The Cost of Inaction 2024

Companies must embed climate risks and opportunities into their overall strategies Climate risks and opportunities are no longer a peripheral concern; addressing them is a critical component of a company’s overall corporate strategy. Physical and transition risks and opportunities increasingly impact all aspects of corporate strategy. Our corporate philosophy is that sustaining our business for the long term requires us to protect the planet. Climate adaptation and mitigation are central to our strategy as we strive to reduce our environmental footprint and develop solutions that address the increasing impact of climate change on human health. Thomas Wozniewski, Global Manufacturing and Supply Officer, Takeda Pharmaceutical Company Risks are already materializing and accelerating, with potentially drastic impacts even in the short term Escalating climate events could ultimately make certain regions economically unsustainable as businesses struggle to cope with increasing physical risks. In California, rising wildfire risks have driven insurers to withdraw from high-risk areas, increasing costs for businesses. Similarly, regulatory actions can prompt fast sunsetting of so-far prosperous markets. In the European Union, for example, regulatory shifts such as the ban on internal combustion engine vehicles by 2035 are reshaping industries. Companies should not operate under the illusion of a continued business-as-usual approach Losses and damage to properties, operations and supply chains will seriously impact people’s and businesses’ wealth. This, in turn, may trigger substantial and fast changes in public opinion and more drastic climate-related policies are becoming conceivable. As time progresses, the current status quo is at greater risk of becoming outdated by either physical or transition impacts. The strategic approach to managing climate risk should be tailored to each company’s specific context. For industries that are reliant on long-term trends for their success and stability, proactive yet gradual business evolution can be the most sensible way forward. We incorporate climate risk assessments into our investment decisions to ensure long-term resilience and alignment with regulatory standards. Mark Konyn, Group Chief Investment Officer, AIA Group In more dynamic environments, companies may choose a flexible, adaptable positioning that allows them to seize opportunities and manage volatility. We are investing in diverse energy solutions like biomethane and hydrogen-ready turbines to navigate market fluctuations while positioning ourselves for future growth Pierre-Alain Graf, Chief Executive Officer, GETEC Companies with the scale and risk appetite to influence their market can also take decisive actions to shape market trends and lead the transition of their sector. Our strategy is to take leadership in decarbonizing shipping through an ecosystem-wide effort. Vincent Clerc, Chief Executive Officer, A. P . Moller-Maersk This guide is designed to position climate risks and opportunities as a central component of corporate strategy, elevating them as core CEO priorities. With both downsides and upsides at stake, climate risk should no longer be a compliance effort. It should sit at the heart of the leadership agenda, permeating all levels of organizations, so companies can safeguard their long-term resilience while unlocking value in new, sustainable markets (see Figure 21). 37 The Cost of Inaction: A CEO Guide to Navigating Climate Risk