Food firms Nestlé, Campbell Soup, Nissin Foods and Kerry Group are among a list of 50 companies worldwide that are highly exposed to physical climate risks, the Institutional Investors Group On Climate Change (IIGCC) has said.
The companies named, which are involved in food, pharmaceuticals, energy, mining, technology, transport and utilities, are more exposed to issues such as flooding than other companies in their sector and region, the IIGCC said.
In a letter to the European, Asian and U.S. companies from more than 50 IIGCC members, the investors asked the firms to identify properly and respond to events such as flooding, droughts and extreme heat.
“Companies cannot afford to ignore the impact that climate change could have on their businesses," said Stephanie Pfeifer, CEO, IIGCC.
"It is more important than ever that investors are able to understand the risks and associated financial impacts that companies are facing when it comes to the physical effects of global warming. This means that they can effectively identify sectors and individual businesses that are resilient or well-placed to adapt, and increase engagement with those that don’t have an effective risk management strategy in place.”
Set Of Expectations
The IIGCC also published a set of expectations for all companies on building resilience to physical climate change risks, including scenario testing and reporting against a set of risk metrics.
Companies have come under pressure from activists and investors to cut their carbon emissions, with Shell planning to appeal a landmark ruling on the issue.
But physical risks to a business can be overlooked, said Marion Maloney, head of responsible investment and governance at Britain's Environment Agency Pension Fund.
"We think that are there two parts to the climate change debate - often the physical risks element is the poor cousin that doesn't get enough attention," she said. "I want every company in my portfolio to be looking at these expectations."
Other investors signing the letter included AustralianSuper, Impax Asset Management and Lombard Odier.
Nestlé 'Undertaking Scenario Analysis'
Switzerland's Nestlé said it was "already undertaking scenario analysis to assess physical impacts on our value chain over a longer time horizon", adding this would "provide direction for our mitigation and adaptation actions across our raw material sourcing and operational footprints".
The investor initiative comes ahead of the next round of global climate talks in Scotland in November, where governments are being urged to accelerate their efforts to reach net zero emissions by 2050.
It follows the release of a landmark United Nations climate report in August warning that global warming was dangerously close to running out of control.
The companies were identified based on research by the IIGCC and climate risk data firm Four Twenty Seven.