It feels like big business has woken up to the climate crisis with a start, and our number crunching suggests they are right to do so.

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All of us will have felt the profound change sweeping through global finance in recent months. Sustainability was already on our agendas, but the way it has suddenly captured the world’s attention is rapidly reshaping the way we do business. It is a moment for all of us to seize the initiative.

Climate change and sustainability seem to be the first thing I’m hearing in meetings with clients and other business leaders right now. So what’s behind this apparent change of tack? The first thing to say is that the concern in boardrooms feels absolutely genuine. The horrific images from Australia moved us all..

But leaders are also applying a rational, business-focused lens to this issue: not only will their consumers harshly judge companies on the wrong side of this debate, financial markets are increasingly punishing the laggards.

As-yet-unnoticed threat

The financial consequences are becoming clearer every day, but we think there’s another, as-yet-unnoticed threat that the climate crisis poses to both corporate balance sheets and the broader global economy. As you’d expect, at Refinitiv we’ve been pouring over the data and we think it’s a risk that could amount to as much as 13% of revenues for those companies with the greatest exposure.

Please bear with me while I try to explain. The world emitted roughly 55 giga-tonnes of carbon dioxide or CO2 equivalent last year. Yet only 20% of those emissions were taxed, and at a level (around $28 a tonne) that most economists and climate scientists say is too low to have enough impact on emissions. If a levy were applied to every one of those 55 giga-tonnes, then the tax take would shoot up from around $220 billion today to around $1.5 trillion. A ‘carbon gap’ of around $1.2 trillion might sound like a big number, but it’s fairly manageable at an individual corporate level (the additional cost for the average company would be around 1% of revenue).

However, increase the level of carbon taxes to $75 a tonne of CO2 (a level the IMF has said is needed to limit temperature increases to around two degrees) and companies in sectors including construction materials, utilities, metals and mining and airlines could face a major impact, based on our analysis of around 3,000 publicly-listed entities. Applied to all emissions globally, and the carbon gap yawns to almost $4 trillion*, or around 4% of world GDP.

Simply put, this is a cost that global businesses have not factored in. And they need to. The message from policymakers around the world is coming through loud and clear: “the world needs to tax carbon at a realistic level and we are increasingly likely to do just that, given the urgency of the crisis.”

Even if I’m wrong and policymakers fail to act decisively on this issue, business leaders need to weigh up the probability that they might act – and the cost that would entail. For the most exposed companies it could threaten their very existence.