Environmental Factors Flashcards
(38 cards)
WEF environmental risk categories
- Extreme weather events and temperatures
- Accelerating biodiversity loss
- Pollution of air, soil and water
- Failures in climate change mitigation and adaption
- Risks linked to transition to low-carbon economy
Stockholm Resistance Centre findings
• Nine priorities relating to human-induced changes to the environment
• Regulate stability and resilience of earth system
• Four of the nine “boundaries” have been crossed:
o Climate change
o Loss of biosphere integrity
o Land-system change
o Altered biogeochemical cycles (N and P)
Climate Change (Overview)
- Change of climate, directly or indirectly due to human activity
- Alters the composition of the atmosphere
- Observed over comparable time periods
- Global issue with local manifestations (extreme weather) and global impacts (sea levels)
Climate Change (state of play)
• Stern Review – biggest market failure ever
• Scientific evidence points to increasing risk of serious, irreversible impacts from climate change
• 2018: IPCC: humans have caused 1 C, will reach 1.5 between 2030 and 2052
• UN Environment Programme Emissions Gap Report 2019: even if all Paris Agreement were established, still on course for 3.2 C temperature rise
o 1.5 C: 2020 to 2030: 7.6 % YoY drop in emissions
o 2 C: 2020 to 2030: 2.7 % YoY drop in emissions
Socioeconomic impacts of climate change
- Liveability and workability: 2017 East African drought – 800,000 displaced in Somalia – 2x more likely due to climate change
- Food systems: Ocean warming – 35 % decline in North Atlantic fish yields
- Physical assets: 2012 Hurricane Sandy – USD 62 bn in damage – 3x more likely
- Infrastructure services: 2017 flooding in China – USD 3.55 bn in direct economic loss
- Natural capital: 2012 30-year record low Arctic sea ice – 70-95 % attributable to climate change
Business risks
• Sectors at risk:
o Oil, gas and coal
o Heavy industrial sectors (petrochemicals, steel and cement)
o Buildings and transport sectors
• Climate risks:
o Transition risks – result of climate and energy policies, shift to low-carbon technologies and liability issues
o Physical climate-related risks – extreme weather events
• Businesses are exposed to range of risks:
o Stranded assets as climate policy action taken to reduce emissions
o Stress on water resources with implications for agriculture
o Physical impacts of climate change – rising sea levels near infrastructure and buildings
Climate change adaption and resilience
- Mitigation: reducing and stabilising levels of GHGs
- Adaptation: adapt to climate change already taking place and increase resilience
Climate change mitigation
• Involves:
o Reducing the sources of greenhouse gas emissions (burning fossil fuels, electricity, heat)
o Slowing down the process or enhancing sinks such as forests, oceans and soils
• Goals:
o Avoid human interference with climate system
o Stabilise greenhouse gas levels to allow ecosystems to adapt naturally
o Ensure food production not threatened
o Enable economic development in sustainable level
• Examples
o Energy – renewable energy sources
o Buildings – retrofitting to become more energy efficient
o Transport – electric vehicle adoption
o Industry – more efficient processes
Climate change adaption and resilience
• Involves:
o Adjusting to actual or future climate events
o Reduce harmful effects on the vulnerable
• Goals:
o Anticipating the adverse effects of climate change
o Taking appropriate action to prevent damage of climate change
o Take advantage of opportunities
• Examples:
o Drought resistant crops
o Clean cooling systems
o Building flood defences
o Protecting coastlines
Pressure on natural resources
• Increased pressure on natural resources caused by:
o Population growth
o Health improvements leading to people living longer
o Economic growth
o Increased consumption in developed and emerging economies
• Pressure on resources = resource scarcity
o Companies more efficient with natural resources
o Allows them to remain competitive and be sustainable
o Benefit on bottom line
Water
- 70 % world covered with water – 2.5 % is fresh
- Vital for human consumption, agricultural, industrial, household – set for demand rise
- WEF – water creates broader social challenges around economic uses, public water supply or environment
- 2 bn people experience high water stress
- 4 bn people experience severe water scarcity at least 1 m/y
- SDG 6 – ensure availability and sustainable management of water and sanitation for all
Biodiversity
• Invaluable services that for human health, well-being and economic growth
• Biodiversity is the “variability among living organisms in different ecosystems; includes diversity within species, between species and ecosystems”
• Provides natural resources and natural capital:
o Natural capital is the world’s stock of natural assets including soil, air, water and living things, deriving ecosystem services
o Include food, clean water, genetic resources
• WWF’s 2018 Living Planet Report – 60 % decline in species’ populations between 1970 and 2014 – driven by habitat loss
• Sectors at risk:
o Fishing
o Agriculture
o Extractives (cement and aggregates)
o Forestry (timber and palm oil)
o Tourism
Land use and forestry
• Agriculture, forestry, and other land use (AFOLU)
• Impact on soil, water, nutrients and organisms – 23 % of anthropogenic emissions
• 2019: IPCC: stability of the food change set to decrease
• Forests cover 30 % of land area: part of carbon cycle: photosynthesis
• Deforestation: 15 % of global GHG emissions
• CDP: USD 941 bn revenue associated with commodities linked with deforestation:
o Palm Oil
o Soy
o Timber
• Risks faced:
o Supply disruption
o Cost volatility
