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Adapting for economic growth and prosperity

 

Businesses in the capital have an important opportunity during London Climate Action Week, which starts on 1 July, to learn more about how to prosper in a changing climate. The week will include two events on 3 July at City Hall co-organised by the London Climate Change Partnership which will explore the link between economic growth, business and climate change adaptation.

Although the UK’s legislation was strengthened this week to reduce our annual emissions of greenhouse gases to zero by 2050, the consequences of climate change will continue to worsen over the next few decades as the atmosphere, oceans and land respond to levels of greenhouse gases not experienced on Earth for millions of years.

The UK is already becoming warmer and wetter because of climate change. Met Office research shows that the frequency of some extreme weather–mainly high temperatures and heavy rainfall events–is increasing.

The UK’s 10 warmest years have all occurred since 2002 and its average annual temperature is about 1 Celsius degree higher than it was during the 1970s. Last summer was the second warmest on record, and scientists have calculated that climate change made it 30 times more likely to happen.

A warmer atmosphere can hold more water, which means heavier rainfall, and a potentially higher risk of river and surface water flooding. Six of the seven wettest years on record for the UK have occurred since 2000.

Dense and heavily built-up cities like London are even more exposed to many of these risks. Roads and buildings absorb more sunlight and radiate more heat than the surrounding countryside, creating an urban heat island which can amplify temperatures, particularly during hot weather.

Cities with lots of impermeable surfaces are prone to flash flooding during heavy rainfall, particularly if drainage systems are inadequate or poorly maintained.

London is also in the driest part of the UK, and only ever 18 months away from drought. The cost of an extreme drought in London is estimated at £330 million per day.

Climate change is also causing sea level rise, which is increasing the risk of coastal flooding, and tidal flooding along estuaries. High water levels in the Thames Estuary are not only rising, but the rise is accelerating.

So companies of all sizes in London need to adapt to the direct and indirect effects of our warming world.

In its ‘UK Climate Change Risk Assessment 2017: Synthesis Report’, the UK Committee on Climate Change warned: “Recent empirical evidence highlights the growing impact that climate risks have on business and industry in the UK. Flooding and extreme weather events which damage assets and disrupt business operations pose the greatest risk now and in the future.”

Companies can be affected directly by extreme weather events, or indirectly through, for instance disruption to supply chains or threats to the safety of staff, leading to lost business.

Companies that assume that the responsibility for managing these risks lies entirely with central and local government are likely to expose themselves to unexpected costs and losses. Enlightened businesses will assess their risks and take action to protect themselves.

For instance, smart businesses will be aware of whether their premises face the possibility of flooding from nearby waterways or heavy rainfall, and how to manage the risks. The Environment Agency has flood maps to help firms make assessments of the threat. Risk-aware businesses will also consider what measures they can take themselves, including through insurance policies and business continuity plans.

A critical task for companies that own or have long-term leases on their properties is to make sure they are adapted to the climate of the future as well as the climate of the present. A building that rarely overheats today may become unbearably hot in future summers, requiring expensive retrofitting and higher energy costs for air conditioning.

Companies making long-term decisions and major investments can undertake simple risk screening to check whether projects require a more in-depth assessment of risk.

Perhaps the biggest challenge for large businesses with long decision time horizons is managing the uncertainty about our changing climate. While scientists are building their understanding about the direction of trends in extreme weather, they are often less certain about the pace or extent of change that could occur in the future, not least because we do not yet know how successfully the world will limit and  reduce greenhouse gas emissions. But this should not stop businesses from taking action.

A crucial tool for helping to deal with this uncertainty is scenario analysis which allows multiple plausible outcomes of climate change to be considered. Such analysis can avoid vulnerabilities being locked in by failing to consider a full range of potential impacts.

Climate change scenario analysis requires specialist skills, and if a company does not possess such expertise in-house, there are consultancies that offer such services. Investors, lenders, insurers and regulators increasingly expect large companies at least to carry out scenario analysis, as recommended by the Taskforce on Climate-related Financial Disclosures.

The uncertainties about the future impacts also mean that businesses need to be careful about when and how to make decisions that affect their future resilience. ‘No regrets’ actions allow the flexibility to adjust as new information about climate change impacts becomes available.

Businesses should also engage with local and national policy-makers to ensure that critical infrastructure is resilient to the changing local climate. Companies that escape the direct impacts can still be badly affected if employees and customers are stranded by public transport networks that are crippled by severe weather.

Businesses heavily dependent on overseas supply chains or markets will also need to consider how climate change in other countries will affect their own risk.

Many big companies already have the capabilities to assess and manage the risks of climate change. However this is far more challenging for small and medium-sized firms, which need stronger support for climate change adaptation and resilience from organisations such as the British Business Bank.

Our events next week will explore the business and economic case for climate change adaptation. They will showcase examples of how London and other cities are combining growth and resilience.

The UK is a global leader in tackling greenhouse gas emissions. It needs also to be a leader in climate change resilience if its companies are to prosper and its economy is to grow.

Bob Ward is deputy chair of the London Climate Change Partnership and policy and communications director at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science. Kristen Guida is Manager of the London Climate Change Partnership.

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