Hosted by Ramble. My name is Ryan Dowling, senior manager at Ramble, and I'm excited to be here, with you today. Today, we're diving into a topic that's rapidly reshaping corporate strategies, investor expectations, and regulatory landscapes. And, yes, we're talking about climate related risks. More than ever, companies are recognizing climate risk as not just an ESG or a regulatory issue. It's a fundamental business and financial risk that demands strategic action. And for today, we'll explore that in terms of how organizations can move beyond those compliance check checklists to real resilient driven decision making. Our goal today is to share insights, practical examples, as well as, diving into where climate risk management is heading and how companies who are potentially like yours can stay ahead of the curve. Before we start, for the people who are not aware of Ramble, Ramble is a leading global engineering architecture and consultancy company with more than eighteen thousand experts worldwide. It's founded in nineteen forty five. Our headquarters is in Copenhagen, Denmark, but we have a global presence with more than two hundred forty offices across thirty five countries, creating a essentially a robust capability to deliver diverse and specialized services on a global scale. Ramble is known for and has national reputation as a leader in climate action and adaptation planning, resiliency consultancy, renewable energy and energy efficiency planning, sustainability planning, environmental strategic analysis, regulatory compliance assurance, and risk management. And with these various skill sets, we offer an end to end climate risk consultancy surface, including focusing on transition as well as fiscal risk assessments, risk governance evaluations, the development of adaptive risk strategies, and really spanning from that initial risk screening to detailed vulnerability analysis and the implementation of tailored adaptation measures. So here at Ramble, we have supported multiple clients with their climate risk assessments, and disclosure requirements and building that climate risk into the business functions, such as within your operations or in your corporate strategy. And then for today, we we really encourage you to listen and to reflect whether you're just starting or further along your climate risk journey. And for for, the fireside chat today, we have two experts that are joining, which are Mark Romanelli, our transition risk expert, as well as Ross Beardsley, our fiscal risk expert. I will hand it over to you to to both of you just to introduce yourself. Mark, do you would you like to kick it off? Sure. Thanks. My name is Mark Romanelli. I'm a manager at Ramble based out of the Princeton, New Jersey office. And my background is actually in risk management. Prior to joining Ramble, I helped financial companies and other other firms manage their enterprise risk management systems. And so I bring to Ramble both the the sustainability that Ramble's known for as well as that that corporate risk management background. I'll turn it to Ross for his intro. Thanks, Mark. Ross Beardsley. I'm director of Haz Atlas, which is Ramble's internal climate risk tool. I focus on physical risks and helping our clients understand their risk exposure profiles now and in the future to help inform due diligence, regulatory disclosure, and resilient design. Excellent. Fantastic. And I I think in terms of the fireside chat, let's let's kick it off with the with the first initial question. Really setting the scene for today and our conversation is why is it important? So why is managing climate related risk becoming a business imperative today and not just a sustainability goal? And and, Ross, potentially, we can we can start that with you. Well, the reality is climate change and its impacts are no longer theoretical. They're really causing material impacts today. I mean, some recent examples we can think of is hurricane Helene, which ripped across the southeast and caused more than seventy five billion dollars in damages, including in many areas that didn't think they would be exposed traditionally to a hurricane, you know, up in the Appalachian Mountains and in areas of North Carolina that you don't typically think of as being coastal. Also, we had the recent wildfires in LA that burned over fifty thousand acres, destroyed tens of thousands of structures. These are causing real world impacts now. Climate change, we typically think about the future, but the reality is it's starting now, and it's it's projected to only accelerate over time. And the issue with that is the vast majority of our built environment was designed using historical climate data only. So, you know, most facilities around around the US and around the globe are built according to building codes. With very few exceptions, building codes are accounting only for historical conditions. And so we have facilities and and supply chains and infrastructure that are based on historical data. Where we're starting to see these these rapid and accelerating changes in those conditions. And so now your hundred year flood that you designed your facility to ten, fifteen, twenty years ago is no longer a hundred year flood, and the risk tolerance you think you have is not actually what is occurring due to these changes in climate. And one of the issues with this is when all of our facilities and our critical infrastructure are built around that historical data, this results in cascading of impacts very quickly. So one major data center you rely on that's flooded, one heat buckled runway, one storm damaged port, these can disrupt entire supply chains and really have widespread and major impacts on businesses across the globe. And this results in direct hits on the bottom line. You know, these operational disruptions, these asset damages, supply chain interruptions really have resulted in material impacts as we're starting to see more and more and as well as also in insurance premiums, which has been the primary avenue which people use to to to mitigate and transfer these risks, drastic increases in those. And so particularly in high risk areas such as the Southeast or in California, we're seeing insurance premiums really increase and and even be pulled out, which is causing some of the the the primary avenue we use to mitigate these