How Will Climate Change Affect Your Wealth?

InfinisClimate change is “no longer a subject just for environmentalists”. That was the conclusion of a new report from Walmart (NYSE: WMT.US)-owned supermarket giant ASDA, which has been consulting with PwC on the potential danger that the changing environment poses to its business.

“It is already having an impact on businesses around the world and across all sectors,” the report stated, warning that 95% of its fresh produce is under threat by the global changes we are seeing.

And that’s not the only recent study warning of the dangers posed to business and economies. A new bipartisan report commissioned by a group of politicians, financiers and academics has warned that climate change could cost the USA alone hundreds of billions of dollars by the end of the century.

Over the next 25 years, annual property losses from hurricanes and storms could cost $35 billion, falling crop yields could leave farmers billions out of pocket and heatwaves could add up to $12 billion a year onto consumers’ energy bills.

That’s in the States, where major changes in the economy will inevitably affect the UK. But what about British business — is it more prepared for the changing climate? Can shareholders future-proof their investment by looking to companies with clear strategies for this changing world?

Meanwhile, in Britain…

Last year CDP, an international not-for-profit environmental group, worked with PwC to publish a report into how well British business is prepared for the international impacts of climate change.

It found that there has been a “seismic shift” in corporate awareness of the need to build resilience to climate change into growth. This was particularly true for the FTSE 100, which “show a much more sophisticated response to the threats and opportunities of climate change than FTSE 250 companies.”

That increased sophistication can be explained by the larger corporations’ international operations, which leave them more exposed to extreme weather events across the planet. For example, in 2011 the Thai floods wiped more than £1.6 billion off Lloyds of London’s books, and restricted the flow of some electronic goods into the UK.

Celine Herweijer, a partner at PwC, concluded that the globalisation of supply chains has “shortened the distance between headline disasters and our high streets”.

Over the next years and decades, consumers are going to be made more aware of the impact of climate change on the goods and services they expect. However, canny investors need to be assessing now what impact the environment could have on companies’ value, growth and even their survival.

Rising to the challenging temperatures

The American study concluded: “It is time for all American business leaders and investors to get in the game and rise to the challenge of addressing climate change.”

Perhaps it is also time for UK shareholders to increase the pressure on boards to protect their stake in business and the planet.

Where next for investors?

If you’ve already started to think about the long-term viability of your investments then great, you’re already ahead of the game.

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