Are Private Companies Extending Climate Awareness across Corporate Strategy?

Facing mounting climate risks and opportunities, companies are focusing increasingly on how to embed climate into strategy and planning. This article offers a framework for research, using proprietary data based on a private equity portfolio, to examine three drivers behind this trend, each considered a factor affecting a company’s ability to continue to achieve sales and profitability. The analysis found that, overall, a climate-positive exposure to one sustainability/climate factor meant a greater exposure on another: (1) companies with lower-emissions operations are also exposed to greater physical climate risk from flooding, (2) companies with lower-emissions operations are also those achieving more sustainability-aligned revenue, (3) and companies with more climate value at risk from flooding are also those experiencing more sustainability-aligned revenue. However, only in the case of the first factor was correlation found with statistical significance. Overall, therefore, we tested for climate awareness and its manifestation in corporate strategies and conclude that these results should be seen as exploratory in terms of understanding the extent to which they demonstrate any strategic interplays between risk and opportunity levers, and the article serves as a methodological guide.