary Leadership language Business, individual Study Background: Adaptation vs. Mitigation

8 MITIGATION Indirect benefits to actor All systems Benefits not seen for decades Effectiveness more certain Sometimes ancillary benefits Monitoring relatively easy ADAPTATION Direct benefits to actor Selected systems Benefits seen more immediately Effectiveness less certain Mostly ancillary benefits Monitoring more difficult Study Background: Adaptation vs. Mitigation

9 STATE AND SHAPE OF LITERATURE

10 Literature: Status Search key words 2,400 candidates Sensitivity, vulnerability, resilience, adaptative capacity, risk, opportunity Identified and reviewed 201 studies New language (climate proofing, climate resiliency, processes of co-adaptation)

11 Literature: Types Academic –Journal articles Government, International Organizations –Educational organizations –Climate change leadership councils (Pew, Tyndall) Practitioner Literature –Insurance, reinsurance, finance company reports –Carbon Disclosure Project; Industry Referrals

12 Literature: Number of studies by source type Journal, Peer Review 66Consortium/ NGO/ Think Tank28 Journal, Secondary 23Newspaper, Magazine25 Industry Report 7Referred Study17 Government report 7Web-Site10 Internal organization 5Other13

13 Literature: Findings by Sector (sectors with more than 5 studies) Insurance 35Finance 7 Agriculture 23Mining 5 Tourism & Recreation 20Forestry 4 Energy 13Oil & Gas 4 Water 12Infrastructure 3 Construction 10Transport 3

14 Literature: Findings by Sector (sectors with fewer than 5 studies) Food & beverage 3Chemicals 1 Electricity 2Manufacturing 1 Airlines 2Fishing 0 Information technology 2Retail 0 Automotive 2Real estate 0 Coal 1Media 0

15 Literature: Content Analysis Topic# studies Case studies, lessons learned32 Tools for business18 Risk frameworks screening9 Scenarios5 Decision Trees2

16 Literature: Focus on Academic Literature Sector level Approach adaptative cognition and action Closely linked to IPCC assessments Avoid definitions in abstract in favour of operationalizing the concept through –Theoretical construct –Empirical studies

17 Literature: Limitations of the Literature English language only (there are other language sources, notably German) Available on web Reports, case studies and articles that are web accessible Articles or web sites, not books or book chapters

18 KEY FINDINGS

19 Findings: Literature We are in early stage of early adapter literature: citations in last ten years Not many sectors have heavy coverage (more than 10 case studies) in literature Not many companies have a well told story in literature on adaptation Some adaptation literature is really adaptation to mitigation challenges

20 Findings: Management Important to add climate change risk and vulnerability analysis to decision-making Place to start is to define risk because climate change has many indirect Rationale based on traditional economics: save money, reduce risk, increase energy efficiency, minimize waste

21 Findings: Action One size or answer doesnt fit all Whats right for one company may not readily work for another (management, geography, business strategy) Not all businesses need to take action now, but most need to ensure decision-making includes a good vulnerability analysis (property damage, business disruption)

22 Findings: Value of Literature Possibilities of collaboration Organizational adaptation is individual and direct response Mitigation not enough: curb GHGs too late to prevent significant warming Some businesses, managers confuse weather (daily) and climate (long term)

23 Findings: Climate Change Requires diligence in looking not only at extreme events (flooding, hurricanes, drought) but also at –greater intensity of extremism –Significant uncertainties May lead to technical change for some sectors and not others When it does, it can either enhance or badly hurt (destroy) a company

24 RISKS, OPPORTUNITIES & BARRIERS

25 Risks & Opportunities: Landscape Risks are tangible and real –Canada highest country risk –Africa highest vulnerability –Mitigation may not be enough Opportunities are dramatic –Prosper not just survive –Positive cost-benefits

26 Risks & Opportunities: Types of Climate Change Risk MarketChanging consumer behaviour OperationsIncreasing operational, infrastructure costs ReputationBeing perceived as a laggard CounterpartyBankrupted suppliers Political/LegalNew regulations, lawsuits Business/ Competitive Uncertain costs, deferred decisions

