Heat belongs in every company's climate portfolio

This content was originally published at BusinessGreen.

With heatwaves, drought and wildfires intensifying worldwide, companies adopting a heat-focused, total climate accounting approach can reduce risk and boost their market leadership potential, writes Kiff Gallagher from the Global Heat Reduction Initiative

Earlier this summer, extreme heat led the headlines once again. From the Northeast US to southern Europe to India, heat domes and waves are affecting health and community well-being, as well as policy and businesses.

Disrupting supply chains, affecting productivity, and spurring crop losses, extreme heat is already presenting major risks and costs to national and global markets. In the US alone, heat-related economic losses already exceed $100bn annually.

Left unchecked, these losses are projected to grow dramatically: By 2035, heat could drive $2.4tr in annual productivity losses and $445bn in annual fixed-asset losses for publicly listed companies. Planetary warming will result in an income reduction of 19 per cent globally by mid-century. Climate tipping points pose significant and underestimated risks to financial systems, holding the potential to trigger sudden, systemic blows that reach across asset classes and global markets.

These serious and current financial risks present a clear imperative for businesses to address heat in the near term. Yet, many climate strategies currently focus on longer-term decarbonization goals, looking at 2040 or beyond, inadvertently overlooking the other 50 per cent of warming: super pollutants. These near-term heat levers could slow warming and protect their businesses today. The risk tomorrow is greater than the risk a year from now, and each year of delay compounds financial exposure, increasing the cost of adaptation and heightening the likelihood of systemic shocks.

To manage this risk, companies must take a portfolio approach to climate action, investing in a holistic approach to climate accounting, one that addresses both carbon dioxide and those near-term heat drivers like super pollutants and albedo (the planet's reflectivity).  

We currently are underutilizing these key levers to address warming and mitigate risk. The high-impact, short-lived emissions of super pollutants, like methane, black carbon, and hydrofluorocarbons (HFCs) are causing tens to hundreds to thousands of times more warming than carbon in the near term.

As extreme weather has pushed businesses to rethink their climate strategies, holistic climate approaches that include targeting heat directly can unlock more effective, science-aligned strategies for climate action. This total climate approach offers the fastest path to cooling in the next one, five, 10 and 25 years, allowing us to tangibly improve the near future for communities and businesses.

Some companies have begun investing in heat reduction, recognizing how it can maximize their impact. Google recently made headlines with a massive two new partnerships to mitigate short-lived climate pollutants, eliminating 25,000 tons of methane and HFCs by 2030 – the warming equivalent to eliminating roughly one million tonnes of carbon dioxide.

Extreme heat and warming are already here, driving economic losses and snowballing financial and business risks, and these losses will only compound. To reduce risks now, businesses can lean into a heat-driven approach, considering all the available levers for cooling and climate action.

By adopting a heat-focused, total climate accounting approach, companies reduce system risk while leading the market in defining a more resilient future. This year's continued extreme heat has made the risks of near-term warming undeniable. Businesses must act now to prevent the losses they're currently set to incur.