DEEP DIVE
Key Finding #1
Climate change is both a driver of change and a source of risk
Respondents recognize that the climate crisis, as a threat multiplier, is both directly creating and indirectly exacerbating challenges facing the energy transition.
Most alarmingly, the climate crisis is creating a negative feedback loop, with the growing number and severity of climate-induced weather events disrupting the deployment and operation of renewable energy technologies that are crucial for reducing emissions and tackling climate change.
This complex dynamic of climate change being a driver of change and a source of risk is a principal issue for businesses, with climate change reshaping their operational landscape today and for the longer term.
Survey results show a range of risk factors facing energy stakeholders in the UK and US in which climate change plays both a proximate and secondary role:
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Energy price volatility
Energy price volatility (cited by 56% of respondents), often dictated by unforeseen geopolitical developments, serves as a key indicator for predictability, stability, operational continuity, and long-term planning. Although not a direct cause, climate change is increasingly playing a role in this risk factor, as the growing use of renewable energy coupled with changing climate and weather is contributing to the reshaping of energy system operation, supply and demand patterns, and therefore wholesale energy prices.
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Supply chain disruptions
Supply chain disruptions (cited by 41% of respondents) underscore the need for diversified sourcing strategies and resilient logistical networks. Supply chains are becoming increasingly exposed to climate-induced weather events, with climate-related natural catastrophe and resource scarcity affecting sub-sectors of supply chains, including natural resource provision and logistics.
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Changing regulatory and policy environment
Changing regulatory and policy environments (cited by 39% of respondents) highlight the increased pressure to quickly evolve organizational strategy to align with country-specific mandates. Policies and regulations are changing in response to the climate crisis, with multi-decade policies on decarbonization. While these can provide clarity for companies on what is required of them in the energy transition, they also impose new or additional compliance and disclosure measures across a company’s operations and strategy.
Notably, stakeholders in the UK are more likely to view this as a major risk factor (42%) compared to those in the US (35%).
This reflects the instability of UK politics in recent years, as well as specific changes to energy and climate policy. By contrast, in the US, the government has presided over a period of relative stability, with the Inflation Reduction Act giving clarity to developers and investors.
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Technology disruptions
Technology disruptions (cited by 36% of respondents), emphasize the critical need for climate-resilient technology solutions, with both renewable and traditional energy industries impacted by climate change. While the effects of climate change are already being experienced by a range of energy stakeholders, growing climate risk and severity means that even day-to-day operation and performance of energy technology will need to evolve and adapt to changing conditions. Designing technology to be more resilient to extreme weather events has a knock-on effect for project costs.
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Extreme weather events
Extreme weather events (cited by 35% of respondents) encompass the increasing risk posed by hurricanes, floods, wildfires, and other climate disasters. There is a growing imperative for businesses to strengthen their resilience in the face of a changing climate. While this results in a different operational environmental for technology and infrastructure, worsening natural catastrophes and weather events pose a real threat to infrastructure and assets — especially as they are typically harder to model and predict.
Energy Efficiency as Energy Resilience
When asked about energy transition investments, the most commonly cited category for industrial energy buyers was energy efficiency — for both the UK (71%) and US (73%).
This is a significant finding because investments in energy efficiency measures globally are lagging behind what is needed to achieve net zero — and a key outcome of COP28 (2023) was the aim to double energy efficiency measures globally by 2030.
Energy efficiency investments may not be primarily about emissions reductions for industrial energy buyers, but instead about reducing costs for their businesses. The high frequency of reported investment in energy efficiency should be interpreted within the context of the recent energy crisis and exposure to fossil fuel and commodity price volatility for consumers, which has spurred efforts to reduce energy consumption (60% reporting renewable energy investments in the UK and 62% US). When asked about the major risk factors facing their company, energy price volatility was the most common response for industrial energy buyers in both the UK (63%) and US (57%).
Specifically, industrial energy buyers are significantly more likely than energy producers to report being motivated by reputation management (46% of industrial energy buyers vs. 37% of energy producers) and meeting elevated expectations of both consumers (42% vs. 32%) and employees (35% vs. 25%).
Energy efficiency can be hard to monetize from an investment standpoint compared to other energy transition infrastructure assets, but it is a low-regrets option that industrial energy buyers can take to increase their resilience while also reducing emissions.
“As the impacts of climate change continue to intensify and affect more of our day-to-day lives, we can anticipate that environmental concerns — and desire to take action — will only continue to grow across all stakeholders.”
Richard Carroll, Global Head of Energy Resilience at AXIS
Motivators Driving Corporate Climate Action
The survey also explored motivators driving businesses to address the climate crisis more proactively today. The data revealed three common drivers across both markets:
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Long-term business viability
Long-term business viability is the most frequently cited driver for corporate climate action. This is particularly true in the UK, where a majority (54%) of stakeholders identify climate risk mitigation as a safeguard for future business success, significantly outpacing the focus US stakeholders place on this today (43%). According to Mark Gregory, Head of Global Markets at AXIS, “this forward-looking thinking is a strong indicator that businesses in the UK see addressing climate risk as a strategic imperative that will ensure the future success and resilience of their businesses.”
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Regulatory compliance
Regulatory compliance is cited as a motivation for roughly half of survey respondents (49%), underscoring the pivotal role government policies play in influencing corporate decision-making and the potential of public policy to accelerate the transition to clean energy.
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Genuine concerns related to climate change
Genuine concerns related to climate change are cited by 47% of energy producers and industrial energy buyers.
While these core motivating factors are prevalent across markets and audiences, the survey data reveals several noteworthy differences between research audiences regarding drivers of corporate action on the climate crisis. Specifically, industrial energy buyers are significantly more likely than energy producers to report being motivated by reputation management (46% of industrial energy buyers vs. 37% of energy producers) and meeting elevated consumer expectations (42% vs. 32%) and employee expectations (35% vs. 25%).
Conversely, energy producers are significantly more likely than industrial energy buyers to report being motivated by pressure to decommission fossil fuels (35% vs. 26%) and pressure from investors and/or shareholders (33% vs. 23%).
These findings highlight the unique challenges faced by different stakeholders in the energy market as they aim to decarbonize.
Navigating Climate Risk is Integral to Business Strategy
When thinking about future growth, over two-thirds of industrial energy buyers (69%) anticipate the climate crisis will have a measurable impact on their company’s business performance, including revenue, costs, and investments.
In response, businesses are factoring climate considerations into decision-making across core areas of their organizations:
- Forward-looking aspects of businesses, such as investment planning (54%), corporate strategy (54%), and the development and marketing of new products and services (53%), are identified as growth areas to leverage for sustainable product differentiation.
- Pillars of stakeholder engagement, such as public relations and external communications (53%), employee recruitment and retention (52%), and investor relations (49%), are increasingly incorporating climate considerations into how they foster stakeholder trust, attract talent, and maintain investor confidence.
According to Elliot Lyes, Head of Upstream Energy and Active Underwriter of AXIS Energy Transition Syndicate 2050, “this shift to incorporating climate-related concerns into long-term planning is an indicator that today’s corporate leaders are no longer questioning whether climate change will impact their business — they are proactively preparing to address it in a way that is responsive to the global energy transition already underway.”