27 Risks & Opportunities: Scientific Status Climate Change Scientific community has accepted that (a) climate change is happening; (b) that it is largely man-made; and (c) it will have significant effects (IPCC 2007, Stern 2006, Source 178) Increase risk drought, desertification, melting ice, flooding, intense hurricane activity

28 Risks & Opportunities: Opportunities The business sourced literature puts an especial emphasis on business opportunities Mitigation and adaptation are co-dependent but different contexts of climate change Actions involve shorter term adaptation (decreasing unavoidable damages) together with longer term mitigation can reduce risk

29 Risks & Opportunities: Forms of Adaptation Bearing the cost Preventing losses Sharing or spreading losses through insurance Changing the activity (for example, making ski resorts four season facilities) Changing the location of activities Enhancing the adaptive capacity of ecosystems to be more resilient. Source: Natural Resources Canada

30 Risks & Opportunities: Types of Adaptation Intent: timing relative to climate change (proactive, reactive) Temporal (short-term, long-term) Spatial (local, regional)

31 Risks & Opportunities: Barriers to Adaptation Lack vision Lack regulation Lack leadership Lack long term sector specific climate change data Poor pricing certain resources (water)

32 Risks & Opportunities: Findings on Vulnerability (1) Degree to which system is susceptible to and unable to cope with adverse effects of climate change Three factors affect vulnerability: –Nature of climate change to which exposed –Climate sensitivity of system –Capacity of system to adapt (IPPCC, p 21)

33 Risks & Opportunities: Findings on Vulnerability (2) Businesses likely affected by –Climate change itself –Exposures: regulatory, physical, competitive and reputational While climate change may well be a slow-moving force, relative to terrorism or hurricane, asset prices will on occasion move sharply when –new evidence reaches the market –policies are changed. Source: Lehman Brothers

34 Risks & Opportunities: Time Scales and Forecast Short: 3-12 months, typical biz, long range hurricane; info on coming season, year Medium: 5-10 yrs, longest biz can consider Long: 10-100 yrs; pension fund, nuclear generation or waste; limited climate data Source: Med Office Consult

35 LEADERS AND LAGGARDS

36 Leaders and Laggards: High Resources Dependence High Level of Coverage Moderate Level of Coverage Low Case Study Coverage AgricultureFishingChemicals EnergyForestryElectronics TransportIndustrial productsPharmaceuticals

37 Leaders and Laggards: Long Planning Horizons High Level of Coverage Moderate Level of Coverage Low Case Study Coverage EnergyAutomotiveReal estate TransportHealthWaste-Nuclear Mining

38 Leaders and Laggards: Already Affected by Climate High Level of Coverage Moderate Level of Coverage Low Case Study Coverage AgricultureFishingFood and beverage Tourism & Recreation ForestryPharmaceuticals InsuranceHealthReal estate

39 WHAT YOU CAN DO

40 What You Can Do: Strategies (1) Rethink business strategy: look into pure adaptation Prepare for the worst: contingency planning Cut green exposure/taxes; really mitigation Determine if there is any/no risk Develop climate resilience strategy with co- dependent mitigation, adaptation actions

41 What you can do: Strategies (2) ManageBear the cost TransferShare or spread losses through insurance AvoidPrevent losses AdjustChange nature activities, business AdaptEnhance adaptive capacity AnticipateInvest in acquiring better info

42 Adapt Building resilience Decreasing vulnerability Risk + opportunity = Adapt initiative What you can do: Adaptation Pyramid

43 What you can do: Lessons from Insurance Pricing and capital markets are deficient and lacking Extreme windstorm events will increase in particular with major impact on businesses and insurers Climate change will have great impact on asset values: more important to price risk accordingly Not addressing these issues will bring lawsuits from shareholders, investors and clients

44 UNEP: critical to adopt vigorous adaptation measures even as we strive to cut emissions because even with aggressive mitigation –cant avoid further warming –benefits of mitigation not seen before 2040 –oceans at least 0.6 degrees warmer due to inertia, whatever we do Key is to realize triple dividend –Need integrate and/or synergize sustainable development, risk management and adaptation. –This will integrate adaptation policies with sustainable development policies and disaster management. What You Can Do: Why Mitigation is Not Enough

