Risky Business: Adapting Climate Science for Industry and Finance

Christopher Wright reflects on the third Business Making of Climate Change event, where a panel of experts from industry and academia came together to address the challenges of integrating climate science with business.

Image by Sonia BurtIn, via Unplash

Last Wednesday evening, Sydney Environment Institute held the third and final public talk in the very successful The Business Making of Climate Change series. Having focused on investor and corporate climate responses in previous talks, the final session in the series focused on how climate science can better contribute to business understandings of the physical and financial risks of climate change. A key theme in the evening’s discussion was the disconnect between the big picture focus of climate science models used to identify potential future climatic changes this century and the far more specific concerns of businesses, markets and governments over changing weather systems and their impacts upon local regions, supply chains and populations. Facilitated by the series convenor, Dr Tanya Fiedler from the University of Sydney Business School, a highly qualified panel of speakers outlined the limitations of existing climate science models to more immediate concerns of market and physical risk, as well as the possibilities of greater collaboration between scientists and business organisations in better anticipating extreme weather events.

Leading the discussion, Professor Andy Pittman, Director of the ARC Centre of Excellence for Climate Extremes at the University of New South Wales, stressed how climate science and modelling of future climate change was never designed to answer the sorts of highly specific questions that many businesses are now asking about climate risk. Climate models break the world down into hundred kilometre grids and take many months of calculation on some of the world’s most powerful super-computers to come up with projections of future climatic changes. By contrast, business executives often want quite specific estimates of their operational and supply chain exposure to extreme weather events in the near future. Despite this, he noted there was a growing focus on developing much more specific climate modelling and that there is massive potential for far greater collaboration between climate scientists and financial analysts in this area.

Following up on these points, Dr Brendan Cullen from the Faculty of Veterinary & Agricultural Sciences at the University of Melbourne emphasised how warmer and dryer conditions in Australia over the last several decades have galvanised the attention of the agricultural sector towards climate change. Farmers have witnessed contracted growing seasons and knock-on effects in terms of the increasing price of stock feed and irrigation. This raises questions about both future extreme weather events and weather variability. Here questions of how to adapt to future climate change revolve not only around drought resistant crops and heat tolerant species but also more accurate climate models that can be linked to agricultural system models.

Panel experts Brendan Cullen from the University of Melbourne, Kate Simmonds from Willis Towers Watson, Andy Pitman from the ARC Centre of Excellence for Climate Extremes and Nick Wood from Earth Systems and Climate Change Hub. Photo courtesy of Chris Wright.

The issue of accurate climate modelling for different businesses was also emphasised by the third speaker of the evening, Kate Simmonds, who as a Catastrophe Analyst at Willis Towers Watson develops proprietary extreme weather hazard models for many of the country’s major insurers. She stressed how historical insurance models are no longer viable as record-breaking weather events such as last year’s US hurricane season and the ‘once in seven hundred years’ flooding of Townsville, become more frequent under the influence of a warming climate. As she noted, the potential worsening of extreme weather events threatens the viability of insurance and raises the issue of governments being left as insurers of last resort.

The final speaker for the night, Nick Wood returned to the issue of market responses to climate change. As a Director of the consultancy Climate Policy Research and Chair of the Stakeholder Advisory Group of the Earth Systems and Climate Change Hub, Nick spans both science and business perspectives, and argued that the partisan politics that has emerged around climate change is to some extent irrelevant now given the global market shifts that are underway and the role of investors who are factoring in climate risks of investments and particular regions of the world. Like Professor Pittman, he argued that there was no shortage of climate change data but that there was a need for a clearer articulation of what data different businesses and industries need to better calculate their climate exposure.

The evening provided a fitting end to what has been a highly informative and engaging series led by leading industry practitioners. The three panel discussions in the series highlighted how despite the partisan culture war that now rages around climate change in national politics and the media, innovative businesses and investors are rapidly engaging with climate change as a fundamental risk to the future of the global economy and the pre-eminent business issue of our age.

Christopher Wright is Professor of Organisational Studies and leader of the Balanced Enterprise Research Network at the University of Sydney Business School. His research focuses on the diffusion of management knowledge, consultancy and organisational change. His current research explores organizational and societal responses to climate change, with particular reference to how managers and business organizations interpret and respond to the climate crisis. He has published on this topic in relation to issues of corporate citizenship, emotionology, organizational justification and compromise, risk, identity and future imaginings.

The Business Making of Climate Change series of public talks ran between May and June 2019 at the University of Sydney. The series, convened by Dr Tanya Fiedler and produced by SEI Deputy Director Michelle St Anne, brought together investors, lawyers, insurers, corporates, consultants and scientists, to collectively consider why climate change is increasingly relevant to the business community, as well as how businesses can make sense of climate change in a way that is relevant to them.