More and more companies are considering expenses related to climate adaptation

Research on climate change has mainly focused on prevention of its worsening. Moreover, but, as a new report from the Royal Bank of Canada published on Monday underlines, companies are also starting to think more about potential adaptation and preparation expenses in the face of the accumulation of disaster costs.

The report indicates that the costs of extreme weather phenomena and natural disasters have already reached US $ 368 billion ($ 505.2 billion) last year. Similarly, 14 % more than the long -term average since 2000, and that the year 2025 could match, or even exceed this total.

The trend should worsen, because, as the report indicates, an increase in average temperatures of 2.7 degrees is planned by 2100 according to current global policies and actions, while an optimistic scenario assesses it to 1.9 degrees.

Costs linked to the more more companies considering expenses increase in temperatures arouse increased attention to boards. Meanwhile, the report noting an increase in the mentions of climate change in the United States and Asia.

We also note that discussions on the impacts of extreme weather conditions during telephone conferences on results have reached new summits this yearsays Sara Mahaffy. However, director of research on global sustainable development strategies of the Royal Bank, in the report.

The mentions of the physical risk linked to climate change during telephone conferences on Canadian results certainly experienced an increase marked between the end of 2020. Moreover, a peak in the middle of last year, but the report shows that these mentions have decreased sharply in recent months.

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The discussions have been more numerous in sectors such as public services. insurance and industrial services, which could be the most affected by climate change, recalls Ms. Mahaffy.

Companies have not only mentioned larger financial impacts (risks). but also increased advantages for their products and services that help their more more companies considering expenses customers prepare and react to extreme weather events and natural disasters (opportunities).

The report indicates that, so far, it remains difficult to finance greater and longer -term adaptation efforts, which may include measures such as the burial of power lines and the construction of derivation channels, but that a study published this year has revealed that each dollar invested in adaptation and resilience generates more than $ 10 of profits over a decade.

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More more companies considering expenses

Invest in developing countries

In addition. public funding has so far financed around two -thirds of the expenses devoted to adaptation efforts, funding being particularly insufficient in developing countries. While the annual adaptation needs of low -income countries amount to US $ 387 billion ($ 531.3 billion) per year, international public financial flows reach only US $ 28 billion ($ 38.4 g CA) per year.

The importance of investing in developing countries lies in part in the possibility of building the future now, underlines more more companies considering expenses Ms. Mahaffy.

According to the World Bank. 70 % of the infrastructure that will exist in developing countries by 2050 remain to be built, which represents a great opportunity to integrate adaptation solutions from the start.

In addition to the need to increase spending, companies also seek other ways to adapt, such as the emission by insurers of sustainability -related covers that reward and encourage business resilience measures, and the increase in ESG debt (environmental, social and governance factors) including adaptation clauses.

Insurers also adapt by issuing more disaster obligations, which transfer the risk of insurers to investors who buy these obligations. The market in this category has increased by 7 % per year more more companies considering expenses since 2015 and is expected to exceed US $ 50 billion ($ 68.6 billion) this year, according to the report.

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The Royal Bank’s study indicates that many American companies could benefit from the evolution of trends. but it also highlights some Canadian companies.

The fertilizer giant Nutrients could more more companies considering expenses be well placed thanks to its products which help farmers manage their cultures. while the Satellite Satellite MDA Space could experience increased demand for weather forecasts and climate modeling.

Canadian companies in the waste management sector may also experience increased interest due to intervention needs in the event of a disaster. while engineering and construction companies could benefit from the need to build for the future.