45 What you can do: The wait-and-see option Wait See Approach Predominates North American Task Force FI, UNDP study of costs of waiting by time periods Wait and see is folly as issue is inescapable carbon footprint responsibilities: its the market curve, not the regulatory curve; its a business imperative, not an environmental one

46 What you can do: Proactive and Reactive Matrix Monitor Follow Lead ReactAct Wait for govt regulations Adapt Do risk analysis

47 What you can do: Collaborations (1) Industry collaborations –Insurance Academic/industry centres –Pew Centre –Tyndall Centre –Intergovernmental Panel on Climate Change

48 What you can do: Collaborations (2) Institutional networks or shared action-study mechanisms –Carbon Disclosure Project –Equator Principles –UNEP Financial Initiative –CERES –Investor Network on Climate Risk (INCR) –Institutional Investors Group on Climate Change

49 FUTURE WORK

50 Gaps in Knowledge: Literature Lack of consensus surrounding meaning of business adaptation early literature: Not often literature address risks, opportunities and adaptation at firm level Rarely reveal insights not only of actions taken and why but also what action alternatives not taken, or why

51 Gaps in Knowledge: Decision Making Uncertainty re: statistically significant variations –climate change risk by region –Perceptions of climate change risk Actual risk exposure for each sector by country Lack empirical data carbon emissions/risk measure for each plant, office Lack transparency firm level opportunities analysis

52 Gaps in Knowledge: Meteorology Near absence projections beyond 2012 Weather and climate info needed across a range of time scales Need know impacts climate change on water, weather, food, health and ecosystems at temperature increases 1 to 5 degrees

53 Gaps in Knowledge: Future Research Agenda Research collaboration –Industry associations –Multi-stakeholder networks –Academic-practitioner collaborations Assess efficacy various decision-making models Climate change scenarios –Disaggregate, sectoral

54 SECTOR STRATEGIES

55 Sector Strategies: Agriculture (1) ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Drought and flood resistant seeds New heat-tolerant goats Invest in women as seed keepers Irrigation, drip systems New heartier crop strains Exterminate cattle ticks Cold tolerant plant species On-farm genetic diversity banks Water conservation Challenge: drought in Africa

56 Sector Strategies: Agriculture (2) ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY New irrigation trading rights Biodiversity conservation Adopt plumbing fixtures Fertilize oceans with iron (reduce CO2) Revegetation for carbon sequestration Grow more resilient crops Use biofuelsImprove rangeland management Relocate activities Challenge : increased incidence weather extremes

57 Sector Strategies: Automotive Sector ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Set emission targetsDesign, use more carbon efficient raw materials Design lower emission products Build hybrids, more fuel efficient vehicles Measure carbon footprint (total and plant basis) Assess which types adaptation will increase GHG

58 Sector Strategies: Building and Construction (1) ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Redesign roofs and windows New product, materials, markets Flood prevention equipment Modular systemsInvest in better water treatment Watertight storage Design for safer living Larger drain pipesMeasure carbon footprint Challenge: high tides and storm surges

59 Sector Strategies: Building and Construction (2) ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Redesign roofs and windows Increase use local power supply Better water storage Modular systemsPrefabricationMove offices Better emergency planning Better drainage (material, sewers) Improve insurance coverage Challenge: droughts, less water

60 Sector Strategies: Chemicals ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY New agricultural, health products No till farming herbicides Exit some businesses based on carbon emission grounds Assess, invest in biotechnology Use less carbon intensive fuels Better insulation, energy efficiency Reuse heat from manufacturing

61 Sector Strategies: Electric Utilities ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Catastrophic event bonds Reduce water for cooling Reduce air travel Zero air and water emission plants Reconfigure data centre Reduce carbon emissions through supply chain Reuse heat to make electricity

62 Sector Strategies: Energy (1) ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Water acquisition strategy Contingency planning Cut carbon exposure New exploration fields, locations Low impact vehiclesReport carbon emissions Set CO 2 output targets Drill shipsDeep injection water to recover oil Challenge: lower water levels, less water

63 Sector Strategies: Energy (2) ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Diversify location critical functions Pollution to reflect sunlight Run wires into stations at roof level Reflect sunlight back into space More generation from renewables Recycle CO2 into fuel (hydrogen) Target outage reduction timing Tougher anchor platform specs Relocate vulnerable operations Challenge: extreme events, melting permafrost