risks to be at risk itself. And so the the key takeaway from this is the economics are clear. You know, there's there's these material impacts that are occurring, but the reality is that you can implement and invest in resilient strategies. And those investments often result in more benefits than what you actually spend, Whereas opposed if you focus on reactive repairs, that cost four to six times more than if you just invested in the first place in those proactive resilience investments. Mark, do you have any input from a transition risk perspective? Yeah. And I I'd say from a transition risk side of things, you don't actually have to believe in climate change to look around and notice that governments and other stakeholders are reacting to the idea of it, whether that's by adapting to it or by trying to mitigate it. And so with that framing, climate change climate related risks are just part of the broader risk landscape that you need to understand and manage. Investors, regulators, customers, they're all looking and demanding credible risk management, not just storytelling and disclosures. And increasingly, companies are being held accountable for their climate oversight. And so that means that climate risk really needs to be moving from sustainability teams to core risk functions and and operating throughout the business. And it needs to inform strategic decisions, thinking through where to site facilities per some of Ross's points, how to structure supply contracts, and how to future proof business models. We're seeing a fundamental shift right now from why should we care about climate risk to how do we manage it effectively. And companies are realizing that climate risks directly shape their strategy operations and connective position, not just reputation. Yeah. It's clear it's clear that the climate related risk is very important to the business, not just from a future perspective, but it's it's essentially now. It's it's here. And as you've been working with multiple multiple and dozens of various companies and clients, what what are the types of climate related risk, fiscal or transition, that clients typically most often underestimate? Yeah. So, you know, I think people always tend to focus on those things that are in news, what I was mentioning, hurricanes, floods, fires. These acute severe events are extremely damaging. You know, they can cause widespread disruptions and impacts as we've seen, and they're typically insured. But the reality is these chronic physical risks are typically the silent killers and are typically overlooked. And so these include, you know, long term changes in average temperatures, increasing drought and water scarcity. These things are moving slowly, they're they're unfolding gradually, but they can significantly impact operations over time. You know, as I mentioned before, you you have your your cooling system designed based on historical data. All of a sudden, this slow rise in temperature is causing your cooling system capacity to be exceeded more often, which requires you to shut down or slow down your operations. And so these things often these slow burn risks often fly under the radar until they start to cause these impacts on productivity, equipment lifespan, employee safety, and other resources such as regional utilities, but they are truly silent killers. They're not typically covered by insurance, and they're these slow creeping hazards that you need to address proactively because they don't appear so quickly and cause such acute impacts. Got it. Got it. And and, Mark, how do you see that from a transition side? So I think on the transition side, it's not so much any one risk or risk category, but the speed at which these risks occur. On the regulatory side, shifting regulations, carbon pricing, customer preferences, they can they can change much faster than you think. And if you're not actively monitoring and managing these things, they can catch leadership teams unprepared. So timelines are actually speeding up from what policy is announced to when they're being implemented. And so that means that you have less time to make these strategic pivots. And then on a competitive front, things can change even more quickly than on the regulatory front. Customers companies are underestimating how climate considerations are reshaping customer requirements, supplier standards, market positioning, and they can find themselves behind other competitors that are more actively managing this. And so when when we're really understanding this, the data to decision gap is critical. Even if you understand the risks, you can't be and you but if you can't tie these risks into your financial and strategic implications, quantify the ROI, you might not be able to get these measures off the ground, and then you'll be caught flat footed if and when these risks do occur. Yeah. That makes sense. And, you know, we what I'm hearing is obviously that these these risks are very pertinent. They're they're very pressing. They can they can derive from various areas. But businesses also, they have other pressing matters that they that they need to tend to take to take into account and monitor, including, currently, which which, obviously, hot topic. It's just from a terrorist point of view. Right? So how how what is your view in terms of companies wanting to focus on client related risks as well as their opportunities, but also needing to balance that with other various pressures or uncertainties out there such as, for example for example, tariffs. Yeah. And as I as I said in my my first statement, at its core, companies need to understand that climate related risks and opportunities, they aren't something separate. They should be part of the core business. Climate risk is a type of business risk, and many different business risks can have climate risk related components. On the climate opportunity side, we we have to talk talk about the positive aspects of this as well. These often overlap with other business goals. Investing in energy efficiency, changing supply chain locations to be more resilient. Those those are not just going to help mitigate impacts from climate change. They're also gonna help make the business more resilient and strong regardless of whether or not climate change is is occurring faster or slower. And so an initial climate risk focused