How directors can prepare for Australia's increasing climate hazards

In a time of political change, navigating uncertainty while maintaining your climate action strategy is vital, say Pru Bennett GAICD and Rory Macpherson from business advisory Brunswick Group.

The most recent Intergovernmental Panel on Climate Change (IPCC) Synthesis Report shows the socioeconomic costs of climate variability and climate change have been increasing in Australia. 

This is a result of a combination of chronic and acute hazards, according to the Climate Change — Science Snapshot 2025: An Overview for Australian Directors, developed by CSIRO in collaboration with the AICD to provide directors with the latest climate science, supporting informed boardroom discussions on scenario analysis, risk management and transition planning.

Chronic hazards include increasing mean temperatures, ocean acidification and sea surface temperatures, rising sea levels and decreasing mean rainfall. Key examples of acute hazards include heatwaves, storm tides, marine heatwaves, floods, storms, tropical cyclones and bushfires.

As the frequency and intensity of climate-related hazards increase, physical climate risks may also increase for the environment, community and businesses. 

For example, a company with a factory in a low-lying coastal area may be exposed to more frequent coastal inundation due to rising sea levels. If the factory contains critical machinery, easily damaged by floodwater and expensive, hard to insure and time-consuming to replace, then the company is also vulnerable and therefore at risk.

Future climate changes will have far-reaching effects on Australia’s environment, economy and people. Significant impacts are already being experienced with the current level of global warming (1.2°C). Due to time lags in the climate system, some future changes are “locked in” and unavoidable, the report says.

Projections show sea levels continuing to rise until well beyond the end of this century. The impacts of future climate change will depend on the level of global warming the world reaches. 

The report states that if global warming hits 3°C, Australia could face extremely severe consequences. If the Paris Agreement goal of holding global average temperature increase to well below 2°C, and pursuing efforts to limit it to 1.5°C above pre-industrial levels is met, the impacts of climate change will be more limited, but still significant, requiring substantial investment in mitigation and adaptation. 

Australia’s ability to adapt could also be affected by how well other countries adapt, especially those nations that Australia depends on for trade and resources.

Interconnected risks

Climate risk analysis must consider interconnected risks from interconnected hazards, not just individual risks from weather events in isolation.

Climate change is expected to make extreme events more frequent and intense, increasing the risk of compound events and cascading impacts.

A compound event is when multiple extreme weather events occur at the same time and place, in sequence or simultaneously in different locations. The impact of a compound event is often greater than if its component events had occurred independently of each other.

When the initial impact of a weather or climate event on a socioeconomic system, such as a city or a company, has knock-on effects that cause other problems, that is a cascading impact. 

One example is Tasmania’s 2015–16 experience, when a warm, dry October–April season combined with a large number of lightning strikes in January–February. This resulted in bushfires that burned about 120,000ha, costing the state more than $50m.

In late January, heavy rainfall caused flooding in other parts of the state, forcing emergency services to simultaneously manage fires and floods. The extended dry period also further reduced already low water levels in the state’s hydroelectric dams, thereby affecting power generation capacity. In addition, a marine heatwave along the east coast impacted fisheries. Together, these events caused problems for key sectors such as agriculture, forestry, fishing and energy.

What can boards do?

When managing climate risk, it would be useful to know the likelihoods of different future climate outcomes. Given the complexity of the climate system, precise probabilities are often unavailable. 

Instead, an approach should be taken that avoids false precision and maladaptation. 

One such approach is “storylines” — plausible scenarios with narratives, not probabilities. Instead of predicting specific outcomes, storylines explore how events might unfold, drawing on our knowledge of the past, present and future. 

They highlight key drivers, their interactions and the underlying “causal network” behind climate change and its impacts, including exposure and vulnerability to risk.

The storylines approach considers the full range of possibilities and it can be tailored to specific concerns and decisions. 

Storylines still compare different scenarios of human development and future global warming, but they emphasise narrative-based insights rather than precise numbers or probabilities.

This article first appeared under the headline 'Coping with climate change' in the August 2025 issue of Company Director magazine.