Partnerships to quantify climate risks provide strong early returns

One of my hopes and goals, when Woodwell Climate Research Center (formerly Woods Hole Research Center) began working with the investment industry, was that making investors more aware of physical climate risk (i.e. business risks from extreme weather, etc.) would increase awareness of this important risk category in the broader corporate world.

An important step in that direction took place this month with the release by Wellington Management and the California Public Employees Retirement System (CalPERS) of guidelines for corporate disclosure of physical climate risk. These guidelines, a direct result of Woodwell Climate’s work with Wellington and CalPERS, encourage companies to assess and disclose their physical climate risk—as distinct from risks associated with possible climate policies such as carbon taxes. Physical climate risks include, for example, risks to company-owned infrastructure from storms or flooding, risks to supply chains from various forms of extreme weather, and risks associated with customer migration or loss of prosperity, which may be climate-related.

We believe that when corporations start to look at their exposures to physical climate risk, they will be impressed with the scope and scale of near term risks. This has been the case with Wellington and CalPERS themselves, and it has been interesting and rewarding to see the personal journeys of individuals we’ve worked with as they gain more appreciation of the risks posed by climate change.

As more corporations understand their physical risks from climate change, this will send the message that climate change is a threat to the corporate bottom line. This is absolutely critical in mobilizing the private sector to address climate change, because it makes doing that an act of self-interest rather than a corporate social responsibility. To state it plainly, understanding the near term risks means that even those interested only in profit will be motivated to address climate change. I am proud of the role that Woodwell Climate is playing in making this happen.

There’s more to come in Woodwell Climate’s work with the private sector. Later this year, another corporate partner will release a flagship report on the business and broader societal ramifications of climate change. This report will make the case very forcefully that climate change is a threat to human prosperity. Nearly all of the science upon which this is based was done here at Woodwell Climate, and I am proud of the effort and talent our people put into making this happen.

These corporate relationships are new for Woodwell Climate, and I believe are an important pathway to impact. This is especially needed in an era when our federal government is doing everything it can to make climate change worse. Even so, I am excited about the potential from working with the private sector—including their ability to influence federal policy. Thanks as always for your interest and support.