How boards can use COVID-19 to proactively plan for climate change risk
Companies have long struggled to adequately prepare for disruptive risks — risks that can manifest suddenly with severe consequences. The COVID-19 pandemic has exposed the magnitude of global unpreparedness to contain and adapt to widespread public health and economic shocks.
Companies and their boards everywhere are focusing on how to evolve their enterprise risk management (ERM) systems to surface and plan for future disruptive risks. As they do so, it is critical they build in preparedness for how to handle the climate crisis, potentially the greatest risk of all.
Climate change is a systemic threat to financial markets
Investors view climate risks as business risks. A 2020 survey of 439 institutional investors that include pension and mutual funds, banks and insurers found that more than half already are integrating climate risk into their investment processes, and 91 percent expect climate risk to be financially material to their investments in five years.
In his 2020 letter to CEOs and boards of portfolio companies, BlackRock’s CEO Larry Fink announced that the firm would make investment decisions with environmental sustainability as a core goal since "the evidence on climate risk is compelling investors to reassess core assumptions about modern finance."
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