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Climate change the key threat to business growth, CEOs say

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Risk arising from climate change and the environment has jumped to be the No.1 threat to company growth worldwide, according to a KPMG global survey of top executives.

Environmental risk was cited by 28% of Australian CEOs and 21% of global CEOs.

Emerging and disruptive technologies were second, while operational risk was third, with double the response from last year, according to the KPMG CEO Outlook.

The study questioned 1300 CEOs in 11 countries across insurance, asset management, automotive, banking, consumer and retail, energy, infrastructure, life sciences, manufacturing, technology and telecommunications sectors.

Australian CEOs say “making environmental and socioeconomic impact” is their foremost motivation, and two-thirds feel responsible for ensuring their companies’ environmental, social and governance (ESG) policies reflect their customers’ values.

Most CEOs agree business growth will be determined by their ability to navigate the global shift to a low-carbon, clean-technology economy.

“There is a growing awareness of the exposure of business models to climate risks,” Adrian King, Global Chairman of Sustainability, Climate Change and ESG Services at KPMG, said.

He says more large companies need to engage in climate change scenario planning, because banks and investors are steering clear of companies with significant climate risk exposure that are unable to demonstrate a comprehensive strategy to manage such matters.

“Directors are now aware of the two significant legal opinions that climate change is a material and foreseeable risk, which they must consider,” Mr King said, adding there was also an increased risk due to regulators and accounting standard-setters issuing guidance on climate risk disclosures in the past year.

Business will have to drive progress on climate change, as radical government policy initiatives are unlikely, Mr King says.

In general, more than half of Australia’s CEOs are “very confident” about their companies’ prospects over the next three years.