Carbon emissions will be the principal contributor to the potentially catastrophic effect of climate change on the American economy. This is among the findings of a recently released study by Risky Business, a consortium of business leaders that calls on all companies to reduce climate risk through best business practices.
In this video, the consortium leaders discuss the challenge to business and our economy. Key findings of the study follow, along with Paladino’s recommendations on how companies can mitigate climate change risk and create business value.
Entitled Risky Business: The Economic Risks of Climate Change to the United States, the study predicts these most economically significant threats:
Damage to coastal property and infrastructure from rising sea levels and increased storm surge:
- If we continue on our current path, by 2050 between $66 billion and $106 billion worth of existing coastal property will likely be below sea level nationwide, with $238 billion to $507 billion worth of property below sea level by 2100.
- Property losses from sea level rise are concentrated in specific regions of the U.S., especially on the Southeast and Atlantic coasts, where the rise is higher and the losses far greater than the national average.
Climate-driven changes in agricultural production and energy demand:
- Extreme heat across the nation—especially in the Southwest, Southeast, and Upper Midwest—threatens labor productivity, human health, and energy systems.
- Demand for electricity for air conditioning will surge in those parts of the country facing the most extreme temperature increases, straining regional generation and transmission capacity and driving up costs for consumers.
Shifting agricultural patterns and crop yields, with likely gains for Northern farmers offset by losses in the Midwest and South:
- As extreme heat spreads across the middle of the country by the end of the century, some states in the Southeast, lower Great Plains, and Midwest risk up to a 50% to 70% loss in average annual crop yields (corn, soy, cotton, and wheat), absent agricultural adaptation.
- At the same time, warmer temperatures and carbon fertilization may improve agricultural productivity and crop yields in the upper Great Plains and other northern states.
- These shifts, however, still carry risks for the individual farming communities most vulnerable to projected climatic changes.
What Can Business Do?
We’ve written about climate-related challenges for business in previous posts. Our advice to real estate developers and owners then and now is to think more broadly about the impact of climate change. What are some key business strategies you can implement to both mitigate climate change risk and create business value?
Move Beyond Compliance
You may report your emissions to the Carbon Disclosure Project and also note climate-related risks in your 10-K, but don’t stop there. Use the data to prioritize initiatives for performance improvement by identifying areas that need attention and matter to your stakeholders: identify property ‘outliers’ that have higher consumption or emissions than the portfolio average, and perform business analyses including materiality assessments to determine which upgrades to include in the next year’s list of capital projects. Consider opportunities from a portfolio-wide basis rather than regionally, to increase your potential impact.
Revamp Your Green Team
If your sustainability committee is an ad-hoc, part-time group, it might be time for some organizational redesign to ensure that your low carbon strategies will be implemented effectively. Cross-office and cross-team coordination and communication is a common challenge, which will be more easily addressed if there is consistent, dedicated management. Provide sustainability team members with training in change management and influencer skills to promote successful implementation of messaging and initiatives. Ensure that sustainability is championed by the C-suite, and incorporated into business objectives at all levels of the organization; the ‘green team’ will be most effective when it is more than a stand-alone committee, and when it has backing from senior leadership.
Implement Materiality Principles
Revise your sustainability policies by focusing on climate change issues – both direct, such as weather events, and indirect, such as increasing resource prices – that matter to your investors, employees, tenants, and other stakeholders who add top and bottom line value to the company. Align strategies to your desired end results in these material impact areas. Develop a common language and metrics to communicate carbon, energy, and other sustainability goals internally using values that apply across the organization, but which allow for local adaptations. Connect these goals to performance objectives at all levels. Track your progress and celebrate successes.
Manage Your Data
You need to not only measure, but also to synthesize and understand your building performance data, in order to manage the carbon and energy impacts of your portfolio. Do you have baseline and benchmark data? Do you have an effective Energy Management System (EMS)? Can you identify properties that require improvements now, or will require them soon, in impact areas that are materially relevant? Is ISO certification a good business decision? If you’re not reporting to GRESB, consider the potential value for your company, your investors, and the industry.
Investors want to see accountability. Use CSR reports to indicate your current status in climate change and other material sustainability-related impact areas, outline goals, and report progress and areas for improvement. Demonstrate a leadership position by using the GRI framework, which is becoming widespread, and which clearly provides information to investors in a format they understand and are beginning to request more frequently from public companies. Publish case studies to inspire others to take action.
Seek Opportunity to Add Value
Since nearly 40% of greenhouse gas emissions are attributed to buildings, real estate companies are well positioned to take advantage of the potential value in the business of climate change. Look beyond risk mitigation, toward opportunity through industry leadership.
Lexy Relph is a Sustainable Business Consultant, PE, LEED AP in Paladino’s Seattle Office