Climate change poses many risks.  For companies, besides the physical impact of climate change itself, this risk is often embodied by regulatory pressure imposed by government agencies or other entities exercising oversight over economic activities.  This regulatory pressure is often applied through additional requirements, whether for the disclosure of information or a shift in the source of energy (e.g., to renewables from fossil fuels). 

However, it is important to recall that government action is only one of the array of risks that organizations must navigate in this ever-changing landscape.  In particular, there is the risk of becoming the target, or an interested bystander, in a moral persuasion campaign engaged in by the private sector.  And divestment is often a tactic embraced by these movements. 

In short, divestment means the directing of financial resources away from sectors perceived to be contributing to climate change--e.g., fracking, or the fossil fuel industry generally--and thus exerting financial pressure on companies to change their behavior.  The clearest example of this sort of activity is public pressure through the media and other channels to discourage private sector investment in the securities of fossil fuel companies.  While certain organizations are well-known for being the target of divestment campaigns, such as the oil majors, it is important to recognize that this pressure can radiate outwards, and involve sectors and industries that are not directly connected to climate change.  In one recent example, recruiting events for law firms representing major oil companies were targeted by activists, who sought to discourage young lawyers from working at those firms.  In this case, being a service provider to perceived bad actors exacted a reputational cost.

When evaluating the risks posed by climate change, it is important to bear in mind these secondary impacts, in addition to direct exposures to climate change, as organizations navigate these issues.