The forecast for the Year of the Snake is, in a word, volatility. As market crests and crashes become more normal, so severe storms, droughts and floods are becoming commonplace. Both market and climate volatility take a toll on business. But while companies can turn to hedging, sourcing and other strategies to manage their exposure to market risk, managing climate risk seems more elusive.
Each year, the Climate Change Business Forum surveys Hong Kong companies to determine how they perceive the threats and opportunities presented by climate change, with a particular focus on the energy-climate nexus. The third annual Hong Kong Business Survey on Energy Efficiency and Climate Change reveals that both angst and action are on the rise.
Rising power costs, the availability of environmental resources and disruptions due to extreme weather top this year's list of business concerns. That's no surprise. The global price of oil hit an all-time high last year. And the International Energy Agency predicts that a convergence of trends - including increasing fuel costs, use of renewables and carbon pricing - will continue to drive up energy costs for the coming years.
Environmental stress is most evident in water. Droughts and floods struck vast regions of the world last year, with devastating impact on buildings and crops. But the damage does not stop there. New HSBC research reveals that China lacks the water to produce the electricity it needs to power its economy in the coming years.
Scarcity has led to lower supplies and higher prices in many provinces, including Guangdong. Hong Kong, which buys about 80 per cent of its water from Guangdong, agreed to pay up to 19 per cent more during the three years of its current contract ending in 2014.
But it's the storms that garner the most attention. A new study by the International Monetary Fund reports that a large and growing number of people are affected by natural disasters, due to the confluence of climate change and population concentration in vulnerable regions. Seven hundred natural disasters hit more than 450 million people over the past two years alone. Asia, with its underdeveloped regions and heavily populated coastlines, is overexposed.
What can businesses do in the face of all this volatility? They cannot change the weather. What they can control is their exposure to rising costs - particularly energy, in the short term, and weather- induced disruptions in the long term. Here the story is mixed.
The good news is that almost 75 per cent of Hong Kong businesses are quietly taking action. The majority are cutting energy use in their operations and supply chains. Barriers like finding the right technology or securing financing seem to be subsiding. Behavioural change remains the biggest challenge.
The less encouraging news is that for most companies, the story stops there. Few conduct risk assessments to identify vulnerabilities in their businesses or supply chains. Only 13 per cent report demand for energy-efficient, low-carbon products and services. Without this demand, companies are not investing to develop the sustainable products and services needed to reorient themselves to a low-carbon economy. In short, they are stuck.
How to get unstuck? The first step is to recognise the "new normal" of climatic volatility. Both corporations and government have critical roles to play in redefining business-as-usual to prepare for the bumpy road ahead.
One predictable bump will be the rising cost of energy. We have witnessed the predictable response to rising electricity tariffs here: first, public resistance, then, quiet conservation. What hasn't made headlines - yet - is that most Hong Kong businesses are actually willing to pay more for electricity, if they get co-benefits in return.
The Climate Change Business Forum survey posited a choice: the current, coal-heavy fuel mix; a mix of gas and nuclear power which would reduce pollution and carbon emissions and lead to a moderate tariff increase; and a mostly nuclear option which would further reduce pollution and carbon emissions but at a higher cost. In response, almost two-thirds (62 per cent) opted for a cleaner, lower-emitting but more expensive fuel mix . The message is clear: Hong Kong businesses value quality of life in addition to quantity of cash in the bank. This is as it should be. But the government must play its part as well. Hong Kong companies are seeking financial incentives, public education and more stringent legislation to spur the transition to a low-carbon economy. Some 87 per cent of those surveyed called on the government to adopt environmental targets akin to those in China's 12th five-year plan.
Anyone who has seen the plan knows its objectives for clean energy, new materials, pollution and emissions reduction, and energy efficiency are incredibly ambitious. Attaining them will help put China on the path to clean development. We need similar levels of ambition here. The new environment secretary, Wong Kam-sing, can lead the way. But he needs a strong and committed team to succeed.
Hong Kong people have long supported progressive moves towards a low-carbon economy. The business community is on board.
And with the government coming into alignment, the one element that the survey does not measure - political will - may just be sufficient to spur action.
Thomas Ho is chairman of the Climate Change Business Forum