o Reputational damage
• Opportunities:
o Agricultural and economic development
o Health and stability of forests
o Reduction of GHG from deforestation
Marine resources
• Largest carbon sink o More ½ world’s oxygen produced o Absorbs 50x more CO2 than atmosphere • OECD: EUR 1.2 tn in value added • Known as the blue economy o Fishing o Mining • 680 m people in low-lying coastal regions • Issues in numbers: o 33 % of marine fish stocks are harvested at unsustainable levels o 60 % are fished at maximum levels o 7 % are fished at lower than sustainable levels
Air Pollution
• Increased air pollution:
o Damages environment
o Negative impact on human health
o Reduces crop harvests through soil acidification
• WHO: 1/10 deaths are due to air pollution
• Lancet Commission on Pollution and Health: 9 m premature deaths in 2015
• Air pollution set to worsen
Water Pollution
• Pollution: contaminants such as chemicals and microorganisms are introduced to the natural environment
• 2014: Flint Water Crisis
o Changed water supply – to older pipes
o Lead leached, long term health implications
o Lawsuits to city, state and fed government, including utility companies (Veolia)
• Causes:
o Spills and leaks
o Untreated sewage or industrial waste discharge
Water and waste management
• Feedback loop:
o Increasing consumption and waste levels
o Put pressure on landfill waste
o Causing landfill taxes to rise and tougher regulation
• Different models for waste disposal:
o Domestic: Paid for by taxes or based on house values
o Industrial: commercial service – encourages cheapest disposal option such as landfill
• Fragmented:
o Landfill most popular
o Practices around recycling varies between cities and countries
Circular Economy
• Economic model that:
o Avoids waste
o Preserves value of resources (raw materials, energy and water)
• Based on three principles:
o Design out waste and pollution
o Keep products and materials in use
o Regenerate natural systems
• Ellen MacArthur Foundation: importance of circular economy
o Key areas: cement, aluminium, steel, plastics and food
o 9.3 bn t of CO2e savings
Physical Risks
• Arise from:
o Damage to property, infrastructure and land
o Impact supply chains
• Become more important in last 20 years:
o Rising sea levels from melting glaciers
o Acidification of oceans
o Extreme weather affects (Australia in 2019)
• PG&E:
o 2019: filed for chapter 11 bankruptcy from Northern California fires
o USD 30 bn in liability damages
Transition Risks
• Risks from policy, legal, technology and market due to transfer to low carbon economy
• UK EPC example:
o Landlords cannot rent house that is below EPC E
o Therefore, leaving stranded assets
• UNEP:
o Policy measures backing green finance have doubled since 2015
o Increasing policy presents a business risk
Direct and Indirect Impacts
• Direct impact:
o Activities are directly affecting biodiversity
o Surface water used for irrigation purposes
• Indirect impact:
o Caused by organisation’s supply chain
o Importing fruits and vegetables
o Road construction leading to new commercial development
• Sectors particularly at risk:
o Agriculture, aquaculture and fisheries
o Forestry
o Tourism and hospitability
Supply, operational and resource management issues
• Companies need to measure and disclose environmental impact from direct operations
• Examples:
o Toxic waste
o Deforestation
o Air emissions
• 2019: UK Government: Environmental Reporting Guidelines: KPIs to capture link between environmental and financial performance
• 2019: EU Commission: Circular Economy Action Plan
• Global mining:
o 2019: Vale Brazil: Dam disaster
o 250 dead, 11.9 bn in market cap. Fell
o Sustainalytics – downgraded Vale
o Feb 2020: ICMM launched Mining Principles
Supply chain transparency and traceability
• Supply chains are complex as heavily interdependent
• Companies expected to understand, manage and disclose supply chains
• Traceability:
o Identify and trace the history, distribution, location and application of products, parts and materials
o Ensures reliability of sustainability claims
• CDP – GHG from supply chains often 4x higher than in direct operations
o O&G
o Cocoa
o Leather
o Forestry
• Key areas of risk:
o Energy use
o Raw material use
o Deforestation
• Traceability schemes
o Forestry Stewardship Council (FSC)
o Marine Stewardship Council (MSC)
o Roundtable for Sustainable Palm Oil (RSPO)
o Fairtrade Labelling Organisations International (FLO)
• Not-for-profit with measurement frameworks and tools:
o WWF – 50 performance indications
o EU Taxonomy for sustainable activities – assets, projects and activities are compliant with Paris Agreement
• Investors should access:
o Environmental requirements that suppliers are expected to meet in procurement policy
o Environmental risks through supply chain and discuss whether it has a mechanism to improve poor practices
Kyoto Protocol
• Adopted 1997, effective 2005 • Six main GHGs: o CO2 o Methane o Nitrous oxide o Hydrofluorocarbons o Perfluorocarbons o Sulphur hexafluoride • Commitments extended to 2020
Paris Agreement
• Conference of UNFCCC in Paris 2015 (COP21)
• Goal:
o Keep temperatures well below 2 C above pre-industrial levels
o Limit increase to 1.5 C
• Nationally Determined contributions (NDCs)
o Require signatories to determine, plan and report NDCs
o With updates every 5 years starting 2020
o 25-30 % reduction 2005-2030 are typical
• Members:
o 195 UNFCCC signed
o 184 have ratified it
• Article 6:
o COP25 in Madrid – no consensus reached on Article 6 (carbon markets)
o At COP26.binding agreement required
UNSDGs and Kigali
• UNSDGs: o Agreed by UN general assembly in 2015 o Cited by businesses • Kigali: o 2016 o Phase out manufacture of ozone depleting HFCs 80-85 % by 2045
