b'Climate Change isthe Next Solvency HorizonBy Dr. Janis SarraJ gas (GHG) emitters in Canada by sectorchange can be event driven (acute) or ust as a number of Canadian insolvency practitioners saw theare: oil & gas 27 per cent, transportationlonger-term shifts (chronic). Natural dark horizon just prior to the 200824 per cent, mining 14 per cent, andResources Canada offers many examples global financial crisis, climate-relatedbuildings and construction 12 perof climate-related acute events, including insolvency risk is now visible on thecent. Each of these industries will needthe 2013 extreme flood event in southern horizon. The Intergovernmental Panel onsignificant investment to transition toAlberta that displaced 100,000 people and Climate Change (IPCC), representinga low-carbon economy, which couldresulted in $6 billion in damage, and the the consensus of 800 scientists globally,create solvency risk. The Sustainability2016 Fort McMurray wildfire that burned reports that human activities have nowAccounting Standards Board has reported6,000 square km of land area, resulting caused 1C of global warming above pre- that 72 out of 77 industry subsectors willin evacuation of 80,000 people, halting industrial levels and there may be only onebe materially and systemically impactedoil production, and resulting in losses of dozen years left to keep global warming toby climate change.$4.5 billion. Physical risks result in direct a maximum of 1.5C, beyond which evenlosses, as well as having follow-up effects half a degree will significantly worsen theThe Canadian Expert Panel on Sustainablesuch as supply chain disruptions.risks of drought, floods, extreme heat andFinance estimates that the total necessaryTransition risks include policy, legal, poverty for hundreds of millions of peopleinvestment for Canada to meet itstechnology and market changes to address (IPCC 2018). international commitments is moremitigation and adaptation related to than $2 trillion. Canada has to deployclimate change. Investment risks could WHY IS CANADAsignificant resources to ensure that climatearise from downward pressure on the PARTICULARLYobjectives are met, and that imperativevalue of carbon-linked assets during the VULNERABLE? means that there will inevitably betransition to a lower-carbon economy. 14.4 per cent of the Canadian economy isinsolvencies where companies fail to act inInvestors are increasingly seeking tied to the extraction, refining, transporta timely manner. additional information to quantify their and sale of oil, gas, coal, and minerals.THERE ARE TWO MAINexposure to carbon-linked assets, and These sectors are vulnerable as globalRISKS: PHYSICAL RISKS ANDcompanies that fail to disclose could face investors divest and/or move to investTRANSITION RISKSproblems accessing capital or face lawsuits in renewables. The largest greenhousePhysical risks resulting from climateover misrepresentation. Climate change 24 Rebuilding SuccessFall/Winter 2019'