Perils of ignoring climate risks - by Dr. K. Srinivasa Rao

perils of ignoring climate risks

by Dr. K. Srinivasa Rao

Global warming is causing fury across the globe, devastating lives and livelihood. It leads to natural calamities and even triggers pandemics. Climate risk is mounting up into catastrophe that can be a threat to the human species if risk management is not made inclusive to protect the green planet. The sea surface temperature going beyond 28 degrees Celsius is triggering a series of intense cyclones, hailstorms, and tornados, causing extensive damage much beyond coastal regions. One cyclone following another one has become the ‘new normal’ sending shock waves, more to the poor, at the bottom of the pyramid.

Though the Paris climate agreements – December 2015, mandates to limit global warming to well below 2, preferably to 1.5 degree Celsius, compared to pre-industrial levels, not much is seen to have happened to manage climate risk. Continued use of fossil fuels, deforestation and frequent forest fires due to carbon sink are inimical to climate with its perils inundating the society.

hazards of climate risks

enterprise risk management (ERM)

Greenhouse gases, increased carbon emissions amid continued thrust on industrialization and rapid urbanization, are collectively increasing mean global sea levels. Ocean heat waves, irreversible damage to biodiversity, and extreme weather conditions threaten food security due to floods and droughts that can hit millions of poor. The far-reaching consequences of an inability to focus adequately on managing climate risks that are responsible for unfettered carbon emissions.

Even the coronavirus that is ravaging the planet is nature’s revenge for the way human habitation is living closer to wild animals interchanging space, making it easy for diseases to jump from animals to humans. Developing countries are growing fast, living amid skyscrapers and perpetuating wildlife wet markets full of exotic animals/bats, a perfect cauldron for animal-to-human viral transfer. Mania for risky developments that humans can hardly put up with unless managed well restoring ecological equilibrium.

Management of climate risk is part of ERM. But the tradeoff between near-term business aspirations of corporate entities and long-term climate control needs are not balanced well, causing imminent ecological imbalance.

ERM should be actively operationalized to include goals for climate control and assess the investments set aside for environmental-friendly projects to reduce carbon emissions, waste treatment, pollution control, and treatment of toxicity of air/gases emitted in manufacturing processes.

As a value proposition, the ability of a business to deal with Environmental, Social and Governance (ESG) concerns material to it has a significant impact on its long-term sustainability. Going beyond the uptick in stakeholder values, the investors and the community should participate in assessing the performance of companies in managing climate risk through rigid implementation of ESG standards at all levels.

It should be influenced by a number of factors, including the board’s knowledge of ESG rationale. How it impacts the society and what are the risk management methods to pursue sustainable ecosystem. Mere management of operational risks through business continuity plans may not be sufficient to create a compatible climate for future generations to thrive, unless an ESG tracker is firmly in place. Large manufacturing units should have carbon clocks to improve sensitivity towards climate risks.

Developing a purposeful culture is important to driving ESG efforts and aligning ESG vision and principles within a company. Such a culture should be set across the enterprises and across the globe to move towards environmental protection with sustained persuasion of internal climate control goals.

Going beyond implementing ESG as a responsible corporate citizen, it is necessary to disseminate climate literacy down to the line management and to the society at large. Even the regulators across the globe have to collaborate on a massive scale to integrate climate control as an essential risk management objective. While the ERM policy framework should be redesigned to tackle environmental degradation at the unit level, as a larger part of corporate social responsibility (CSR), better awareness has to be spread across the stakeholders.

As part of sustainable development goals, climate action and climate literacy is to be initiated on a massive scale targeting the society. Climate literacy initiatives in collaboration with non-government organizations (NGOs), trade unions, educational institutions, civil society organizations, and other stakeholders have to be institutionalized at various levels on a mission mode.

Beginning with plant protection, people have to realize their contribution in making the climate better, moving on to use the renewable, biodegradable and non-conventional energy sources. It is noteworthy that some active environmentalists are engaged in designing mobile apps to track and map carbon emissions so that people can contribute individually in managing climate risks.

Besides including environmental protection as a part of curriculum at schools/colleges, it is more important to take up climate protection projects that can eventually make the society conscious about the climate risks. Present levels of indifference towards climate risks could invite far more disasters that can be consciously averted.

climate risk management

While the government should be besieged with climate control targets at the macro level, the business units and society should work its way to innovate and create micro risk management tools to protect the environment by reducing carbon footprints.

references

https://www.raconteur.net/manufacturing/manufacturing-gets-personal-industry-5-0/ https://assets.kpmg/content/dam/kpmg/cn/pdf/en/2018/09/esg-a-view-from-the-top.pdf

author

Srinivasa Rao

operations. Srinivasa Rao teaches risk management at the Institute of Insurance and Risk Management (IIRM), Hyderabad. India. He has been with Bank of Baroda with wide experience in managing risks at the corporate level.

He was associated with business process reengineering and was engaged in asset liability management. He worked to design bank level policies to manage diverse risks in business

He is passionate in teaching, writing and publishing. He brings his vast industry experience to the classroom in B – Schools. He is keen in disseminating digital and financial literacy to ensure that stakeholders are able to explore the power of digital banking.