Businesses face many physical and transition risks from climate change, but also many opportunities. Through efficiency, innovation, and growth, businesses can take measures to ensure they thrive through their climate transformations.
The Task Force on Climate-related Financial Disclosures (TCFD), a globally recognized framework for climate disclosures, can be used to help companies identify and capitalize on climate change opportunities. The framework identifies various actions that companies can take to ease their climate journeys and to profit along the way.
In this blog, we explain and provide examples for each of the TCFD’s outlined climate-related opportunities.
Business opportunities in climate change
One fundamental way for firms to mitigate climate impacts and reduce operating costs is by improving their efficiency across production and distribution processes, buildings, machinery/appliances, and transport/mobility. Measures such as recycling, reducing water usage and consumption, and improving buildings’ energy efficiency can lead to significant cost reductions. They can even lead to increased production capacity, resulting in increased revenues.
In 2020, Kilroy Realty installed irrigation systems with smart meters in nine of its buildings, which sense the moisture level in the soil and only water the plants in these buildings when needed. The firm also installed low-flow toilets and other plumbing fixtures as well as a captured rainwater system for flushing toilets in certain buildings. Kilroy estimates that the irrigation system alone will save over 7.5 million gallons of water annually while the rainwater system will save 288,000 gallons of water annually. Financial savings from water usage can be reinvested in the company’s growth.
Using clean energy
Switching to clean energy sources is not only good for the climate but can also insulate businesses from transition risks. For example, switching should reduce a business’ exposure to future fossil fuel price increases. Firms that switch may also avoid potential future costs related to emissions, like carbon taxes. Furthermore, switchers may reap reputational benefits, which could lead to more demand for their services.
Investing in clean energy is another one of several business opportunities in climate change that could yield financial and reputational benefits. In 2021, US bank Citi financed climate technologies that could expedite the low-carbon transition, including bioenergy; carbon capture, utilization, and sequestration; direct air carbon capture; hydrogen; renewable energy; and renewable natural gas. Investing in these sectors could generate outsized returns as the energy transition takes hold. By making itself a go-to option for clean energy clients, Citi is also burnishing its reputation as a champion of the low-carbon transition.
Investing in climate-smart products and services
Today, a heightened awareness of climate change has given rise to many climate-smart products and services. Organizations that innovate to make the most of these new developments can gain a competitive advantage and capitalize on shifting consumer and producer preferences. These climate-smart options include low-carbon consumer goods — like clothing, footwear, and food — as well as financial products, like climate adaptation and insurance risk solutions and ‘green’ mortgages.
For example, NatWest has launched green mortgage and remortgage products that offer customers a lower interest rate if they purchase, port, or remortgage an energy-efficient property. As of end-2021, the bank had sold £728 million (USD$965 million) worth of green mortgages.
Accessing new climate-related markets
Businesses can increase revenues by accessing new and emerging climate-related markets. They can do so through partnerships with governments, development banks, small-scale local entrepreneurs, and community groups working to shift to a low-carbon economy. Firms can diversify their revenue streams by tapping new climate change opportunities in these markets. Businesses which take a proactive approach will ultimately be in a better position to capitalize on the low-carbon economy.
The EU, for instance, has launched the European Green Deal Investment Plan which will mobilize €1 trillion (US $1.1 trillion) to finance the transition to a low-carbon economy between 2021 and 2030. Firms that support the plan could benefit from this financing. The utilities firm EDP is one such business. It intends to leverage its existing expertise, operational capabilities, and competitive cost base to play a leading role in helping an array of different countries (and markets) meet their climate goals.
Demonstrating value through resilience
Businesses can protect their enterprise value through resilience planning. This includes measures to ensure their supply chains are reliable and can keep functioning under various conditions created by climate change. Extreme weather events, such as hurricanes and tornadoes, as well as changing climate patterns, such as temperature fluctuations, affect the viability of all businesses. Investing in resilience allows companies to operate and thrive in the face of climate-related impacts.
In 2017, utilities firm AES and manufacturing company Siemens joined forces to create Fluence, a global energy storage technology and services provider. With this venture, which allows AES to incorporate energy storage across its electric power network, the firm hopes to increase its climate resilience. This applies both to regular peaks and troughs in energy usage, and also to acute and chronic climate-related physical events. The move will help the firm to operate through the worst impacts of climate change, increasing AES’s efficiency and, in turn, its revenues.
Manifest Climate can help identify business opportunities in climate change
Are you curious about how your business can thrive through climate change? We can help. Our climate intelligence SaaS platform combines cutting-edge technology, an industry-leading database of climate disclosures, and ongoing support from climate experts to deliver best-in-class climate guidance at scale. Let us guide you on your path to navigating climate change with success. Request a demo today.