As the weather becomes more unpredictable, big business is paying the price. A new report finds that companies are increasingly talking about how climate change impacts their bottom line, with weather and climate more common topics of discussion in the earnings calls of S&P 500 companies than “oil”, “the dollar”, or even “Trump”.
The report also makes it clear that the financial impacts of climate change are starting to become apparent for big companies.
“With climate change and severe weather events increasingly making headlines, lenders and institutional investors are becoming more interested in how these events are hitting the bottom lines of companies around the world,” reads the S&P Global Ratings report released Tuesday.
According to the report, jointly conducted by S&P 500 and climate risk management specialist Resilience Economics, 73 (primarily American) companies on S&P 500 publicly disclosed an effect on earnings from weather events for the 2017 financial year. Of those, only 18 actually quantified the effects—an average six percent impact in earnings, which may sound small but it’s not nothing.
“In S&P Global Ratings’ view, the effect of climate risk and severe weather events on corporate earnings is meaningful,” the report states. “If left unmitigated, the financial impact could increase over time as climate change makes disruptive weather events more frequent and severe.”
Companies have to perform a complicated calculus to understand the financial impact of weather events, which can affect wide-ranging aspects of their business. For example, extreme rainfall could cause mine floods or reduced mine access for a mining company, while unseasonably warm weather could mean reduced sales of summer clothing for a retail company.
According to S&P, more companies are expected to report on climate issues as their effects on overall cash flow become more visible.
Top companies are aware of this. In fact, CEOs of publically-traded companies bring up “weather” and “climate” more than they do about “Trump”, “oil”, “the dollar”, or “recession,” according to S&P’s analysis of ten years of the credit agency’s earning call transcripts.
The report adds a compelling layer of evidence to motivate what we’ve already seen. Although their words are sometimes more impressive than their actions, large companies are starting to fill the vacuum the U.S. has left as it receded from the international stage on climate. Increasingly, investors are seeing fossil fuels as bad business.
The fact that the world’s financial elite are waking up to climate change underscores a dire reality: If left unchecked, rising temperatures could wreak havoc on a wide cross-section of human enterprises.
Let’s hope these business leaders put their money where their mouths are.