Climate Science for Business Professionals

Understanding the fundamental science behind climate change is essential for making informed business decisions and conducting robust risk assessments. This lesson provides business professionals with the climate science knowledge needed to understand and apply AASB S2 requirements effectively.

Understanding Warming Scenarios

The Temperature Targets Framework

Climate scenarios are built around specific warming targets that drive different future pathways:

1.5°C Scenario

Probability: Requires immediate, unprecedented action
Timeline: Global emissions must halve by 2030, net zero by 2050
Business Implications: Rapid transition, stranded assets, regulatory acceleration
Physical Impacts: Moderate increase in extreme weather, manageable for most regions

2°C Scenario

Probability: Achievable with strong international cooperation
Timeline: Net zero by 2070, more gradual transition possible
Business Implications: Sustained transition pressure, adaptation investments
Physical Impacts: Significant increases in heat, drought, and storm intensity

3°C+ Scenario

Probability: Current trajectory without enhanced climate action
Timeline: Limited decarbonization, continued fossil fuel dependence
Business Implications: Severe physical risks, systemic economic disruption
Physical Impacts: Catastrophic changes, significant infrastructure damage

Regional Variations

Australia-Specific Projections:

Temperature: 1.4°C increase already observed since 1910
Rainfall: Declining in southern regions, increasing variability
Extremes: More frequent bushfires, marine heatwaves, intense rainfall
Coastal: Sea level rise of 8-88cm by 2100 (scenario dependent)

Physical Climate Hazards and Business Impacts

Acute Physical Risks

Extreme Weather Events:

Bushfires

Frequency: Increasing by 15-25% by 2030
Business Impacts: Supply chain disruption, asset damage, workforce safety
Sectors Most Affected: Agriculture, forestry, tourism, manufacturing
Example: 2019-20 Black Summer fires cost Australian economy $13.2 billion

Flooding

Frequency: 1-in-100 year floods becoming 1-in-30 year events
Business Impacts: Infrastructure damage, operational downtime, logistics disruption
Sectors Most Affected: Real estate, infrastructure, retail, agriculture
Example: 2022 Queensland floods disrupted coal exports for months

Cyclones and Severe Storms

Intensity: Fewer but more intense storms (Category 4-5 increasing)
Business Impacts: Infrastructure destruction, insurance cost increases
Sectors Most Affected: Energy, ports, tourism, construction

Chronic Physical Risks

Long-term Climate Shifts:

Rising Temperatures

Trend: Average temperatures rising 0.13°C per decade
Business Impacts: Cooling costs, worker productivity, heat stress
Adaptation Needs: Building design, working hours, health protocols

Changing Rainfall Patterns

Southern Australia: 20-40% decline in winter rainfall
Northern Australia: Increased wet season intensity
Business Impacts: Water security, agricultural productivity, hydroelectricity

Sea Level Rise

Current Rate: 1.7mm per year, accelerating to 3.4mm by 2050
Business Impacts: Coastal infrastructure, port operations, real estate values
Vulnerable Assets: $226 billion in coastal infrastructure at risk

Transition Pathways and Decarbonization

Sectoral Transformation Requirements

Energy Sector

Current: 76% fossil fuels in energy mix
2030 Target: 82% renewable electricity
2050 Target: Net zero emissions across all energy
Investment Required: $132 billion in renewable infrastructure

Transport Sector

Current: 98% fossil fuel dependent
Transition: Electric vehicle adoption, sustainable aviation fuels
Infrastructure: Charging networks, hydrogen refueling
Timeline: 50% EV sales by 2030, net zero transport by 2050

Industrial Processes

Challenge: Hard-to-abate sectors (steel, cement, chemicals)
Solutions: Hydrogen, electrification, carbon capture
Investment: $80 billion in industrial transformation
Timeline: 50% emissions reduction by 2035

Technology Deployment Curves

Renewable Energy

Solar PV: Cost declined 85% (2010-2020), continuing decline expected
Wind: Offshore wind potential of 2,000 GW capacity
Storage: Battery costs declining 89% (2010-2020)

Emerging Technologies

Green Hydrogen: $70 billion export opportunity by 2050
Carbon Capture: Commercial deployment from 2030
Synthetic Fuels: Aviation and shipping applications from 2035

Climate Tipping Points and Systemic Risks

Critical Earth System Thresholds

Arctic Sea Ice Loss

Threshold: Summer ice loss accelerating beyond natural variability
Global Impact: Accelerated warming, weather pattern disruption
Business Risk: Supply chain disruption, commodity price volatility

Amazon Rainforest Dieback

Threshold: 20-25% deforestation triggers irreversible change
Current Status: 17% already cleared, approaching tipping point
Business Risk: Carbon sink loss, biodiversity collapse, regulatory response

