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UNEP FI Flags Industrials Climate Risks

The United Nations Environment Programme Finance Initiative has outlined the physical and transition risks facing the industrials sector in a new guide aimed at raising awareness of climate-related exposures among financial institutions. The industrials sector emits 25% of global CO2 emissions and includes high-emitting sub-sectors such as cement, steel, petrochemicals, plastics and manufacturing. According to the report, key transition risks facing the sector include the broadening application and ongoing increase in carbon prices, as well as other public policy changes, which will increase pressure to decarbonise and reduce industrial pollution. It also cited rising litigation risks, adding that firms also face reputational risks “if they are too slow in responding to shifting demand patterns from consumers and shareholders for more sustainable inputs, production processes, and disclosures”. The report highlights physical risks from extreme weather events such as storms and floods, but also from greater severity and frequency of droughts and through temperature increase, which can will impede worker productivity, hamper industrial cooling processes, and increase expenses for air conditioning. “The industrials sector often relies on stable climate conditions to enable effective operations in complex supply chains,” it said noting that the physical impacts of climate change “will make current industrial practices more difficult or risky”.



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