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Climate change ‘is the greatest threat to business for London’s SMEs’

At a recent meeting, the London Assembly’s Economy Committee heard that London’s businesses are failing to adequately invest in suitable climate change risk mitigation strategies.

The Economy Committee were told that large companies have substantial strategies in place to deal with climate change risks; however, SMEs across the capital are generally unaware of the significant threats to their business posed by climate change and severe weather events both in London and to their supply chains abroad.

Jenny Jones AM, Chair of the Economy Committee said:

“It is vital that business owners in London, SMEs and large companies alike, understand the very real risk that climate change and severe weather events, both here and abroad can have on the future success of their companies. But today we heard that SMEs, which account for 90 percent business in the capital, do not have the resources to protect and adapt themselves to the impact of severe weather events.

“We heard examples of what happens to businesses when severe weather events, such as Hurricane Sandy or the 2011 Thailand Floods, wipe out supply chains.

“London must build up its resilience to climate change risks, not just strengthening its infrastructure but also future proofing throughout the economy”.

The information presented to the Economy Committee was supported by a new report released by Marsh and Base London.

The joint report, ‘Resiliency: Adapting to Extreme Weather Events and a Changing Climate’, benchmarks opinion among infrastructure and real estate firms and Base London members. It found that nearly two thirds (62 percent) of respondents believe that extreme weather events are already having an impact on their businesses. Furthermore, 86 percent believe that the impact of the changing climate is already, or will be, materially felt by their organizations in the next decade.

Despite this widespread acceptance that the climate is changing, 84 percent of respondents stated that their firms currently do not record the impact or measure the costs associated with climate change. In addition, 38.8 percent believe that a tangible return on investment would first be required before their firms would further invest in resilience strategies relating to climate change.

Dr Cliff Warman, Environmental Practice Leader, Europe, Middle East and Africa (EMEA), Marsh, commented:

“Extreme weather is no longer a ‘black swan’ event, or a once in a generation phenomenon; last winter’s storms in the UK, which resulted in more than £400 million in flood claims, serve as a stark reminder of the direct impact changing weather patterns are having on our society and businesses.

“While more London businesses accept that the climate is changing, it is worrying that so few are investing in appropriate measures such as resilient building or robust supply chain strategies to protect themselves from the risks associated with extreme weather. Those organizations that are perceived to have a low resistance to severe weather events will become increasingly uninsurable in the future.”

Marsh and Base London’s research also found that firms are under-utilising insurance products which can be used to enhance resiliency. Only 5.9 percent of respondents state that they have a resilient repairs clause on their property insurance policy, which allows for more robust reinstatement of a property after a loss; and nearly three quarters (72.5 percent) do not know if such a clause is in place.

Andrew Dowding, Managing Director, Base London, commented:

“It’s clear that commercial property owners, landlords and tenants need to get a better handle on the changing urban risk landscape. For instance, failure to make contingencies or to prepare for extreme climate events could have very severe, disruptive and costly consequences for everyone. We all have to recognise that this agenda is as relevant to business owners who want to save their businesses as it is about campaigners who want to save the world.”

•Date: 27th June 2014 • UK •Type: Article • Topic: Operational risk

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