Navigating climate risk with AECOM

As the effects of our changing climate become ever more present, the demand for AECOM’s services in climate risk work is increasing.

The infrastructure consulting company’s global experience in climate risk includes technical thinking, establishing methodology, and understanding the issues, and applying this to various projects. Knowledge gained from each project is fed back into the chain of understanding to foster a continual two-way feed of learning.  

AECOM recently localised this international experience when working with the Lyttelton Port Company (LPC). We spoke with AECOM Associate Director – Practice Lead Sustainability and Resilience in New Zealand Anthony Hume about how LPC tackled its own climate change risk assessment during this project.  

Why did LPC engage AECOM?  

LPC was already facing some challenging climate change-related effects. They engaged AECOM to understand the long-term physical risks of climate change to its business, including client operations, the likely effects on the port infrastructure’s physical assets—roads, container operations and quays—and how it might be affected by the transition to a low-carbon economy. There were many different aspects to consider. A cross-Tasman team worked with a range of LPC teams in workshops or on a one-to-one basis to provide a structured approach to identify, prioritise climate risks and the potential solutions to mitigating the risks considered.  

What is a climate risk assessment?  

There are two sides to addressing climate change risks:  

• Physical risks – focusing on climate change's impacts (for example, extreme weather events, sea level and temperature changes) and the suitable response such as adaptation measures and mitigation options 
• Transition risks  – risks that arise due to the shift toward a net-zero economy by 2050 

A climate risk assessment involves determining the long-term physical and transitional risks of climate change for an organisation and then formulating an adaptation plan, setting out the established priority risks and the action required to address them. We know that flooding, storms, drought, and bushfires are becoming more frequent and intense. Therefore, we need to respond with built infrastructure and priority services to meet these future demands.   

Organisations address these issues through adaptation and resilience. This is a growing area of work because incidents, such as flooding, are significantly impacting their operations and raising awareness of their lack of readiness to address the issues. Regulations are also increasing. For example, New Zealand is leading the way with the XRB reporting standards that will eventually cascade to a wide set of organisations. Cyclone Gabrielle is a recent example of the current infrastructure’s inability to cope with the impact placed on it. The failure of bridges and the impact of landslides were just a few of the issues experienced.  

How do you carry out a climate risk assessment?  

Strong stakeholder engagement  

AECOM values strong stakeholder engagement as adaptation often requires this wider conversation. It’s vital to talk with those outside of the enterprise-risk procedure, and, where possible, have the organisation lead the collaboration. You open the door to these multi–faceted discussions by knowing where your company sits – the issues you’re trying to address, and where common issues and goals may exist.    

Workshops  

Creating client awareness and educating them about climate change risk is key and achieved in several ways. We hold workshops with stakeholders to inform their understanding of the physical and transitional risks, and produce risk statements, which we test with the client by looking at the likelihood and impact of the scenarios.  

We test these statements with the executive leadership team (ELT) and the technical / operations staff. This sets up good governance for climate change activity because the ELT then understands the process involved in a climate risk assessment, which enables future action. A typical barrier encountered during this process involves people within a business citing a lack of authority to comment or act, so we empower them to make decisions through the ELT signing off on this process.  

Another key challenge is integrating climate change risk into the enterprise risk framework. This provides the business with a mechanism to address climate change in the future. LPC’s Board elevated climate change as one of LPC’s top strategic risks following its work with us, and this viewpoint is increasingly held by organisations as their awareness of climate change and the associated risks grows.   

We also carry out follow-up work with specialist areas within a business. We build a climate risk register of all the physical and transitional risks, and work with these specialist areas to grow understanding of these risks and the action required. It’s a broad-spectrum approach – the whole operation is involved.  

Establishing and understanding the risks:  

• Physical risks  

LPC knew sea level rise would be an issue, but it didn’t expect wind speed to be a big factor. Yet, if it’s too windy, the port is unable to carry out general operations and experiences lost time. This shows the importance of the broad-spectrum approach to climate change risk by considering more than the obvious climate risks like sea-level rise or flooding. The process directs attention to what the world will look like in the future rather than the risks experienced daily.    

In the workshops, we’re looking at the impact of climate change now and over different time scales. We’re trying to find a snapshot of the world—what it will look like in 2050 or 2100, for example. Within each snapshot, we provide various scenarios depending on the actions taken—if we do nothing, do something, or work hard at mitigating emissions.  

The first workshop focuses on catching all the physical risks and collating a physical risk register. We then prioritise these risks in a follow-up workshop or engagement and look at whether any controls exist. For example, are controls already in place to abate flooding? Do plans exist for raising quay / docking heights?  

