business value at risk: areas of engagement with...

Business Value at Risk:

Areas of Engagement with

Governments on Extreme

Weather and Climate Change

Resilience

New Leef 2013 – Adapting to a changing environment

October 10th, 2013

© Deloitte LLP and affiliated entities.

Overview

1

Business value at risk & opportunities

Role of government

Areas of engagement with government

Benefits & examples of resilience in action


• The climate is changing

• Historic climate data is no

longer a guide for the future

• Existing risk management

measures build resilience

against today’s climate

normals & weather variability

• Business performance needs

to be reviewed in light of future

projections

Climate trends, risk management and coping capacity Business value at risk

Sources: Willows and Connell (2003) 2


Business value at risk (cont.)

3 Sources: N.L. Department of Environment, N.L. Fire and Emergency Services, CBC, Southern Gazette

Heavy rain compounded by high

sea levels, Mattis Point, 2013

Ice dam, Badger, 2003

Heavy rain, Burin Peninsula,

2013

Climate-related disasters

Hurricane Igor, Port Rexton, 2010

© Deloitte LLP and affiliated entities. 4

+3° to 4°

+4 to 6% around

St John’s

Mean temperature

Seasonal

mean rainfall

Tropical storms

Growing degree

days

+2° to 3°

+9 to 10% around

Wabush Lake

Twice as many tropical storms already today

+30% to 35% (summer)

Labrador Newfoundland

Source: Newfoundland & Labrador Office of Climate Change, Energy Efficiency & Emissions Trading

Climate trends

Business value at risk (cont.)

+4 to 7% around

Gander

90th percentile

rainfall

+6 to 8% around

Goose Bay

Mean sea level +30 to 40cm compared with 1990

24-hour rainfall 1-in-100 becomes 1-in-25 year


Business value at risk (cont.) F

utu

re d

istr

ibu

tio

n w

ith

clim

ate

ch

an

ge (

%)

Net Present Value ($ million)

Effect of more extreme weather, temperatures and

rainfall if nothing is done to adapt

Today Tomorrow without adaptation

Future value at risk under business-as-usual

• Intensity &/or frequency

of some hazards will

increase over time

Coastal and inland

flooding

Coastal erosion rates

Ice and permafrost

conditions in Labrador

• Alteration of the

distribution of business

value over time and

across future scenarios

without action

5


Role of government on resilience

6

1 Preventing losses

2 Spreading or sharing losses

3 Changing use/activity and/or changing location

4 Taking advantage of emerging opportunities

D

R

I

V

E

R

S

• Prevent maladaptation and remove barriers to business action

• Put in place incentives for business adaptation

• Create a ‘level playing field’ so that businesses that adapt are not penalized

Creating enabling environments

BUSINESS ADAPTATION

B

A

R

R

I

E

R

S

ROLE OF GOVERNMENT


Role of government on resilience (cont.)

• 2010 Geological survey of N.L. on sea level rise

• 2011 ‘Charting our Course’ Climate Change Action Plan

• Updated flood risk mapping template

7

Steps taken by governments in N.L.

• ‘2012 Turn Back the Tide’ public campaign

• 2013 Climate change projections

• Local community vulnerability assessments and adaptation plans


Areas of engagement with government

Improved

business

resilience

Data and information

Institutional arrangements

Policies

Economic incentives

8

Technology and knowledge

Steps taken by governments in N.L.


Areas of engagement with government (cont.)

9


Institutions

Policies

Economic incentives

Technology & knowledge

• Provincial downscaled climate change projections is a step in the right

direction – but much information and guidance remains needed:

E.g. updated flood risk maps and costs of impacts and adaptation

• Underlying economic opportunities of data/information improvements, e.g.:

Improved streamflow forecasting to increase spot market sales of

hydroelectricity

Better knowledge of future ice and permafrost dynamics to enhance economics

of natural resource exploitation

Better knowledge of biophysical conditions to improve reliability of Strategic

Environmental Assessment and Project Environmental Assessments



• Improved awareness of risks and use of data/information for adaptation

• Improved alignment between private sector, government and civil society on

resilience

• Demonstrated success of collaborative institutional arrangements, e.g.:

Each government dollar spent on Quebec’s Consortium on Regional Climatology

and Adaptation to Climate Change (Ouranos) has leveraged at least 40 cents in

private sector investment for adaptation

Weatherwise Partnership in Toronto


Institutions

Policies

Economic incentives



Institutional arrangements


• Updated building/infrastructure standards and codes

E.g. without adaptation, climate change could add 10 to 20% to infrastructure wear

& tear costs

• Local zoning to reduce vulnerability of assets and operations, e.g.:

Building height and other construction restrictions

Requirements to maintain and/or build natural or artifical coastal defences

• Permitting and impact assessments requiring to consider future impacts


Institutions

Policies

Economic incentives



Policies


• Government incentives for climate-resilient practices , e.g.:

Flood- and storm-resistant building design

Retreat from areas no longer safe from climate hazards

• Finance for business adaptation

E.g. debt or equity finance for agri-foods with more favorable bioclimatic conditions

• Insurance and financial transfer mechanisms to share the burden of climate

risks

E.g. U.K. Flood Re will cover insured flood damage in at least 99.5% of years and

for the 0.5% costliest years up to the equivalent of a 1-in-200 years event


Institutions

Policies

Economic incentives



Economic incentives


• Technology plays a critical role in predicting, identifying and measuring the

extent of climate change and implementing adaptation, e.g.:

Early warning

Remote sensing

• Governments have a role to play in supporting R&D for adaptation

• Technical knowledge of climate change are required for a range of

professionals: civil engineering, spatial planning, architecture, natural resource

management, etc.


Institutions

Policies

Economic incentives



Technology and knowledge


Benefits & examples of climate resilience in action

14

Each $1 invested in

adapting infrastructure

Can save $4 to $69

per year from 2030

onward

$7 to 79 million in

annual damage from

coastal flooding by the

2050s

+5 to 26% in the number

of N.L. dwellings at risk

from coastal flooding by

2050s

Source: National Roundtable for the Environment and the Economy

Source: World Bank

A few figures highlighting the business case for action


• Risk assessments followed by operational

changes and enhancements to hurricane

plans

• When Hurricane Sandy hit, trains were put

‘out of harm’s way’

• Damage suffered:

9% of 2012 revenues (US$531million in

asset damage & 106m in repair/clean up)

19 out of 8,000 rail fleet vehicles

Fast service recovery despite high

vulnerability due to underground tunnels;

49.7 million lost trips

Benefits & examples of climate resilience in action (cont.)

• Delayed risk assessment with no

concrete adaptation plan and weak

hurricane plan in place

• Decision to park rail cars based on ‘the

past being a good guide for the future’

• Damage suffered:

40% of 2012 revenues (US$400

million)

343 out of 1,362 rail fleet vehicles

2 largest storage yards and operations

center under water; 3-month long

severe service disruptions

Future value at risk under business-as-usual

15


Benefits & examples of climate resilience in action (cont.)

16

Issue profile

• Michael Bloomberg and

Hank Paulson spearheading

a project to quantify potential

future costs

• Economic impacts don’t stop

at elected officials, they

concern individuals and

business leaders

• “[Climate change] impacts

will result in increased fiscal

exposure for government”,

U.S. Government

Accountability Office (2013)

• Similar threats to prosperity

exist in Newfoundland &

Labrador

Sources: riskybusiness.org and SPJA

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