Supporting the words of BlackRock’s CEO Larry Fink “Climate risk equals investment risk”, the latest IPCC Workgroup II (WGII) report brings some affirmative insights about climate change on people and nature. And the window for action is narrowing.
In this second blog of our trilogy on IPCC, we present the climate risks for the urban and rural areas in Western Europe and highlight the business opportunities in the emerging market of climate adaptation. The report highlights the risks as well as the opportunities of climate adaptation, which involves adjusting to the consequences of climate change. It assesses the impacts, adaptation, and vulnerabilities related to climate change on nature and people around the globe. Many of the risks are already unavoidable regardless of the emission scenario achieved in the near future. In the next decade, companies will need to seize significant business opportunities that help turn the tide.
Risks
Urban environments will experience more heat stress, which will negatively affect people’s physical & mental health, the habitability of urban areas, and labour productivity among other impacts. River flooding and extreme events related to rising sea levels will damage properties and infrastructure, disrupt economic activities, cause social disruptions and even deaths. The recent damage caused by the river flood that hit Western Europe in July 2021 exemplifies this trend of negative climate change impacts on the urban environment. With increasing global warming levels, the costs of infrastructure maintenance and reconstruction will increase – especially for areas located near rivers and coasts.
Opportunities
Actions and investments in adaptation and mitigation projects that limit global warming to 1.5 Co or below, will substantially reduce projected losses and damages related to climate change. Urgent actions and investments will improve not only the position of the investor and the investment aligned to climate change goals in the short-term but also ensures the longevity of the investment.
More green spaces in urban areas will lead to more biodiversity, reduce air pollution, provide water storage and cooling in hot periods, thereby improving the quality of life. Not to mention the rise of seawater and the accompanying challenge of sustainable drainage, especially in the Netherlands for example. Mapping risk areas for flooding could prevent properties from becoming stranded assets. Therefore, climate mitigation and adaptation solutions should be the core focus in urban and rural planning.
Risks
The higher frequency and intensity of droughts will make water scarcer, especially in areas with sandy soils, like the province of Brabant in the Netherlands. Higher temperatures lead to a decline in biodiversity and related loss of (maritime) ecosystems. Continuous stress on rural area activities, for example, farming and agriculture, are exacerbated by climate change impacts. Think of water availability issues, heatwaves, floods, storms, unpredictable weather patterns, and more.
Opportunities
Inter-sectional adaptation measures can prevent current and future pressure on energy supply. For example, energy companies and homeowners investing in energy efficiency with (geo) thermal and ground source energy systems not only supply renewable heat for the user but also make it local and independent from any possible geopolitical changes. This acts as both a climate impact reduction measure as well as a beneficial move from a political and financial perspective. Another booming market is green infrastructure. Connecting European natural habitats will protect biodiversity and increase the resilience of ecosystems.
More and more aforementioned climate hazards will occur simultaneously and have compounded risk over every category, resulting in inter-sectorial, cross-regional impacts. If adaptation and mitigation are not done in an inter-sectoral manner with clearly outlined goals in mind, new risks, challenges can and will become apparent, further perpetuating climate change impacts.
Consultant, Sustainalize
Consultant, Sustainalize
The Platform on Sustainable Finance published the final report on Social Taxonomy. The Social Taxonomy will aid investors to make informed and consistent decisions and helps to direct resources toward socially responsible activities and companies.
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