For years, experts have been cautioning against climate change. Many of the world’s biggest companies, from Silicon Valley tech firms to large European banks, are now preparing and bracing for how climate change could affect their bottom lines over the next five years. Increasing pressure from shareholders and regulators is also spurring companies into assessing the specific financial impacts they could face.
The CDP, formerly known as the Carbon Disclosure Project, is a U.K.-based nonprofit that asks companies to disclose their environmental impact. Companies also share the risks they believe climate change presents their businesses. In 2018, more than 7,000 companies submitted reports to CDP. 1,800 of these reports were from companies in the U.S.
According to CDP’s latest reports, companies and investors are realizing the dangers posed by climate change and extreme weather. As the planet warms, extreme weather could disrupt supply chains or create stricter climate regulations that could affect the value of coal, oil and gas investments. Operations could be disabled, driving away customers. It could be too hot for customers to enjoy vacations and theme parks, impacting big giants like Walt Disney Co.
“The numbers that we’re seeing are already huge, but it’s clear that this is just the tip of the iceberg,” said Bruno Sarda, the North America president for CDP.
How Businesses are Responding
Top investors are demanding that companies draw up environmental action plans to prepare for what might come. CEOs are also being asked to consider the risks caused by shifting consumer attitudes toward climate change and come up with a response.
“There is more investor pressure and more requirements on companies,” said John Drzik, president of global risk and digital at insurance broker Marsh. “They have been already facing pressure from consumers to make their products more climate friendly, but the amplified investor pressure is new.”
He went on to explain, “View of risks tends to be dominated by the short-term horizon, and climate is still seen as more long-term than geopolitical risk … but that report has started to pull more focus on it.”
Preparing for climate change and other unexpected expenses requires having a cash cushion. If your business needs extra working capital, consider securing a merchant loan with an alternative provider like First American Merchant. Make sure your business has the cash on hand it needs to continue to grow and thrive, no matter what changes might come your way.
Author Bio: As the FAM account executive, Michael Hollis has funded millions by using business funding merchant loan solutions. His experience and extensive knowledge of the industry has made him finance expert at First American Merchant.