How do climate risks affect corporations and how could they address these risks?

Physical and transitional risks resulting from climate change are already inducing significant direct and indirect impacts on organizations—such as damages to assets, disruption to supply chains, or shifts in supply and demand for certain commodities, products or services. The current short-termism of most companies suggests the importance of raising awareness among the private sector about the potential risks of climate change. However, companies increasingly are reporting and disclosing climate risks and associated costs as asked for benchmarking by financial institutions and to comply with regulations with respect to sustainable finance. A guidance on how to do a climate risk assessment and to estimate the costs of physical climate risk as well as transitional and systemic risk concerning their operations and value chain management is lacking. This paper presents a stepwise blueprint on climate risk assessment and financial disclosures that support companies on reorienting capital flows towards more sustainable investments and with their disclosure process to foster transparency and long-termism in financial and economic activity in line with the action plan on sustainable finance adopted by the European Commission in March 2018 to achieve sustainable and inclusive growth.