S&P Global has unveiled “The Big Picture on Corporate Climate Risk” during 2020 Annual World Economic Forum in Davos.
The report includes S&P Global’s latest data and insights into the effects of climate change that pose important transition and physical risks for companies and investors through regulation, changing market dynamics, and technology, among other factors. This year’s presentation incorporated data from the Climate Change Physical Risk Analytics dataset from Trucost, part of S&P Global.
Dr. Richard Mattison, CEO of Trucost said, “Our data shows that heatwaves, wildfires, water stress, and hurricanes linked to rising average global temperatures represent the biggest physical risks for companies in the S&P 500. Furthermore, the location of assets is the key factor in determining the extent of these risks, outweighing the industry or sector in which a company operates.”
The findings revealed in S&P Global’s presentation show that companies in the S&P 500 Index own physical assets across 68 countries globally, while 60% of these entities (with a market capitalization of $18 trillion) hold assets that are at high risk of at least one type of climate-related physical event. Some sectors face heightened risks. For example, real estate investment trusts included in the S&P 500 own properties across the globe with significant concentrations in the US, UK, and Canada. Some of these properties are exposed to risk of inundation due to sea level rise, highlighting the need for effective planning and flood-mitigation measures to preserve asset values.
The presentation also highlights S&P Global Platts analysis that estimates adherence to historic trends would significantly increase energy-combustion CO2 emissions, while Platts’ most likely scenario—taking into account expected policy action and technological innovation—envisions emissions stabilizing after around 2025. But this is still far above needed targets; Platts’ 2-degree scenario would require global demand for fossil fuels to peak by 2025.