Just 1 in 10 UK businesses assessing climate risk as a priority, survey reveals
A survey of more than 500 businesses has revealed that while three-quarters are concerned about climate-related risks, just one in ten consider measuring and disclosing their climate-related risks a priority.
The research was conducted by London-based artificial intelligence (AI) firm Cervest, which polled firms across the UK’s largest sectors including finance, ICT, telecoms, the built environment, retail, manufacturing and hospitality and leisure.
Of the respondents, 75% said they envisioned present or future threats to their business as a result of the climate crisis, while 60% believe they will need to reframe their risk calculations in light of environmental issues. Respondents acknowledged that risks could be physical (i.e. stranded assets), transitional (i.e. the costs of investing in new technologies) and reputational.
But only 10% said their business has either already measured and publicly disclosed their climate-related risks, or is planning to do so in the short-term.
When Cervest asked respondents to detail the major barriers their business faces in accelerating climate risk assessment and disclosure, 72% said their board was framing climate change as a political issue and would like stronger policy supports for not only disclosure, but mitigation and adaptation. More than four in five firms said current government support for the net-zero transition is insufficient, with a similar proportion saying that they would welcome stricter climate regulation.
High assessment costs, a lack of high-level understanding of climate risk and an inability to conduct in-house calculations, whether due to poor skills or a lack of time or resources, were also frequently cited as challenges.
“Our findings show that businesses are unclear of the risks that climate presents to them and the potential price tag that goes with that,” Cervest chief executive Iggy Bassi said.
“Bearing the brunt of this current pandemic will be an immediate focus for many companies, but the long-term cost of ignoring climate change threatens to be far more severe than the expense of putting strategies in place today."
Voluntary or mandatory?
With the Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations having surpassed 1,000 supporters earlier this year, calls are mounting for Governments to mandate climate risk disclosure in line with this framework.
Despite vocal support for the framework, research has repeatedly highlighted the gap between stated ambitions and actions. A 2020 study from CDSB found that 78% of European corporates are failing to report climate-related risks to the degree expected by their key investors.
The UK Government has said it will mandate TCFD-aligned disclosures for certain large organisations within three years, under its Green Finance Strategy. But with the Brexit transition period’s end-date now in sight and with the mammoth task of shaping the nation’s post-Covid-19 recovery at the feet of policymakers, some are urging more clarity to help businesses prepare, alongside stricter requirements on which organisations are required to disclose.
Moreover, the Financial Reporting Council (FRC) recently launched a major review into the quality of how companies and auditors are reporting on climate change impacts and risks.
According to WWF, the UK economy will take a £16bn hit by 2050 as a result of the twin nature and climate crises.
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