Climate change is core to any major business strategy

Around that time I bought a perfectly made lemonade from atop a makeshift stand - a little rickety, strewn with flowers and poured with the irrepressible enthusiasm of someone entirely in tune with their trade. The jauntiest entrepreneur I think I've ever met, who confided in me good future business prospects. Her thinking was that successive summers will see thirstier customers from hotter days due to climate change. She's 11.

Saying climate change is not core business these days is like saying - which, incredibly, we did hear from some over summer - that climate change has nothing to do with our tragic bushfires. Our Prime Minister himself now regularly makes the connection on the basis of the science.

Having been at the debacle of the Copenhagen Climate Summit with then-prime minister Kevin Rudd, on beginning the role of Ambassador for the Environment four years ago I asked international climate veterans why, by contrast, the Paris Agreement had succeeded. There were many reasons, but three responses were prominent: stronger consensus around the science of climate change; a consequent greater sense by governments of the need to unite and act; and much stronger buy-in by business.

That buy-in intensifies each year, precisely because climate change is core business. It is on both sides of the ledger; the risks of climate change to business, and opportunities for business in our transition to a net-zero-emission, more climate-resilient economy under the Paris Agreement.

The risks are often emphasised, such as the adverse physical impacts of climate change itself - and after our summer of hell and the billions it cost us, surely this is no longer lost on anyone. Then there are the risks of the burning platforms many businesses face, as the world transitions to net-zero. While most prominent, it's not just fossil fuel companies. It's also car companies threatened by the onset of EVs; steel, aluminium and cement companies increasingly under competitive pressure to cut emissions; agricultural companies threatened by the changing climate; and real estate businesses - and their insurers - becoming vulnerable to sea-rise and greater flooding. And on it goes.

What if you were their bankers? This is why the governor of the Bank of England, Mark Carney, assesses climate change as a serious systemic risk to the global financial system, and says companies which do not adjust to the transitioning global economy will fail. Underlining the point, the Bank of England has begun stress-testing climate risk for all systemically important banks. The Australian Prudential Regulation Authority has just announced it will follow suit in Australia.

There are also the legal risks to board members in not paying attention to this world - with climate litigation at record levels. Or the reputational risks, as communities and investors grow increasingly concerned by climate change and want to see corporates being part of the change they want to see.

Then there are the opportunities. Last year global investment firm BlackRock - hardly known as a "climate activist" - conducted extensive and groundbreaking analysis across the United States to determine what will be better investment opportunities over time in the face of climate change. This year it announced a major gear-shift toward climate-friendly investing, on the basis it can provide better risk-adjusted returns. With $US7 trillion under management, other asset managers are bound to follow. Goldman Sachs also recently announced it will target $US750 billion at climate transition and inclusive growth, emphasising the strength of the business case in doing so.

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These companies are demonstrating climate action is not a burden to be borne but an opportunity for significant change to more sustainable, and therefore profitable, economies. The International Energy Agency observed long ago a decoupling of emissions reductions from economic growth. The UK is the standout example, having reduced emissions by 40 per cent while growing the economy by 70 per cent since 1990.

At its heart, the Paris Agreement is a pact to transition to a net-zero-emission, more climate-resilient global economy in the decades to come. That means trillions of dollars of investment in change, an estimated $US1.6-3.8 trillion opportunity in clean energy every year to 2050 alone. Making infrastructure - cities, for example - or agricultural or health systems more resilient to the impacts of climate change are also trillion-dollar opportunities. As are changing transport systems, for example to electric or hydrogen. This is not restricted to developed countries; the World Bank estimates a US$23 trillion investment to meet just the 2030 Paris targets of major emerging economies.

Australia is in pole position to take advantage of these opportunities. One of our leading thinkers, Ross Garnaut, has recently published a book outlining why (Superpower: Australia's Low Carbon Opportunity). We have a significant comparative advantage in renewable energy - including next-generation technologies like hydrogen - with the potential not only for export but energy-intensive manufacturing in Australia. We are competitive in other areas such as agriculture and infrastructure, and connected to the most dynamic region in the world, itself looking for climate solutions.

We have one of the most sophisticated finance sectors in the region, where again we are perfectly positioned to help deliver, and benefit from, the third Paris Agreement goal of mobilising the trillions necessary for global transition. London and Paris are currently vying to become the green financing centres of the world, because they can see the direction of travel; as can the 130 banks - one-third of the global banking sector - that signed up at the UN Climate Summit in September to align their businesses with the Paris Agreement goals. This is core business that boardrooms ignore at their peril.

When that 11-year-old girl becomes a CEO, London to a lemonade she won't be arguing the toss.