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Fighting climate change will cost companies worldwide nearly $2.5 trillion over the next 10 years, according to an estimate by Allianz SE.
The German insurer analyzed the most important measures currently enacted or under discussion to rein in global warming and found that the energy sector alone will be hit with an additional cost of $900 billion. Further emissions cap reductions or industrial regulations could increase that amount.
The report comes as representatives from nearly 200 countries hold climate talks in Madrid to implement the 2015 Paris Agreement to limit fossil fuel pollution. The United Nations has warned the global climate outlook is “bleak,” and protests that governments aren’t doing enough to prevent global warming are growing louder.
“The urgently needed transformation into a climate-neutral economic system that lies ahead of us, requires close cooperation between the state and companies in view of the high transformation costs,” said Ludovic Subran, chief economist at Allianz. “Only if companies are not overburdened and structural change is actively managed by both sides can the transition to climate-neutral economies succeed.”
Allianz argued that most companies are “insufficiently prepared” for the regulatory wave coming toward them, and urged them to assess their emissions and address indirect effects including supply-chain transmission and financial risks.
“The ultimate risk is complete loss of value of certain assets or entire businesses,” it said.
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