Tackling climate change can have a significant impact on company value in six sectors worth a total of $7 trillion, according to a new report launched by the Carbon Trust : Climate Change: a business revolution?

The report, based on analysis by McKinsey & Co, found that the deep emissions reductions necessary to tackle climate change and put us on a path to a low carbon economy, will create significant business opportunities and risks.  Companies’ futures will be highly dependent on how well prepared they are for the move, which will create large upsides and downsides for business.  

According to the Carbon Trust, well positioned and proactive, forward thinking businesses could increase company value by up to 80%. Conversely, poorly positioned and laggard companies run the greatest risk of destroying value.  The groundbreaking research found that as much as 65% of company value was at risk in some sectors. In the automobile industry, for example, both significant potential opportunities and risks were identified, which could transform the sector.

The opportunities and risks are driven by shifts in consumer behaviour, technology innovation and regulation – the latter being the main initiator of change. The effects vary significantly by sector.

Tom Delay, chief executive of the Carbon Trust said:

“Climate change will cause a revolution in business and our findings should act as a trillion dollar wake up call to the investment and business communities.  Companies and investors that prepare now and develop new strategies will reap the commercial rewards of the move to a low carbon economy. The financial risks of inaction are just too vast to ignore.  We can see a trillion dollars of company value change, with leading, well-positioned companies gaining and badly positioned or slow companies losing out.”

The study outlines clear recommendations for investors, business and policy makers on how to collaborate to make the shift to a low carbon economy as efficient as possible, including: 

• Strategic investors should discriminate between sectors and companies on the basis of their opportunities and risks.
• Businesses should incorporate climate change in their core strategy and investment decisions.
• Policy makers should work with business and investors now to create a policy framework which rewards early action and an efficient transition to a low carbon economy

Mr Delay added:
“We have a short window of opportunity to act but at present business and investor actions are way out of step with the need to tackle climate change. They must be urgently re-aligned by developing new business and investment strategies and by working with governments to develop policy frameworks that reward early and effective action to rapidly reduce carbon emissions.”