Page 69 - IRMSA Risk Report 2023

Honest and well-researched scenario analysis needs to be performed by all that take
Continued carbon-intensive the climate risk seriously. There needs to be a partnership with corporates to get a
industries in South Africa well-informed landscape/context as to what the threats and opportunities are under
hampering the move towards different climate change scenarios.
a low-carbon economy in the Timeous review and alignment of company strategies in line with the lessons learnt
from the risks and scenario analysis will benefit the early adopters. They will be in a
country. The mining and energy position to generate success in the early adoption of this transition of decarbonisation
industry (electricity, oil and gas) by:
are going to be significantly • Dealing with difficult and significant policy changes way in advance. It is important for organisations trying to understand losers. The mining and energy industries, where
impacted by this transition. • Future-proofing their technology interventions and investments. climate risk to not only look at climate risk as a key exposures will be most significantly impacted
• Quick alignment to expected consumer behaviour changes. standalone item, but also at how it impacts other risks if targets are met, will result in the country ending
that appear on the risk matrix. It has the potential up with multibillion Rand redundant state-owned
to impact almost everything else. The thing about assets. As far as the South African coal industry is
The world is moving much faster on the just transition to a low-carbon economy climate change in South Africa is that it is filled with concerned, when one drives towards a net 0 carbon
An increase in cross-border than South Africa, which brings measures like cross-border carbon tariffs into play. In competing tensions. footprint by 2050, which is the scenario the world is
tariffs because South Africa addition, this slower rate of transition may result in the global markets penalising our trying to achieve, it means that there will no longer
is not transitioning quickly exports. This would reduce our export potential, resulting in job losses and further There is an extremely close correlation between the be any coal mines or coal-powered generation in
inhibiting the South African economy.
enough according to global Committing to the reduction in fossil fuels calls for investment in renewable energies impacts of climate change and the consequences to South Africa.
just transitioning standards. and related technologies. This includes the introduction of electric vehicles in both the greater inequality. Climate change is going to impact
private and public domains, including transportation specific to sea, air and rail. the more vulnerable areas of our population. Either Climate change is currently one of the biggest risks
with an increase in floods or areas that are getting globally. One could argue, as with most of the risks
hotter and drier, rural communities are severely in this report, that they are in some way, shape or
There are extremely close correlations between the impacts of climate change and impacted, particularly those that are in one way or form already unfolding. There are already numerous
the consequences of greater inequality. Climate change is going to impact the poor, another dependent on subsistence agriculture. initiatives in process, but these contest with other
An inadequate response more vulnerable areas of our population. In the case of floods and the areas that are priorities such as unemployment, a struggling
to climate change, leading going to get hotter and drier, rural communities and those dependent on subsistence An additional element to this risk that should be taken economy, loadshedding and being one of the
agriculture are going to be impacted severely.
to greater inequality and All organisations, including local government, the private sector and civil societies, have very seriously is not to view the risk of climate action biggest emitters of CO2 on the African continent.
unemployment and resulting in to start looking at the physical implications of their operations as a result of committing failure in isolation. South Africa a highly carbon-
social bankruptcy and unrest. to climate-change adaptation. Continuous risk and scenario analysis will provide the intensive economy. At the 2015 Paris Agreement, The world is moving at a quicker pace than South
insight and foresight needed to look at the different threats and opportunities that will South Africa committed to nationally determined Africa in the transition of becoming decarbonised
present themselves. contributions, which are greenhouse gas emission and using 100% renewable energy to clamp down
reduction targets, from a national perspective. on the pressures of climate change.
Finance that has been committed by other nations to
The rise in extreme weather events such as floods and droughts may increasingly enable the just energy transition programs is linked Lastly, the World Economic Forum’s 2022 report
disrupt infrastructure (road, rail and sea/ports) in that the supply logistics of goods to South Africa achieving the reduction targets. contains climate risk under South Africa’s risk radar.
are either delayed, damaged and/or routed differently, impacting on cost. It also has
a negative outcome on exports and food security, as well as public health and safety. Climate change exacerbates other risks. From
An increase in severe weather The public and private sector can learn from the investor community. The investor On the other hand, there is tremendous tension a risk management perspective, this is a risk we
around the just transition and the move towards a cannot ignore. Talk needs to be replaced by actual
conditions due to climate community understand the threats and opportunities that climate change presents, low carbon economy, as it will produce winners and engagement.
as well as the impact it may have on the future value of companies. They are asking
change impacting the economy the right questions and are expecting companies to report on their climate change
and public safety. response strategies, plans and targets. They are requesting insights to be reported
based on what has been learnt from their risk analysis and scenario work.
These investment companies are moving towards expecting companies to financially
quantify their threats and opportunities, as well as how they may unfold and translate
into growth and sustainability moving forward.

Compliance to the Bill of Rights from 1995 demands the right for individuals to live
in a healthy environment specific to factors such as air quality. Some cities and towns,
especially towns that are known for producing coal and/or electricity, are negatively
impacted by emissions and the subsequent air quality. Again, there is a dichotomy of
An inadequate response to addressing compliance to basic human rights and the shutting down of industry and
adopting new and innovative associated employment, as well as the cost to transform or transition.
ways of doing business by The funding for a just transition will be critical in expecting South Africa to drive towards
making the climate-change targets committed to by the government. Some funding
carbon-intensive companies will be derived from sponsors and some from investors. The risk-response strategies
creating a continued health risk asked for by both public and private organisations are to prove that they are going to
to the public. be as profitable or productive in the future as they are now, under different climatic
scenarios. In essence: what is the cost to do business into the future?
Investment for restructuring and adopting new technologies will be critical for that
change.

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