effort might be required to bring this understanding to the bit of this area of the business on par with other business risks. But in steady state, it's just another but significant risk to manage. So effective stat strategies can build flexibility, enabling custom companies to navigate a a range of futures. So what do we do if climate change is faster? What do we do if climate change is slower? And understanding how different business decisions are made based around those things. But at at its base, climate risk is just a different strategic lens to look at for innovation, resilience, and understand how these things are are building into a a business strategy. Yeah. And I think compared to tariffs, you know, climate risk you know, tariffs may come and go, but climate risk is here to stay. And I think that's the key thing. This is a long term risk that's not going anywhere, unfortunately, and it's just something we all have to contend with and we'll have to increasingly do so. Yeah. That makes complete sense. And what I'm what I'm hearing here is really just don't don't see it as a a siloed risk. It's really how how to embed that and integrate that within your organization is is what's really key in making those short term, medium term, but also those long term strategic decisions associated with what you're seeing from from a risk perspective. Mark, I would would love to I'd love to double click in terms of what you mentioned. You mentioned, regulatory perspectives as well and various pressures. Right? We see a little bit of an uptake on the regulatory side. That's from California climate related disclosure such as, s p two sixty one, or if that's from the ISSB, right, the International Sustainability Standards Boards that that provides a framework on various sustainability disclosures, including climate risk, or even the CSRD, the Corporate Sustainability Reporting Directive out of the EU that has various climate related risk, disclosures embedded and included, of course, with the caveat that potential change from the omnibus perspective. But we clearly see a regulatory momentum that's happening here. How do you how do you see that influencing the corporate behavior, this this regulatory momentum? Mark, potentially, we'd love love to get your thoughts on that. Yeah. Absolutely. And there are a wide number of climate disclosure laws that are that are taking into effect and more of that are being being discussed right now. And I think what we've seen is that implementation has been at times a little disordered, sometimes a little stuttering, but there's definitely a clear direction and clear momentum that's happening. And it's not just happening from regulators. It's also expectations rising from customers and from investors as well. And so we we have a regular tracking of all of these different these different laws across different geographies. But the regulatory landscape is shifting fast. We're moving away from these voluntary disclosures to legal requirements in many many different areas. They have clear thresholds. They have penalties. They have audit expectations. And so companies need to move towards cross functional responses, bringing legal, finance, operations, sustainability teams to comply and prepare. Disclosures are not just about climate metrics. They're also about making sure that you have the structures in place internally. The governance clarity, the scenario analysis, the transition planning, to make sure that you are managing these things and have a repeatable system to manage these things. That can often require a significant maturity jump. So what we're seeing is more clients reevaluating the risk management systems in light of these changes. But not just to comply, but to identify gaps, build institutional resilience, and again, as I said earlier, to integrate climate risk with all the other risks that that are being managed. Helpful. Thanks so much, Mark. I think I think this is a good point in terms of moving onwards to from the pertinence and the pressures that we know that we discussed moving really to more, like, real world applications. So I'd love to hear from from your regard in terms of for companies that, that that are working on this, and and and the companies that you've been working with, like, what what could you provide an example of an organizational view of the climate risk, how that evolved dramatically after conducting that risk assessment or scenario analysis, and, what the potential outcome is of of that assessment or potential change from the organizational's, perspective in terms of if that's an incorporation or integrating of the risk, the the associated strategic decisions that come after, you know, whatever that that follow-up is, we'd love to hear a little bit of an example of what what that what of of of a company working on the climate risk assessment and and the outcome there. Yeah. Absolutely. One that comes to mind is we were working with a mid sized manufacturing company, and their initial assessment before before we came in was that their climate risk exposure was low because they had minimal scope one emissions, and they had a very very company centric view of this. But we went in, we conducted a scenario analysis, and what we saw is that even though scope one emissions were low, there was an exposure to carbon pricing in its upstream materials and logistics. So increased prices of input costs and other other factors that are not directly controlled by the company. And so that could pose long term cost pressures under especially under net zero policy pathways. And so this really shifted how leadership thought about emissions from just self scope one and two focused to more broadly focused on scope three emissions throughout the value chain. Costa, anything on on your mind? I think there's two examples I can think of. One, we are working with a large commercial real estate client, and they wanted to establish strict downtime standards. Essentially, how long would each of their facilities be down before getting back online after a severe event? But they found that the use their their historical use of standard building codes and insurance based practices weren't allowing them to achieve those goals, especially as these climate change impacts start to evolve over time. And so we went through a climate resilience