Unlocking opportunities in climate risk

Unlocking opportunities in climate risk: Driving growth through sustainable practices

Article courtesy of our corporate threat partner, Sention.

As the global climate landscape continues to evolve, businesses are facing increasing pressure to adapt, mitigate, and respond to climate-related risks. However, for those able to navigate this complexity, climate risk presents a significant opportunity for growth, resilience, and innovation.

This article, co-authored by experts at Howden, ADAPTOVATE, and Sention, explores the strategies businesses can adopt to turn climate risk into an advantage. We aim to offer actionable insights on integrating sustainability into core business strategies while ensuring long-term profitability.

Understanding emerging climate risks

In recent years, the scope of climate risks has expanded beyond the obvious environmental consequences. Businesses now face direct impacts on operations, supply chains, and stakeholder expectations. For example, Australia has experienced some of the largest insured losses in history due to severe floods, bushfires, and cyclones. These events, once considered rare or insignificant, are occurring with varying and more volatile frequency and severity, disrupting continuity and profitability.

To address this, companies must anticipate the physical risks, such as extreme weather events, and the transition risks associated with changing regulations, technologies, and market dynamics. Regulatory frameworks, like mandatory climate disclosures, are reshaping how businesses operate, adding complexity but also offering a competitive edge for those who embrace change early. 

Strategic alignment: climate as a business imperative

Climate risk must be a central consideration in business strategy, not just a compliance issue. Forward-thinking companies are using this as an opportunity to innovate. Businesses that develop sustainable products, increase energy efficiency, or adopt renewable technologies are well-positioned to access new markets, attract investors, and build brand loyalty.

The integration of sustainability goals into overall corporate strategies provides a roadmap to future-proof businesses against climate shocks. As Dan Shields, an expert in climate risk, points out, companies need to understand how climate will shape their future and develop resilient business models. This includes creating new efficiencies, exploring emerging markets, and adapting supply chains.

The monster in the cupboard: regulatory change

Perhaps the biggest challenge for many organisations is the introduction of mandatory climate disclosures. Many businesses are unprepared for the level of transparency and detail required by these regulations. Disclosure obligations now extend to scope 3 emissions, encompassing both upstream and downstream activities, making it vital for companies and their suppliers to account for their entire value chain.

This regulatory shift can be seen as both a "monster in the cupboard" and an opportunity. As Matt Weaver from Howden explains, businesses that proactively adapt will not only meet compliance requirements but will also create competitive advantages by positioning themselves as leaders in sustainability. For instance, a farmer adopting net-zero and regenerative practices was able to add a significant premium to their products, demonstrating how innovation can turn financial burdens into advantages.

Leveraging technology for resilience:

Technological advancements play a crucial role in helping companies manage climate-related risks. AI-powered tools, data analysis platforms, and smart grids are transforming how organisations plan for climate events and optimise resource usage. By leveraging real-time environmental data, companies can enhance decision-making, reduce energy consumption, and improve crisis response capabilities.

Additionally, technology is enabling companies to better understand their carbon footprint and identify areas for improvement. For example, carbon accounting software helps businesses track emissions and implement effective offsetting strategies, ensuring alignment with global sustainability goals.

A holistic approach to climate risk management

Organisations that address climate risk holistically will be better equipped to navigate future challenges. This includes fostering a culture of sustainability at all levels of the organisation. Leadership teams must prioritise identification of emerging climate risks, along with education and awareness, ensuring that employees understand how their actions contribute to the broader corporate strategy.

Agility is also key. As climate risks evolve, businesses must continuously refine their approach. Past climate-related challenges, such as the 2022 floods in Australia, have shown that businesses cannot afford to be complacent. Those that adapt quickly, adjust their strategies, and take proactive measures to mitigate risks will thrive in the new climate economy.

Sention helps organisations reduce uncertain and volatility

Sention helps organisations identify and plan for emerging climate risks. Using corporate threat intelligence, we provide boards and leadership teams with foresight into the changing and interconnected threat environment, enabling organisations to implement more effective strategies to protect their critical assets and strategic viability.

ADAPTOVATE helps organisations embed sustainable changes

ADAPTOVATE assists organisations in transforming their ways of working, behaviours, and operating models to embed risk management into everyday responsibilities, rather than treating it as an afterthought or delegating it to another department. This approach ensures that risk management is sustainably integrated into core business strategies, supporting long-term profitability.

For example, we redesign our clients' operating models to ensure alignment across the organisation, fostering teamwork towards achieving their mission. By adopting a human-centred approach, we have streamlined the risk function's operations, significantly reducing the time and cost associated with risk approvals and simplifying risk documentation.

Furthermore, we leverage Generative AI (GenAI) to help our clients address key operational risks and fulfil compliance requirements by enhancing operational efficiency and providing access to timely, accurate information. The implementation of Generative AI solutions has notably increased our clients' frontline staff efficiencies tenfold, thanks to effective training on utilising AI for optimal outcomes.

Summary: climate risk as a catalyst for growth

The future belongs to organisations that can turn climate risk into an opportunity. By adopting sustainable practices, embracing regulatory changes, and leveraging technology, businesses can not only mitigate risks but also drive growth and competitive advantage.

At Howden, ADAPTOVATE, and Sention, we believe that sustainable business practices are essential for long-term success. Through strategic alignment, innovative solutions, and a commitment to continuous improvement, businesses can unlock the full potential of climate risk and lead the way toward a more resilient, sustainable future.