Adapting To An Uncertain Climate

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Adapting to an uncertain climate: A world of commercial opportunities is a UK Trade & Investment (UKTI) report commissioned from the Economist Intelligence Unit. The report seeks to examine the potential business opportunities, and risks, involved in adapting to anticipated changes in the global climate, such as changing rainfall patterns, rising numbers of extreme weather events and so on. In particular, it examines four key sectors: financial services; infrastructure and construction; professional services and consulting; and agriculture and life sciences. It does not consider business opportunities relating to efforts to stop change occurring in the climate (that is, efforts to mitigate the severity of climate change by reducing greenhouse gas emissions), but rather examines new emerging markets for goods and services as businesses seek to adapt to the realities of an uncertain climate.

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  • 1. ACCESSING INTERNATIONAL MARKETSADAPTING TO AN UNCERTAIN CLIMATE:A WORLD OF COMMERCIAL OPPORTUNITIES

2. About this reportAdapting to an uncertain climate: A world ofAll graphs and tables in this report are sourced fromcommercial opportunities is a UK Trade & Investment the Economist Intelligence Units global survey.(UKTI) report commissioned from the EconomistIntelligence Unit. The report seeks to examine theTo complement the survey findings, thepotential business opportunities, and risks, involved Economist Intelligence Unit also conducted wide-in adapting to anticipated changes in the globalranging desk research and in-depth interviewsclimate, such as changing rainfall patterns, rising with a range of organisations. Our thanks are duenumbers of extreme weather events and so on. In to the following for their time and insight (listedparticular, it examines four key sectors: nancialalphabetically, by organisation):services; infrastructure and construction; professionalservices and consulting; and agriculture and lifeAndrew Brown, climate change andsciences. It does not consider business opportunitiesenvironmental performance manager,relating to efforts to stop change occurring in theAnglian Waterclimate (that is, efforts to mitigate the severity Denise Dewar, executive director for plantof climate change by reducing greenhouse gas biotechnology, CropLife Internationalemissions), but rather examines new emergingmarkets for goods and services as businesses seekPaul Jayson, head of sustainability, DLA Piperto adapt to the realities of an uncertain climate. Fernando Moreiro, CEO, HSBC Insurance BrazilTo quantify this, the Economist Intelligence UnitMichael Riley, deputy portfolio manager for theconducted a survey of 705 companies globally,Energy and Climate Funds, SAMrepresenting a range of business sectors, during Noel Morrin, senior vice-president forJanuary and February 2011. The survey attempts tosustainability and green support, Skanskaafford even representation to the following regions: David Symons, director,Middle East and Africa; Western Europe; Asia Pacic; WSP Environment & EnergyNorth America; and Latin America. In line with thespecic sectoral focus outlined above, nearly half(46 per cent) of the survey sample was focused onthese key sectors; the balance covered a range ofother industries. All company sizes were represented:41 per cent of rms polled had annual revenue ofless than US$500 million, while 44 per cent hadrevenue of at least US$1 billion. All respondentsheld management positions, with just over half(53 per cent) representing the C-suite or board. Adapting to an uncertain climate: A world of commercial opportunities1 3. EXECUTIVE SUMMARYClimate uncertainty is likely to increase in theAlthough most businesses are aware of theWhile risks abound, executives see greater Emerging markets are viewed as the primarydecade ahead. In the past few months alone, imagesneed to respond to climate change, few are opportunity. Adaptation involves both risk business growth opportunity, especially withinof ooding across Australia, Brazil, Sri Lanka, yet actively adjusting. Only three in ten rms management (protecting ofces and operations,Asia. The unfortunate reality is that many ofPakistan and South Africa have lled news channels. are already actively planning and making or bolstering supply chains) and opportunity todays less developed markets are also mostOrganisations such as the UN suggest that tens of changes within their businesses and one in ten (developing new crop insurance products, orlikely to shoulder some of the largest forecastbillions of dollars will be needed annually in therms still thinks that no changes are required athelping to design more resilient structures).climate impacts. Accordingly, 60 per cent ofcoming decades to help countries adapt to the all. Nearly all others recognize the importance of Slightly more rms (64 per cent) see opportunity executives polled point to emerging marketsrealities of a changing climate. Accordingly, this is the issue, but say it is not yet a pressing concern. here, rather than risk (53 per cent), although as the number one source of business growthan apt time to consider the business risks, as well asUrgency is greatest in Asia, perhaps reecting one in three overall thinks it encompasses both. relating to adaptation, ahead of those whothe commercial opportunities in adapting to a morethe high climate risks faced there. In contrast, Around one in