Avoided CO2 emissions

As companies seek ways to lower their carbon footprint, those invested in flood-prone assets must grapple with an additional layer of issues, such as the hidden carbon costs associated with post-flood recovery.

When a climate-related disaster, such as a flood or hurricane, occurs, the damage can render assets prematurely obsolete. Infrastructure, equipment, and other products that were once thought to have long operational lifespans may need to be replaced sooner than expected. Traditional life cycle assessments often fail to account for the potential accelerated end-of-life of assets triggered by climate hazards. This oversight can have significant implications for carbon emissions.

In the rush to improve financial stability, companies may also prioritize rapid replacement and reconstruction, inadvertently opting for less sustainable options with greater carbon impacts. This urgency can lead to decisions favoring quick fixes over resilient, eco-friendly, and long-term solutions. For example, using readily available, emissions-intensive materials in the reconstruction process can become the default choice, compounding the carbon impact. Early asset disposal resulting from climate hazards can also generate additional waste and emissions, contributing to the overall environmental burden.

Of course, climate hazards can also put a stop to some emission-intensive activities temporarily. In the agricultural sector for example, the short-term disruptions from a flood can have conflicting environmental impacts. There can be a temporary halt in carbon-intensive activities like tillage and biomass extraction, but this is offset by the damage to the agroecosystems, the loss of valuable topsoils through erosion, and the contamination of land and water resources.

The recovery process involves additional emissions-intensive activities such as rebuilding farm infrastructure, intensifying fertilizer and pesticides usage to revive high-yield crop production, or even increased deforestation to compensate for losses in productive lands. These actions are another shock to the long-term carbon accounting of agribusinesses.

So, as companies navigate the challenges of conducting business in climate hazard-prone areas, such as by preparing for disaster recovery and asset replacement, they must also consider the potential carbon shocks to their net zero efforts. The best way to do this would be understanding their level of asset exposure to physical climate risks, for example by new tools developed Weather Trade Net.