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Natural Environment

Measuring the financial impact of climate change: You Asked Us

Last month, over 300 people joined our webinar, sponsored by PwC, on the future financial impact of climate change. Here, our expert panel answers some of those questions submitted by attendees that they were unable to cover during the session.

World Built Environment Forum
11 June 2020

Introducing our expert panel:

Dr. Nicole Röttmer, Climate Lead Europe, PwC Germany
Dr. Anne Michaels, Sustainable Finance Expert, PwC Germany
Fritz Fromageot, Real Estate Consultant, PwC Germany

 

How do you foresee the Covid-19 crisis impacting progress towards more sustainable development? Is it likely to slow, or even reverse, gains made in recent years?

The Covid-19 crisis is, at root, an environmental crisis. It has shown us how vulnerable our global economic system is to crises and how quickly the environment in which we live and do business can change. Building strategic resilience a priori to such sudden events could reduce their cost – something as we have seen in the field of natural disaster relief.

Numerous companies in the private sector have stated that Covid-19 poses no threat to their commitment to climate targets. Regulators have also promised economic relief programs that incentivise green development. Such facts are promising signs that the Covid-19 could actually accelerate the transition towards a low carbon economy.

Sustainability has long been considered a moral imperative for businesses; has it now become a commercial imperative too? Is there evidence that businesses with substandard sustainability processes are being punished in the marketplace?

In the long term, companies will increasingly be expected to show their working on the topic of sustainability and climate change to ensure their competitiveness. Frontrunners in many industries are already demonstrating the advantages of integrating sustainability and climate change into corporate strategies.

Conversely, there are multiple examples of companies that have been punished for taking insufficient action. One such example is the coal company Peabody, which faced prosecution by the U.S. Securities and Exchange Commission (SEC) for the insufficient disclosure of climate related risks. In doing so, they endangered their license to operate. Furthermore, they lost investors and their share price plummeted.

Measuring the financial impact of climate change: Risk and scenario analyses and to measuring climate-related financial impact

Buildings contribute roughly 30% of global anthropogenic CO2-emissions and will be crucial to achieving the goals set out in the Paris Agreement. The transition to a decarbonised built environment represents a generational challenge, abundant with opportunity and risk.

In this webinar, sponsored by PwC in Germany, we considered the financial implications of climate change and strategies for the decarbonisation of real estate portfolios. Panellists explained how they have developed tools for modelling various climate change scenarios and their potential commercial consequences.

Download the webinar presentation

How does the sustainability challenge differ between developed and developing economies? Do developing regions have an opportunity to “leapfrog” of developed regions due to a smaller stock of legacy buildings?

Developing countries have often been forced to trade off economic progress against ecological sustainability. Considering the reductions in emissions necessary to achieve global climate goals, the biggest challenge in the building sector lies within the upgrade of the existing building stock. Secondary to this will be setting ambitious standards for new construction.

By comparison to most developed countries, developing nations have fewer major projects and lower energy consumption per capita. Buildings also tend to have shorter lifespans. These factors might be to the advantage of countries in the developing world. Great gains can be made, if they avoid repeating the mistakes of more developed economies.

Developing nations have fewer major projects and lower energy consumption per capita. Great gains can be made, if these countries avoid repeating the mistakes of more developed economies.

If it is investors who are leading the discussion on sustainable projects, do you expect the value and range of green bonds to increase significantly over the coming years?

The total number of green bonds issued has been rising steadily for many years and this trend will continue to accelerate. In their market outlook, the Climate Bond Initiative projects growth in the green bond market of 30% in 2020. The International Capital Markets Association says this growth will be driven by improvements to sustainable finance regulatory frameworks. Indeed, several countries and regions have implemented, or will soon implement, taxonomies for environmentally sustainable business activities. With increased legal certainty on a global level, companies and financial institutions will be better able to confidently issue green bonds.