West Antarctic Ice Sheet Collapse

Threshold: Marine ice sheet instability already triggered
Timeline: 200-1000 year collapse timeframe
Business Risk: Massive sea level rise, coastal infrastructure loss

Systemic Economic Risks

Financial System Stability

Stranded Assets: $1.3 trillion in fossil fuel assets at risk globally
Insurance: Climate damages exceeding insurance capacity
Banking: Mortgage defaults in climate-vulnerable areas

Supply Chain Resilience

Concentration Risk: Critical suppliers in climate-vulnerable regions
Agricultural Disruption: 30% of global food production at high risk
Resource Scarcity: Water stress affecting 40% of global population

Regional Climate Projections for Australia

State and Territory Specific Projections

New South Wales

Temperature: +1.8°C to +3.4°C by 2090
Rainfall: -20% to +10% annual change
Key Risks: Bushfire, coastal flooding, extreme heat
Economic Sectors: Agriculture, tourism, coastal development

Victoria

Temperature: +1.4°C to +3.1°C by 2090
Rainfall: -15% to +5% annual change
Key Risks: Bushfire, drought, extreme weather
Economic Sectors: Agriculture, manufacturing, energy

Queensland

Temperature: +1.3°C to +2.7°C by 2090
Rainfall: -10% to +15% annual change
Key Risks: Cyclones, coral bleaching, flooding
Economic Sectors: Tourism, agriculture, mining

Western Australia

Temperature: +1.5°C to +3.2°C by 2090
Rainfall: -30% to +5% annual change (strong seasonal variation)
Key Risks: Drought, extreme heat, water security
Economic Sectors: Mining, agriculture, energy

Urban Heat Island Effects

Major Cities Projections:

Sydney: Additional 10-20 days above 35°C by 2050
Melbourne: 50% increase in days above 35°C by 2050
Brisbane: 40-70 additional hot days by 2050
Perth: 20-30 additional days above 40°C by 2050

Business Implications:

Increased cooling costs (20-50% increase)
Worker productivity decline (10-15% in extreme heat)
Infrastructure stress and failure rates
Health and safety obligations

Uncertainty and Confidence Levels

Understanding Scientific Confidence

High Confidence Projections:

Global temperature increase
Sea level rise trends
Arctic ice loss
Extreme heat frequency

Medium Confidence Projections:

Regional rainfall changes
Storm intensity patterns
Ecosystem tipping points
Economic impact quantification

Low Confidence Projections:

Precise timing of impacts
Specific location effects
Technology breakthrough rates
Social and political responses

Communicating Uncertainty in Business Context

Best Practice Approaches:

Use scenario ranges rather than point estimates
Clearly communicate confidence levels
Focus on direction and magnitude of change
Consider worst-case scenarios for risk management

Summary

Climate science provides the foundation for understanding business risks and opportunities:

Warming scenarios drive different transition and physical risk pathways
Physical hazards are already increasing in frequency and intensity across Australia
Transition pathways require unprecedented transformation across all economic sectors
Tipping points create systemic risks beyond linear projections
Regional projections show significant variation across Australian states and territories
Uncertainty must be acknowledged while not preventing action

This scientific understanding forms the basis for the risk assessment and scenario analysis work covered in subsequent lessons.

Key Takeaways

✅ Temperature scenarios (1.5°C, 2°C, 3°C+) drive vastly different risk profiles for business ✅ Physical risks are already materializing across Australia with significant business impacts ✅ Transition pathways require transformation of all economic sectors by 2050 ✅ Tipping points create potential for abrupt, irreversible changes with systemic impacts ✅ Regional variation means location-specific risk assessment is essential ✅ Uncertainty exists but doesn’t prevent risk management and strategic planning

Australia Climate Risk Summary

Risk Type	Current Trend	2030 Projection	2050 Projection	Business Impact
Temperature	+1.4°C since 1910	+1.5°C to +2°C	+2°C to +4°C	Cooling costs, productivity
Bushfire	Increasing severity	+15-25% frequency	+50-100% frequency	Assets, supply chains
Flooding	More intense events	1-in-100 → 1-in-30	1-in-100 → 1-in-10	Infrastructure, operations
Sea Level	+22cm since 1880	+15-25cm additional	+40-80cm additional	Coastal assets, ports
Drought	Increasing in south	20% more severe	40% more severe	Agriculture, water supply

Practical Exercise

Climate Risk Mapping: Using the climate projections for your state/territory, identify:

Three physical risks most relevant to your industry/organization
Two transition pathway dependencies for your business model
One potential tipping point that could affect your operations
Confidence levels for each risk assessment
Time horizons for material impact realization

Consider both direct operational impacts and indirect supply chain/market effects in your analysis.