The Bank of England Governor Mark Carney has warned businesses of the risks associated with climate change and how the instability caused by our more extreme weather is going to become more acute. At a dinner at Lloyd’s of London Carney stated that the problems posed by the climate were only going to get worse for future generations but that it was this generation of business leader’s responsibility to help prevent it.
The Governor was not simply concerned by the devastating consequences weather disasters can have on business; he also wanted to make clear that climate change could lead to disruptive legal restrictions. Carney predicted that fossil fuel businesses would be unable to sell their assets in the future due to restrictions imposed by governments fearful of climate change; such restrictions would lead to huge uncertainty in the sector. With 19% of companies in the FTSE 100 specializing in raw materials Carney believes any decline in activity in this sector would send shock waves across the market affecting insurers and investors too.
The speech comes ahead of a UN climate change summit which is to be held in Paris this year and will be attended by representatives from nearly 200 countries. It is likely that the summit will lead to new restrictions being placed upon fossil fuel consumption. However, many developing countries are taking action independently to cut down their fossil fuel consumption; for example by 2030 China aims to have non fossil fuels make up 20% of its total energy consumption whilst India announced in March that it would invest $400 million to boost it’s renewable energy reserves.
Natural resources companies depend on developing countries to get rid of their assets. With developing nations now choosing to be more green like their developed partners Carney’s warnings for the future of the fossil fuel industry are already becoming a reality in 2015.
Mark Carney delivered the speech to leading London insurers who know all too well the lasting damage weather disasters can have on businesses with insurers often left to pick up the bill afterwards. In the UK natural disasters have in the past been few and far between but in recent years that hasn’t always been the case. The winter floods of 2014 cost insurers an eye-watering £1 billion and left 100,000 homes and businesses without power in February.
This year there is likely to be more potentially disruptive weather in the UK; rather than flooding it has been predicted that snow will cause problems for UK business continuity this winter. Although the cold weather this year is not going to be a direct consequence of climate change, it is an effect of the weather phenomenon El Nino, the difficulties it will place upon businesses might very well be a taster of what is still to come.
As the climate changes businesses need to be more prepared and vigilant when it comes to disaster recovery planning. The consequences of climate change might seem far away but in order for stability and business continuity to be assured long term planning needs to start now. As Carney suggested businesses are often inclined to plan for the short term but given the changing nature of our weather systems this attitude to disaster planning will not suffice for much longer.
Businesses need to start implementing long term disaster recovery plans that will be able to protect their most valuable assets should disaster strike in a year or decades from now. Businesses should have a plan that is ongoing, not a plan that is only put into action once disruption has occurred. For instance, a retail supplier should always being storing its most valuable stock in a space that is secure and protected from the elements. Whilst those businesses that primarily handle large volumes of data should regularly back up their information using a fixed rota system.
Each business will have to create a plan tailored to protect their greatest assets whether those assets be something tangible or not. Being disaster-ready doesn’t always seem the most cost effective option but in order for businesses to survive a world rocked by global warming it will be all too necessary.