Although the corona crisis will continue to absorb a lot of attention in the coming months, climate change is still ahead of us – with possibly far more serious and long-term impacts. This makes it all the more sobering that three out of four CEOs and CFOs of the world's largest corporations do not see their companies fully prepared for the financial impacts of climate change. This is shown by a survey recently conducted by the industrial insurance company FM Global, conducted by Engine Insights.
The survey was addressed to several hundred CEOs and CFOs of companies with sales of at least US$1 billion and included results from North America, Europe, Asia and the Asia-Pacific region. In Europe, companies from Germany, the United Kingdom, France, Italy, the Netherlands, Denmark, Finland, Iceland, Norway, Sweden, Andorra, Portugal and Spain were involved.
The survey is based on a report by the World Economic Forum published in early 2020, shortly before the outbreak of the Covid-19 pandemic. This predicted extreme weather events and the failure of measures to mitigate climate change as the main risks of the next ten years. In addition, the current monitoring report of the German Federal Environment Agency shows that risk awareness in Germany is still low despite the extreme weather events that have occurred in recent years.
Outcome of the Survey
82 percent of those surveyed believe that their companies have little or no control over the negative impacts of climate risk. Among European respondents it was even 98 percent. Accordingly, two-thirds (66 percent) of all CEOs and CFOs stated that managing climate risk in their companies was not rated as a top priority compared to other business risks. In Europe this figure is 85 percent. Furthermore, 80 percent of all respondents (Europe: 81 percent) believe that the executive management should be held accountable for the negative financial impact of climate change on their company. At the same time, 66 percent of those surveyed (Europe: 65 percent) believe that the executive board should also be held accountable.
"The results are worrying, as threats from climatic disasters are increasing worldwide," comments Katherine Klosowski, Vice President Manager – Natural Hazards and Structures at FM Global, on the results of the survey. She continues: "The combination of a lack of preparation for natural disasters, the volatility of the financial markets and the current threat of an economic recession could not come at a worse time for many companies.”
"Fortunately, most climate-related losses can be prevented, and loss prevention can help preserve a company's value and resilience, especially during a pandemic," added Klosowski. "The challenge for many companies is to address this issue. Accurate analyses of past events and forecasts for the future have to be the basis for taking measures to prepare now for natural hazards and for defining responsibilities for this topic within companies".
The survey is based on an online survey conducted in February 2020 among 150 CEOs and 151 CFOs in North America, Europe and Asia-Pacific. The respondents run companies with sales of at least one billion US dollars in a variety of industries. A third of those surveyed manage companies with sales of 5 billion US dollars or more. Engine Insights, a provider of market research & analytics, is responsible for conducting the survey.