Business leaders must retain focus as Asia's 'riskscape' evolves

WHILE Asia-Pacific businesses are better prepared to address the adverse financial impacts of climate risk than global peers, a survey of chief executive officers (CEOs) and chief financial officers (CFOs) of the world's biggest companies (that is, US$1 billion or more in annual revenue) showed that only four out of 10 businesses say they are fully prepared to address these impacts. This low level of preparedness is surprising given the increasing number of climate-related natural catastrophes across the Asia-Pacific since 2018, where bushfires, typhoons, floods and drought have wreaked financial havoc across the region.

A survey of several hundred business leaders by FM Global, conducted prior to the current pandemic, found that at least 34 per cent of Asia-Pacific executives believe their organisation is significantly exposed to climate risk, compared to 15 per cent of these respondents from North America and 6.9 per cent in Europe. Further, 57 per cent of Asia-Pacific respondents said that addressing climate risk was a high priority in their company - compared to 29 per cent in North America and just 14.9 per cent in Europe - citing concern about increasing risk of bushfires, typhoons or cyclones and the potential impact on business financials.

Business leaders should be more concerned about the Asia-Pacific's evolving "riskscape" - a term coined in a recent report from the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP), The Disaster Riskscape Across Asia-Pacific 2019, that has studied the region's climate risk impacts and exposures in depth. It confirms that the riskscape across the Asia-Pacific is changing and becoming more complex, with increasing exposures to multi-hazard climate risks. In 2018, almost half of the 281 natural disaster events worldwide occurred in the Asia-Pacific region, including eight out of the 10 deadliest. Indonesia alone was struck by two tsunamis and one earthquake in quick succession while Japan, perhaps the most disaster-prepared country in the world, experienced unprecedented flooding, followed by an anomalous heatwave. Unsurprisingly, economic losses continue to increase due to factors including slow-onset disasters such as drought in the agricultural sector. UN ESCAP reports that multi-hazard losses for the region are calculated at US$675 billion, with 60 per cent of this tagged to drought-related agricultural losses and the remaining US$270 billion for all other economic losses. The impacts of disaster have been outpacing the region's economic growth, rising as a proportion of gross domestic product (GDP), from around 0.1 per cent in the 1970s to about 0.3 per cent in recent decades.