Measuring the financial impact of climate change: You Asked Us

Introducing our expert panel:

Dr. Nicole Röttmer, Climate Lead Europe, PwC Germany
Dr. Anne Michaels, Sustainable Finance Expert, PwC Germany
Fritz Fromageot, Real Estate Consultant, PwC Germany

How do you foresee the Covid-19 crisis impacting progress towards more sustainable development? Is it likely to slow, or even reverse, gains made in recent years?

The Covid-19 crisis is, at root, an environmental crisis. It has shown us how vulnerable our global economic system is to crises and how quickly the environment in which we live and do business can change. Building strategic resilience a priori to such sudden events could reduce their cost – something as we have seen in the field of natural disaster relief.

Numerous companies in the private sector have stated that Covid-19 poses no threat to their commitment to climate targets. Regulators have also promised economic relief programs that incentivise green development. Such facts are promising signs that the Covid-19 could actually accelerate the transition towards a low carbon economy.

Sustainability has long been considered a moral imperative for businesses; has it now become a commercial imperative too? Is there evidence that businesses with substandard sustainability processes are being punished in the marketplace?

In the long term, companies will increasingly be expected to show their working on the topic of sustainability and climate change to ensure their competitiveness. Frontrunners in many industries are already demonstrating the advantages of integrating sustainability and climate change into corporate strategies.

Conversely, there are multiple examples of companies that have been punished for taking insufficient action. One such example is the coal company Peabody, which faced prosecution by the U.S. Securities and Exchange Commission (SEC) for the insufficient disclosure of climate related risks. In doing so, they endangered their license to operate. Furthermore, they lost investors and their share price plummeted.

How does the sustainability challenge differ between developed and developing economies? Do developing regions have an opportunity to “leapfrog” of developed regions due to a smaller stock of legacy buildings?

Developing countries have often been forced to trade off economic progress against ecological sustainability. Considering the reductions in emissions necessary to achieve global climate goals, the biggest challenge in the building sector lies within the upgrade of the existing building stock. Secondary to this will be setting ambitious standards for new construction.

By comparison to most developed countries, developing nations have fewer major projects and lower energy consumption per capita. Buildings also tend to have shorter lifespans. These factors might be to the advantage of countries in the developing world. Great gains can be made, if they avoid repeating the mistakes of more developed economies.