assessment, and this really revealed that what they considered to be one in twenty year risk or one in a hundred year risk based on standard building code were actually becoming more like one in five or one in twenty year risk in the near future. And this allowed them to actually adapt their risk management processes to implement more stringent or additional resilience measures to make their facilities more resilient and to better align with these downtime standards they wanna achieve across the lifetime of their facilities, not just in the present day, but having that more forward looking view and think about across the lifetime of our facilities, how is that how are conditions going to evolve, and how can we adapt our facilities to meet those standards? And then one other example I was think I can think of is, you know, we work with a lot of data center clients. As many people are aware, data centers use a lot of water, and that's posing some challenges in some some water stressed areas. And so a lot of our data center clients are considering moving towards air cooling. However, when you move towards air cooling, if you're not accounting for future temperature increases, you may find that the cooling capacity of the data center is too small. And so we've helped data center clients kinda think about, okay. If we're gonna move from water cooled to air cooled, what is the future temperature ranges we need to consider to ensure that our cooling is sufficient during, say, an extreme heat wave ten years from now? And so switch switching from that, what are the conditions we have to address now to that more forward looking lens and understanding how quickly are those conditions going to evolve, what measures can we implement now either to address those future conditions or at least allow us to be prepared to address them more quickly in the future. Yeah. That forward looking perspective is really key here. Right? That's, that that that's what I'm hearing. It's it's it's very interesting going through those analysis. I I would also imagine that multiple companies who feel like, okay. Well, I would love to just focus from reporting standpoint. Right? Looking at those various reporting disclosures that are out there. You know, let's get them over with. Obviously, there are resource constraints in in various areas. But an approach like that, what what are common common pitfalls for companies who would who would pursue something similar around those lines? Really seeing climate risk management only more of a reporting obligations than than than anything else. Yeah. Frankly, I I view that as a a big missed opportunity. If you're gonna be required to do these these disclosures anyway, you you could spend a little bit of extra time and effort and get a meaningful outcome rather than just treating this as a box ticking exercise where you put together a generic disclosure and that doesn't inform real decisions. I think if you're being given the opportunity and the requirement to actually do this, you can dive a little bit into more quantitative exercises, and you can connect climate risk to capital planning, m and a decisions, competitive positioning, pricing strategy, really build this this internally and build these connections. And as I said before, responsibility is often siloed in ESG or sustainability teams if you're gonna treat this as a box checking exercise. But if you bring in executive ownership, different functions within the organization, and more more integration with the governance structures, you can make this into a much more robust and actually helpful exercise rather than something that you just just kind of waste a couple of hours on. Got it. Russ, do you see the same way? Yeah. Kinda building on what Mark said. I think there's really truly a data disconnect here, particularly when you're focused strictly on regulatory compliance and reporting. So often companies will spend all this time and money collecting this data they need to disclose, but then cannot connect that with their operational metrics. You know, a lot of this data is really useful when you're thinking about capital expenditures, you're thinking about maintenance schedules, capacity planning, emergency response protocols. And so when you collect all this data, it's really important that you connect it with those operational teams that are actually using that data beyond just thinking about reporting and disclosure. And then the other thing we see is kind of a static assessment. You know, climate change is evolving as as we're as we're living, and, you know, our understanding of those future changes is also evolving. And so often, we should we treat climate risk as a onetime thing. You know? We have to prepare this disclosure just to comply with the California laws or European laws and CSRD, and then it kind of ends there. The reality of we should think about this in a in a adaptive way where we're kind of continuously understanding what data we need to collect to understand the types of impacts that are occurring and how well our operations facilities are performing with respect to those conditions. So this needs to be a regular process in which you take that that big effort that you undertook and and the learnings from that, but you figure out, okay. What data do we need to track? What do we need to reevaluate and under what schedules to make sure that we're reacting appropriately and responding to the the understanding of future changes that we need to do to make sure we're resilient. Got it. So if you if you're already collect going through the efforts of collecting the data, use the data, essentially. And then the key question is, like, how do you then integrate the data, which is a great segue to to my follow-up question here. And and, potentially, Mark, as as as you have been mentioning really on the side of perspective versus the integration, maybe this is a question that you can answer here. But love to love to get your perspective on how organizations are currently embedding that climate risk into their enterprise risk management. So let's say from a governance or business strategy, as well as just more from an individual functions perspective. Like, there I I must imagine there are multiple various challenges and difficulties along the line. But how how from your experience, how how have