Climate risk scenario research carried out by the Bank of England found that failure to take any action to mitigate climate change would cost the country’s banks and financial institutions £340 billion in losses by 2050.
Another report by Deloitte, titled The Turning Point, says that if we allow climate change to continue relatively unchecked until 2070, the cost on the global economy will be $178 trillion USD.
However, $43 trillion USD could be added to the global economy if countries ban together to completely reach net zero emissions by mid-century.
Of course, the threats to human flourishing and security are amplified as the climate crisis worsens. Food and water shortages, worsening health conditions, and reduced standards of living – and much more – are expected if we don’t act now. Recent climate disasters and unbearable temperatures throughout the world illustrate clearly the devastating effects our actions have on the environment. Scientists say that the 50 degree Celsius heat waves hitting Pakistan and India were made 30 times more likely to occur because of climate change.
We see the results of climate change every day, and scientists predict grimmer outcomes as inch closer to 2050. The only way to reverse the course our planet is on is if we work to totally eliminate our carbon emissions within the next 30 years – or sooner.
If we know the great and impending damages to occur because of global warming, and that decarbonising is how we avert further climate catastrophes, what is hampering our progress to net zero?
Gaps in energy and carbon data impede net zero progress
The Bank of England analysed the financial implications of different climate scenarios during the next three decades and how these would impact banks and insurers. The analysis warns that great loss of capital will be lost as investments fail to materialise, loans increase and climate-based legal action becomes more commonplace.
The underlying issue creating this great loss of capital is attributed to one recurrent theme found in the analysis: a lack of energy data analytics on key factors that entities need to understand and manage climate risks.
Without carbon emissions and energy data, net zero strategies composed by businesses cannot be successfully achieved.
Brendan Garvey, Chief Operating Officer of ClearVUE, has said he has encountered numerous business leaders who are passionate about net zero, but they face uncertainty on how to achieve it because carbon and energy data is insufficient or completely absent from their purview.
“When I get the chance to talk to customers, the first thing I am asking is about their business and what they’re trying to do to reduce their climate impact. Every time I get into that conversation, customers are very passionate about it. But the one thing that stands out, is that the majority of organisations do not know where to start. They are really struggling to understand how to get from where they are currently to where they need to get to.”
The Bank of England’s survey confirms this issue. The surveyed financial institutions in the report collectively expressed that incomplete data is a disruptive force in many organisations’ pursuit of a decarbonised and more sustainable business.
“The inability to capture appropriate and robust data in certain areas is a common limitation, which means many climate risks are only being partially measured.
“Examples of gaps include information about the location of corporate assets to permit physical risk assessment, and a lack of standardised information about value chain emissions relating to corporate counterparties.”
“This report highlighting the lack of robust and appropriate data being a limitation in correctly measuring the risks and impacts of climate change does not come as a surprise,” said Head of Energy Services, Dan Smith. “The lack of data will not only hamper reporting, but will also cause missed opportunities to undertake corrective actions as the opportunities will simply not be identified in the first instance.”
A wealth of potential with energy data
Investors are deeply concerned with climate issues. Before any company is added to their portfolio, investors vet the sustainable practices towards the environment, social issues, and corporate governance of a business.
According to The Economist Intelligence Unit, up to $43 trillion (£31.5 trillion) of value is at risk as a result of climate change to manageable assets by 2100.
A majority of UK investors think companies with good sustainability strategies make good investments.
These investors also consider environmental, social, and governance factors when making a new investment. In a Charles Schwab UK survey, 44 percent of 1000 surveyed UK investors consider ESG factors; 55 percent of millennial-aged investors and 56 percent of Generation Z investors regularly consider ESG factors.
Yet financial institutions can’t invest or support companies if sustainability measures are not communicated properly. Climate-related financial reporting – such as the kind done through the TCFD framework – is the tool companies use to communicate their ESG initiatives.
As the Financial Stability Board notes, “Without reliable climate-related financial reporting, “financial markets cannot price climate-related risks and opportunities correctly and may potentially face a rocky transition to a low-carbon economy, with sudden value shifts and destabilising costs if industries must rapidly adjust to the new landscape.”
The Bank of England’s report states that financial institutions should “prioritise progress on data and will need to put in place interim measures to inform risk management until these data challenges are resolved”.
Producing data-driven sustainability and climate action reports is no easy task, admittedly, but the presence of such a report serves as an invaluable, transparent reference point for stakeholders. It enhances consumer and investor buy-in.
“Businesses are becoming increasingly aware that net zero and sustainability are only going to become more important in ensuring the longevity of their business model,” said Brendan Garvey. “What businesses need help with is understanding that having a focus around their Environmental, Social, and Governance (ESG) strategies can really help as they develop their net zero plans and begin their net zero journey.”
Data technology minds the data gap for businesses
Digital and data technology play a significant role in facilitating net zero strategies. Next-generation smart meters are powered by cutting-edge and scalable computing technologies that enable advanced data streaming. Systems utilising this tech can deliver a business’ energy and carbon consumption in real time.
“As we explain to customers, the first step starts with knowing their baseline emissions, and using the data from their business to help them design a plan to achieve net zero,” Brendan Garvey says.
Real-time data equips businesses to make proactive decisions.
Carbon and energy management solutions “give businesses a head start with accurate readings of where they are now,” says Loganathan Bose, Head of Products at ClearVUE. “Businesses can measure real progress, project future targets and course correct with constant, consistent, reliable and readable data.
“In a climate of changing regulations, businesses can not only seamlessly adapt and comply, but also exceed targets.”
Dan Smith adds: “The old adage ‘you cannot manage what you cannot measure’ is very true, and especially for energy and carbon. Having robust, big data relating to energy and carbon consumption allows for many other inefficiencies to be identified and acted upon, and it also can ensure that the fundamental changes are taking place correctly.”
Data-driven net zero consultancy with ClearVUE
ClearVUE has a track record of helping businesses address their wasted and inefficient energy usage through real-time, big data analytics. It has formed a powerful proposition to businesses on how to eradicate their emissions.
“By implementing a high quality energy management and carbon accounting system, such as ClearVUE, these businesses will be able to identify and reduce their energy consumption, and give them an advantage in terms of cost and carbon reduction at the same time. This really does provide a win-win scenario for both businesses and the world we live in,” says Dan Smith.
Reach out to us today for a demo of our carbon and energy management solution.