emanuele fanelli
TRANSCRIPT
www.cdp.net | @CDP Page 1
www.cdp.net | @CDP
Climate change and Water impacts: right here, right now
Emanuele Fanelli
SVP Investor Initiatives
TBLI Conference, Zurich
November 2013
Page 2
www.cdp.net | @CDP
CDP’s Climate change and Water programs
Page 3
CDP is an international, not-for-profit organization providing the only global system for companies to measure, disclose, manage and share vital environmental information.
Our Mission: Transform the global economic system to prevent dangerous climate change and value our natural resources by putting relevant information at the heart of business, investment and policy decisions.
www.cdp.net | @CDP
Climate change short-term risks analysis
Page 4
Parameters:
Pose a direct effect on business;
Occur in a current time frame;
Have a virtually certain or very
likely incidence of occurring;
Have a high magnitude of impact
Respondents:
5000 companies targeted;
90% of MSCI World Index;
Almost 2500 respondents
Risks:
Physical climate risks;
Other climate-related risks
www.cdp.net | @CDP
Climate change total risks reported A total of 178 physical climate and other climate-related risks identified A total of 120 companies are affected by those risks globally
Page 5
39 32 19 13 13 10 52
South Korea Japan USA Italy Taiwan UK Rest of the world
www.cdp.net | @CDP
Climate change risks reported by sector
Page 6
0
10
20
30
40
50
Physical climate risks Other climate-related risks
www.cdp.net | @CDP
Climate change risk drivers
Page 7
25 20 16 16 15 14 72
Change in precipitation extremes and droughts Change in mean (average) temperature Change in precipitation pattern Tropical cyclones (hurricanes and typhoons) Change in temperature extremes Changing consumer behaviour Other (i.e. sea level rise, induced changes in natural resources)
www.cdp.net | @CDP
Climate change potential impacts
Page 8
64 40 36 8 7 7 16
Increased operational cost Reduced demand for goods/services Reduction/disruption in production capacity Inability to do business Increased capital cost Reduced stock price (market valuation) Other (i.e. wider social disadvantages, damage to equipment)
www.cdp.net | @CDP
Case Study – Royal BAM Group If physical climate changes attributable to changes in
precipitation force our construction sites to fail to meet the
deadline for completion, first, we may have to pay
compensation to developers as penalties for the delay, or
may not receive part of the construction. Second, the failure
to meet deadlines will decrease our credibility and weaken
our competitiveness in the market, and as a result consumers
will turn their back on us. Quantifying the impacts, our total
sales by 2012 are expected to fall by about 23% or more.
Page 9
www.cdp.net | @CDP
Case Study - Nissan Motor Thailand Co., Ltd.
Page 10
Nissan Motor Thailand Co., Ltd. currently has
a capability to produce 220,000 vehicles
annually. If floods had completely shut down the
facilities and drowned newly assembled cars in
the region, damages would have lasted up to 6
months and more than 200 billion JPY of
revenue might have been lost. Our revenue
will be lost nearly 35,000mil JPY if we stop
production for a single day.
www.cdp.net | @CDP
Water is a material issue for institutional investors
Page 11
www.cdp.net | @CDP
Water disclosure by 184 Global 500
Page 12
www.cdp.net | @CDP
Water risks reported by sector
Page 13
0
10
20
30
40
www.cdp.net | @CDP
Water total risks reported
A total of 952 water risks identified
Page 14
97 51 34 33 33 27 23 654
USA Mexico Greater China Australia South Africa India Brazil Rest of the world
www.cdp.net | @CDP
Water risk drivers A total of 614 short-term risks identified
Page 15
123 61 57 46 44 42 39 39 163
Water stress or scarcity Flooding
Rising discharge compliance costs Declining water quality
Higher water prices Reputational damage
Water withdrawal limits Regulatory uncertainty
Other
www.cdp.net | @CDP
Water risks exposure (% of respondents)
Page 16
www.cdp.net | @CDP
Case Study – General Motors Increases in the frequency of drought conditions can
further depress water availability for production in water-
stressed areas. GM has production facilities in Mexico,
an area that was hit hard by drought in 2012, and there is
a risk that increases in the frequency of such events
could disrupt production due to lack of water availability.
Mexico accounts for about 6% of total global production.
A one month disruption of GM’s production, for example,
could result in loss of US$27 Million in net income.
Page 17
www.cdp.net | @CDP
Case Study - American Electric Power New EPA regulations, which will govern the potential
effects of water intake structures on fish populations,
could affect as many as 31 power plants owned and
operated by AEP. The EPA is also expected to propose
changes to regulations that govern the treatment and
discharge of power plant waste waters. The impact of
these new regulations could cost as much as US$1
billion for the entire AEP fleet of coal-fired power
plants.
Page 18
www.cdp.net | @CDP
Are climate change and water issues material to investors?
Seasonality of business or sector;
Risks can be insured and might not affect the profitability of
companies, but they can increase the insurance premium,
which could lead to rising costs for companies;
Risks can already be incorporated and priced in valuations
of companies (depending on the sector etc.).
Page 19
www.cdp.net | @CDP
Take away for investors
Identify companies/sectors with short-term risks related to
climate change and water in your portfolios;
Engagement with laggards (and applaud industry leaders!);
For some analysis qualitative information could be more
important than quantitative information;
Call for collaboration?
Page 20
www.cdp.net | @CDP Page 21