64 Sector Strategies: Finance ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Facilitate emission trading markets Catastrophic events bonds Measure carbon footprint Invest in clean power, renewables Weather derivativesEnergy efficient lighting, sensors Climate change investment fund Conservation throughout operation

65 Sector Strategies: Fisheries ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Fish farmingDiversify into other species Build better climate models Conservation Challenge: more severe floods, droughts, storms, spread of disease

66 Sector Strategies: Food and Tobacco ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Set water use targets Seed researchAbandon storage facilities in hot climates Invest in sustainable agriculture Investment in water management Measure carbon footprint Use more resistant seeds Educate supply chain

67 Sector Strategies: Forestry ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Plant climate resistant species Process dead treesCommunity reforestation New reforestation partner strategies Plant forests to sequester CO 2 Increase urban (waste) sources Convert wood damaged by pine beetle to biofuel Plant trees reduce urban heat islands

68 Sector Strategies: Health ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Invest in water treatment and storage Introduce climate resilient seeds, food varieties Increase mangrove swamps (hurricane protection) Better emergency management Social protectionDisaster responses foe epidemics Pest management

69 Sector Strategies: Industrial Products ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Rainforest skin: analyze carbon sequestration More sophisticated thermostats Telecom substitute for travel Set carbon footprint targets Design products made from carbon- efficient materials Reduce carbon emissions through supply chain Design products that consume less energy

70 Sector Strategies: Insurance (1) ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Public-private partnerships Association networking Manage supply chain expectations Finance low carbon technology Innovative financingInvest in GHG credits Weather derivativesClient risk educationEnhance design standards Challenge: increased incidence of catastrophic losses

71 Sector Strategies: Insurance (2) ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Reduce reliance on historical losses info New insurance products, underwriting procedures Increase attention water-related property damage Corporate responsibility partnerships Better predictive models of climate change Support carbon footprint disclosure Catastrophic event bonds Customized insurance policies Protect high value property in vulnerable areas Challenge: increased natural catastrophe exposure

72 Sector Strategies: Mining and Metals ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Sturdier buildings, machinery Close loop operations systems Increase maintenance of rail, roads Emphasize recycled sources for metals Catastrophic insurance coverage Water strategy Curtail building roads Challenge: more extreme weather events

73 Sector Strategies: Oil and Gas ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Invest in offshore, onshore wind turbines Multi-fuel (not just gas) stations Better climate change data, scenarios Invest in hydrogen fuel cells Shift to alternative energy Review drilling station risks Challenge: extreme weather events

74 Sector Strategies: Pharmaceuticals ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY New tropical disease products No till farming herbicides Trap factory fugitive emissions Low GHG emission production Water recycling

75 Sector Strategies: Real Estate ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY New forms of catastrophic insurance coverage Relocate new investment in less risky zones (No literature) Reposition asset portfolio

76 Sector Strategies: Retail ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Reduce power consumption Buy, use green/ renewable energy Buy local Location decision models include climate change Reduce emissions throughout supply chain Combine heat, power (use waste heat): on-site energy production Measure, target carbon footprint Purchase carbon offsets Energy efficient lighting, sensors

77 Sector Strategies: Tourism & Recreation ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Develop off-site activities Snow farming and fencing Ski slope design Invest in more indoor facilities All year round tourism Invest in artificial snow Create artificial beaches Develop higher terrains Flexible ticket pricing

78 Sector Strategies: Transport (1) ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Year-round roadsIce class vesselsApply higher emission standards Scenarios re: marine, land transport systems Climate researchMaintenance and safety standards Strategic marine services Water treatmentRelocate railroads to new growing areas

79 Sector Strategies: Transport (2) ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY NorthWest PassageThermosyphonsImprove insurance coverage Eject CO 2 from atmosphere at poles Water tight storageImprove supply chain management Move offices Challenge: change in permafrost, sea and lake ice, and snow cover

80 Sector Strategies: Water Utilities ADAPTATION INITIATIVE BUILD RESILIENCE DECREASE VULNERABILITY Promote conservation Catastrophic event bonds Reduce water for cooling Better risk forecasts data

81 More resources on climate change from nbs.net Reports from this studyReports Other resources on climate changeOther resources


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