The Cost of Inaction 2024

Using a scenario-based framework, a major construction player found that one of its most significant risks was the potential high cost and low availability of green construction materials. The company assessed its exposure towards risk by translating it into measurable metrics under different transition scenarios. One identified risk was high cost/low availability of green construction materials. The company measured its vulnerability to these risks by using related CO2e emissions as a proxy. For the green materials risk, this was tied to Scope 3 value chain emissions abated through green materials adoption. The company then derived synthetic risk scores based on the exposure and vulnerability assessments in order to compare risks. It found that the cost and availability of green construction materials was among the most material risks. Finally, the company estimated the economic impact of the most significant risks in order to assess the magnitude of transition risks and projected that the higher cost and lower availability of green construction materials could reduce EBITDA by about 1.5% by 2030, considering all known transition factors. Source: BCG.CASE STUDY 3 Quantification of transition risks in the construction supply chain Identify climate-related opportunities By thoroughly assessing and efficiently managing climate risks, companies can position themselves for opportunities in both severe warming and faster transition scenarios. Climate risks reveal opportunities to create more efficient, resilient and cost- effective properties. By addressing those, we aim to enhance the value and usability of buildings. Guy Grainger, Global Head of Sustainability & ESG Services, JLLImproving internal operations, through increased resilience, resource efficiency and an optimized energy mix, can set a company apart from its peers. Navigating the transition skilfully builds muscle for offering new green products and services and expanding into new markets. On top of transition finance to support the decarbonization of our clients, adaptation financing represents a cost-saving and revenue-increase potential. Insuring against physical risks also presents a significant business opportunity. Javier Rodríguez Soler, Global Head of Sustainability and Corporate & Investment Banking, BBVAWe are working to quantify transition risks using scenarios including those of IEA and NGFS to understand the impact of carbon pricing and regulatory changes on our operations. We recognize that transformation risks and opportunities will have significant impacts, including on our clean ammonia strategy. Bernhard Stormyr, Vice President, Sustainability Governance, Yara InternationalAs with physical risks, transition risks are best identified using scenario-based analysis. One source of scenarios is the Network for Greening the Financial System (NGFS),61 which regularly updates its analysis of how climate policy and technology trends could shape these risks in different futures.Evaluate transition risks The Cost of Inaction: A CEO Guide to Navigating Climate Risk 40