you seen organizations doing this? Yeah. And I'd say with leading companies that we've seen, climate risks are embedded into existing categories. So potentially a separate separate box that you can check where you have your like finance, operational risks, and then you can tag whether or not things are climate risks. So they know their climate risks are financial operational compliance and not just responsibilities of the sustainability department. But they also know to pull in the sustainability department when they're trying to understand these things. So boards are increasingly demanding climate competence, prompting updates to risk oversight charters and scenario review cycles. On the strategy side, some companies are integrating climate related insights into investment screenings, like site selection, product development, and that's that's impacting how they how they go about things and making sure that climate risk is integrated into all decision making. Then operationally, climate resilience is embedded into asset life cycle planning, infrastructure up upgrades as as Ross was mentioning with the data center client and supply chain diversification. And so this shift really starts with doing maturity assessment and a risk manage mapping exercise, trying to understand where climate risk is already showing up, where it's being it's being noted, but not specifically highlighted as a climate risk and and attacking it that way. Thanks. Alright. Perfect. Alright. I think I think we've talked enough in terms of, like, what good practical examples look like of of the companies that you've been working with. A lot of the owners of the conversations, of course, like the utilization of the data and the forward looking perspective. So the key question here I would I would I would ask, which is, like, how can companies prioritize between the immediate actions or even the and and and balance that with that long term strategic investments while, when managing climate risks. Ross, love to get your perspective here from how you see it from a fiscal risk perspective. Yeah. Ideally, we'd all wanna address all the risks right away. Right? But then in in in reality, that's not possible or practical, especially when you're looking at complex value chains, companies with large large footprint. And so you really have to be very practical here. And and the goal really is if you're just starting out with this, is really to understand what are your critical material vulnerabilities that would impact you in the short term. Like, if, for example, if you have flood prone facilities or, you know, near term regulatory exposure, that's really gonna impact your operations and your bottom line. The reality is you just need to address those now. But at the same time, you should begin to understand where those more long term or chronic impacts may occur. And so you wanna do you do be thinking about, you know, where do our water intensive facilities lie? You know, where are our carbon heavy supply chains that need that longer term transformation? Those things may not impact you right away, but in reality, it's gonna take time for you to adapt your business and implement measures to address those. And so you start need to start working on those now. So the reality what I would suggest in the short term, address those immediate concerns immediately. You know, address those things that are really gonna impact your business, but you have to start laying the foundation for those longer term, more systematic changes that need to take place to address those chronic physical and transition or long term transition risks. And then thinking about prioritization, you should work within your existing systems and understand how do we apply materiality or assess materiality, and you can apply the similar process here to climate risks. So thinking about the severity and likelihood, thinking about the cast potential for cascading of impacts across your business. So you should think through each of these risks, both the chronic acute, and to apply those materiality filters. That would allow you to prioritize which risks are most material and where they overlap with these business critical outcomes, like revenue protection, cost of capital, asset valuation, and identify those that are most likely to resolve those impacts that should be prioritized. And then tying this all together, what you really and truly need to implement is what's called an adaptive management framework. So, essentially, you you develop a formal strategy. You have defined trigger points for reassessment and major infrastructure decisions. You know, like I said, you can't address everything right now. So instead, what we should do is implement an approach that says, if this occurs, we're gonna reassess and determine what we wanna do. And, also, establish those procedures and those processes that you see you can address those more long term changes, and this will give you flexibility. I think a great example of this is we worked with a client here in California. They realized they would have some some future flood risk in in a development they were working on, and they said, okay. What's our flood risk gonna look like thirty years from now? But instead of building a huge floodwall to address that risk thirty years from now because it's thirty years from now for one, and two, it's somewhat uncertain. Instead, what they did is they they built their floodwall a bit wider. So they built a floodwall for the near term but made it a bit wider. So in in the future, they can more easily raise that up to protect against future risk. And they said, look. We're gonna build out this floodwall now. We'll set this point in the future to reassess and see what the impacts have been to date and what the most recent projections are telling us and decide to what extent we need to raise it. But they gave themselves the flexibility to do that more cost effectively and establish that formal process to ensure that they're actually revisiting that in the future and not just waiting for an impact to happen and responding to that. Very interesting. Very interesting. Mark, how how how does that work from a transition risk perspective? Yeah. And I think, this tension between the need for immediate action and for long term strategic investments highlights the need for a risk asse