ve (19 per cent) rms has already look to developed markets (43 per cent). Asia inunpredictable climate.concern is lowest in North America, most likelygenerated new revenue from such opportunities. particular is singled out, with North America andreecting divided opinion over climate risks.Of the four sectors proled in greater depth inthen Europe the next contenders.This UK Trade & Investment report, commissioned from this report, professional services and consultingthe Economist Intelligence Unit, seeks to outline these Around nine in every ten rms have sufferedstands out: 24 per cent of rms in this sector say Limited awareness about adaptation andemerging opportunities for business. In particular, itclimate impacts in the past three years. Morethey have already generated revenue from sucha shortage of skills are the main obstaclesconsiders four key sectors in detail: nancial services;than half (55 per cent) of rms polled havework, compared with 19 per cent in infrastructurehindering further development. Severalinfrastructure and construction; consulting and reported an increase in weather-related impactsand construction and 15 per cent in nancial executives interviewed for this report noted theprofessional services; and agriculture and life sciences. over the past three years; just 9 per cent say their services. Far more see growth ahead, some in the limited awareness from clients when pitchingIts key ndings include the following:companies have not been affected. Impacts have short term (25 per cent), but more in the longer-adaptation-related products and services.been varied: most are simply disrupted by staffterm (36 per cent).Furthermore, the subject of climate change itselfnot being able to make it into work, but many remains contentious in many markets. In general,have had supply chains disrupted, or have lost Much work is already underway in terms ofa lack of awareness of the opportunities is therevenue. Nearly one in ve (17 per cent) havedeveloping relevant new products and services. primary barrier cited for slow development in thissuffered damage to buildings or equipment. Although adaptation remains a relatively niche area, along with a shortage of related skills. SeedAccordingly, a number of businesses plan to invest area today, a growing market is expected tobiotechnologists, engineers, climate modellers,in measures to cope with such impacts over the emerge over the coming decade. Nearly four inand ood planners are just some of the jobs thatnext few years. For example, around one in fourten (39 per cent) of respondents say players inwill likely be in demand in the decade ahead.plans to protect some of their assets throughtheir industry are grabbing competitive advantageweather-proong (27 per cent) or upgrading their from helping clients adapt to climate change.insurance policies (26 per cent). Most efforts willAnd close to half of rms polled (46 per cent),Around nine inbe handled in-house, but a signicant proportionwill turn to external consultants or vendors, are conducting related research already. Given the sometimes blurred line between mitigationevery ten rms have driving new demand.and adaptation, there are clear synergies and crossovers that will be reected in this report.suffered climateimpacts in the pastthree years Emerging markets are viewed as the primary business growth opportunity2Adapting to an uncertain climate: A world of commercial opportunities Adapting to an uncertain climate: A world of commercial opportunities3 4. INTRODUCTION:THE NEED FOR ADAPTATIONDuring the past decade, a huge global industry Accordingly, regardless of what efforts are takenREGIONAL VARIANCEScatering to rising concerns about energy and climate to mitigate the severity of climate change, somechange has emerged. The most obvious aspect of adaptation will also be necessary to cope with thatthis has been the boom in production of renewablechange which is already unavoidable. Such effortsGiven that climate impacts vary widely across Businesses in the Middle East and across Africa fallenergies, but related businesses span sectors as are not always carried out in isolation, however:different regions and countries, the urgency of right on the global average, although 39 per cent ofdiverse as consulting, education, construction and for example, when building new structures, engineersresponses to the issue vary widely too. respondents from the UAE in particular are actively manufacturing. Much of this activity relates toare increasingly considering not only how to reduceengaged. There, concerns centre largely on watermitigation efforts to cut the amount of emissionsthe climate impact of such work (mitigation), butIn North America, which faces lower risks than some issues. This is perhaps not surprising; in January 2010 produced by power stations, buildings, vehicles, also how to make it more resilient against an adverseother countries, active responses from business the UAE issued a three-volume report detailing theagriculture, and other sources. Accordingly, there climate (adaptation).have been many studies looking at what rolelag other regions: 22 per cent of those polled arelikely impacts of climate change among its memberbusiness can play here. Rather fewer have considered For businesses, climate change raises clear risks, bothmaking an active response in terms of planning or Emirates and the need for adaptation. Work hashow industries will cope with the consequences directly

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