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Climate risk in the public sector

Public sector climate risk management is challenged by the complexity of navigating shared risk.

This is the fourth and final blog in a four-part series exploring climate risk, resilience and adaptation’

Climate change is here now

In recent months, there has been no shortage of headlines on various disasters and records that are concerning for those affected. If anyone had doubts, or perceived that climate change was a problem for tomorrow, let there be no illusions that climate change is here now. The situation varies across the world, but in the past five years Australia has seen unprecedented drought, catastrophic bushfires, and sequential flooding events across many parts of this vast country. Communities are hurting, our environment is battered, and costs to the economy are emerging.

The actions we take in response to climate change matter, not just for the people of today, but for future generations.

So what does climate change mean for you?

It is almost certain that climate change will contribute to the increasing frequency and severity of climate extremes. How this plays out regionally will vary depending on where you are located, with some regions seeing changes occurring at a faster rate than others.

But what does it mean when it gets hotter, or when the heavy rain keeps coming? 

Considering the impacts of chronic temperature rises provides important context to understanding your climate risk – to translate what it means for the things that matter for you, your community, or the businesses with which you interact. This often depends on the types of activities and services with which you are engaging. For example, extreme heat can impact food production systems, lead to equipment malfunction and failure, increase the incidence of heat stress and mortality, and trigger power failures that disrupt all services which rely on electricity.

What is climate risk?

Climate risk includes physical hazards and transition drivers and how they intersect with your exposure and your circumstances that influence vulnerability. How we proactively manage, or reactively respond, when risks eventuate is also an important determinant of climate risk.

Climate risk is often split between the physical changes in conditions (including tropical cyclones, heatwaves, floods and bushfires) and transition risks associated with changes across the social, economic, built and natural domains required to achieve a low-emissions future. Physical and transition risks go in tandem, and therefore holistic approaches to climate risk assessment should ideally consider both.

Where does nature fit in?

Nature underpins essential ecosystem services that support all forms of life on Earth, from the air we breathe to the energy we use to power our devices. The health of our environment is intimately linked to climate, as changes can either promote or inhibit nature with broader implications for the food and water systems on which we rely. For example, hot and dry conditions can impact crop yields due to declines in water availability, soil quality and pollination services, while many other biodiversity losses are likely as ecosystems are challenged by the pace of change. In the context of a just transition, the long-term viability of biodiversity credits or nature offsets may be challenged when wildfires occur.

Awareness is key for effective management

Assessing your climate risk involves more than just understanding that it is going to get hotter. It also means seizing the multiple opportunities enabled by change and recognising the co-benefits of swift action.

Our future is contingent on the ambition of society globally to reduce emissions and enhance climate-resilience and adaptation efforts. Climate risk assessment remains complex, due to diverging trends across multiple socioeconomic factors that may collectively lead to different emissions intensities and corresponding global warming levels. A climate risk assessment should consider at least two plausible and distinctive climate scenarios and compare how risk exposure varies between them and changes over time.

Building on the lessons from the private sector

Since 2017, through the Taskforce on Climate-related Financial Disclosures (TCFD), investors have increased their scrutiny of how companies are managing their climate risk. Numerous businesses globally have adopted the TCFD recommendations, and several jurisdictions are moving to make those recommendations mandatory. In June 2023, the International Sustainability Standards Board (ISSB) announced the S1 sustainability (S1) and climate-related (S2) disclosure standards which build upon TCFD. They require explicit detail on the climate risks and opportunities that are material to an organisation and robust justification when details cannot be provided. With the ISSB assuming TCFD-monitoring responsibilities from January 2024, momentum is building for more public accountability and transparency on how an organisation’s activities either materially contribute to, or are impacted by, climate change. 

Public sector response as an accelerator for action

Climate action is not just required of big business. Governments are critical for reducing barriers to change through appropriate policies aimed at shifting incentives away from those that are emissions intensive to those that are less so and strive to reduce exposure and vulnerability to multiple climate changes. Governments are large organisations, too, and provide many services to citizens. They can legislate change when required.

Like the private sector, government employees recognise that climate change is a wicked problem. However, the complexity that climate change presents, particularly due to the shared responsibility with other jurisdictions, levels of government (e.g., federal versus state) and other businesses are challenges that need to be navigated to manage climate risk effectively. It is precisely this shared risk and ability to stimulate transformational change where government requires support to build capability to understand what climate-related risks and opportunities are material to their workplace, and the products and services that they deliver.

This blog was co-authored by Dr Tayanah O’Donnell, Partner for Climate & Sustainability, Dr Annette Hirsch, Specialist Senior Manager & Climate Scientist for Climate & Sustainability, and Jordan Petrie, Senior Manager for Climate & Sustainability

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