Businesses often think they have nothing in place to address climate change and massive costs are inevitable. But, for physical risks, controls often already exist. We are looking to identify where gaps occur or there are no controls, and the action required.  We encourage future proofing for the worst-case scenario because investment is then prioritised ensuring sufficient adaptation. It’s effectively an investment strategy.  

• Transitional risks  

This assesses what the world will be like in set periods and whether what’s currently in place will still be relevant and adequate at that future time.   

Ports form part of our essential infrastructure, but we expect them to be part of the modern low carbon world. In future, ships may contain electric propulsion units, rather than diesel, so investment in charging infrastructure may be needed.  Much thought is required because ports have not traditionally needed the electricity supply and connection to provide these types of services.  Investing in charging infrastructure can form part of an emission reduction plan and address adaptation action required to satisfy future demand.  

Thinking about a low carbon world is just as important as the physical infrastructure – where you need to be in say 2050, and how you will get there. We know that we need to make changes now if we are to be ready by this time as most companies have 30-year investment cycles.   

Formulating an adaptation plan  

This step follows risk identification. The adaptation plan sets out the established priority risks and the action required to address them. Ports are very process oriented. Often their processes are impacted, rather than their physical assets, so they need to focus on embedding adaptation into their everyday processes. For example, having electricity installed on the dock, raising the pavements on the quayside, or changing the cranes so they can handle strong winds.  

This is always the challenge as adaptation actions are easy to identify but difficult to cost. However, we know that adaptations need to be made at certain times, so we try to keep organisations open-minded so that they view the actions required as more than incremental. For example, building an inside port that is not affected by the wind, or an inland port accessible via a tunnel. This is not being impractical. It might take investment but it's addressing the risks and trying to understand the bigger issues as we’re not going to get where we need to by incremental steps alone.   

This is also contrary to the “sweat the asset” approach taught economically over recent decades. This mindset, which involves running assets into the ground and then replacing them, may no longer be preferable because it may leave you underprepared for adaptation. However, this change in approach can be challenging for organisations whose asset and investment cycles are based around keeping things for as long as possible.  

Adaptation planning is also tricky because it is addressed differently depending on the infrastructure provided. There is no one size fits all. Therefore, organisations must ask what adaptation is required to enable them to continue providing their key service to customers.  

There are several different ways to do this:  

• Include adaptation measures in a long-term plan – invest over time and see where technology gets you;   
• Dynamic triggers – for example, when sea level gets to a certain point, an adaptation action is triggered, and investment made. This is a good way of phasing the costs and acting before problems or emergencies.  

Cost  

Adaptation is often considered unaffordable so phasing the costs is crucial.  Smart ways exist to deal with the costs, including planning the actions required now and in future. This thinking alters elements such as design guidance. Specifications can be altered, which builds in adaptation at an affordable cost by breaking it down. You shouldn’t be guided by the cost of adaptation; it’s about how you address the costs. Thinking must be focused on the ways to implement the adaptation and the need to commence that journey now.    

Many organisations like LPC are doing this voluntarily. New Zealand is one of the first countries to introduce mandatory climate change risk reporting so we’re also helping LPC prepare its disclosure for the coming financial year. This enables us to see our work through and provide advice based on our knowledge gained through working with other ports.   

Can you measure the impact of adaptation?  

The adaptation space is much more tangible than emissions mitigation because the impacts can be seen at a local and global level. Our increasing familiarity with the effects of climate change makes the threats easier to grasp and will hopefully encourage action to be prioritised. We need to move quickly to prevent organisations being caught out or unable to get insurance because of poor resilience and adaptation planning.  

Do you assess adaptation from a cultural perspective?  

Yes. We’ve looked at adaptation from an iwi and Māori perspective for some projects because we have many Western business-model construct processes. A cultural adaptation response involves inhabiting and applying the relevant worldview when interpreting and addressing risks. Taking a cultural perspective on climate risk may change the risks prioritised and follow-up adaptation options, for example, using nature-based approaches rather than more grey engineering solutions to achieve similar results.   

What do you believe is the ultimate takeaway to the client in this climate risk process?  

I think the value lies in the engagement and upskilling involved in the process, not just in the report produced, and taking the time to really understand the clients’ business and related issues.   

We’re trying to empower the client to take meaningful action. Climate change requires you to get to the heart of the matter and approach it from a technical and people-oriented perspective. We really enjoy helping organisations and individuals navigate this challenging area and believe anything we can do to ease the journey in a practical way is worthwhile.  

Connect with Anthony Hume on LinkedIn

Find out more about AECOM's climate adaptation services

This article was brought to you in paid partnership with AECOM.