Climate change risk will have a “transformative effect” on the global energy sector, which is currently facing a number of short-term pressing issues including a collapse in demand amid the COVID-19 pandemic, according to a new update from Willis Towers Watson.

The update emphasises the need for energy players to invest more in dealing with climate change and environmental social governance(ESG).

“In these unprecedented and uncertain times there is no denying that the past 12 months have been challenging ones for the energy industry,” Head of Natural Resources George Nassaouati said.

“However, it is the issue of climate risk and wider ESG factors that will have a significant impact on the future shape of the industry.

“There is no doubt the world will eventually recover from COVID-19 and the energy industry will recover from the oil price war. But there is one issue that is here to stay on a permanent basis and that is climate change, and the transformed risk landscape that now confronts the energy industry.”

Mr Nassaouati says today’s energy businesses must commit to incorporating ESG standards and climate change into their risk mitigation strategies if they hope to ensure a sustainable future.

The update says achieving a satisfactory ESG rating will be critical for energy companies if they are to secure the support of key stakeholders in the future.