Identify risks & opportunities - INTERMEDIATE

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HIGH
EFFORT
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medium
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IMPACT
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Sustainability risk arises from an uncertain social or environmental event or condition that, if it occurs, could have a material adverse effect on the company. At the same time, these changes and uncertainties can create opportunities. Risks and opportunities create the pressure points that prompt boards/management teams to develop and invest in sustainability strategies. Adopting a sustainable approach not only demonstrates resilience and long-term value creation for the business, but is also a source of competitive advantage.

Failure to address climate change and its consequences, including extreme weather events, environmental damage and loss of biodiversity, is widely recognised as the most urgent potential systemic risk, leading to an unprecedented focus by companies and investors.

There are three main climate-related risks to business:

  • Physical risks are the risks of losses due to environmental events such as floods or storms (which can be acute or chronic).
  • Transitional risks (transition to a low-carbon economy) arise from changes in policy and new technologies, such as the growth of renewable energy.
  • Litigation risks, where those affected by climate change seek compensation from those responsible.

There are also climate-related business opportunities in resource efficiency, energy sources, products and services, markets and resilience.

Follow these three initial steps to identify the specific and material risks/opportunities for your business:

STEP 1: Create a sustainability profile

- From the list of industry-specific sustainability issues, identify the list of risks that have a material impact on the business and specify the list of opportunities that have the potential to capture the market and/or create value for the business.

- Do the same with the list of stakeholder engagement and analysis topics derived from your materiality assessment.

STEP 2: Characterise these issues based on internal operations, and external operating environment.

- Internal operations: a) key revenue streams and b) key inputs to value creation.

- External operating environment: a) Geographical footprint b) Business climate c) Regulatory climate d) Political climate e) Economic climate

STEP 3: Define time horizons

The timing of the risks and opportunities may exceed the typical short-term horizon although preparation for these risks takes time and should start now. Therefore companies should assess the risks and opportunities in short-, medium- and long term, as relevant.

+ 1.1 °C

average temperature rise in Singapore between 1980 and 2020
(NCCS)

+67 mm rainfall

per decade in Singapore betwen 1980 and 2019
(NCCS)

ADDITIONAL RESOURCES

The TCFD is the world's most influential disclosure framework and provides a climate risk classification. Here is their Climate Risk and Opportunity Classification.

In Singapore in particular, companies are exposed to significant physical risks. Here is a list of them.