The threat that climate change poses for companies is no longer theoretical. Businesses are working to protect their assets from extreme weather events, and more companies are figuring such ‘climate risk’ into their calculations. Investors are paying close attention. But there is a related threat that many haven’t fully taken in: carbon risk – the impact of climate-change policies on a company’s strategy and returns. As global warming worsens, companies can expect tougher government measures that will extract a growing price for their carbon emissions. These mechanisms could sideline the unprepared. This article describes the approach used by an increasing number of companies to brace for the future: internal carbon pricing. At its core, this involves setting a monetary value on the company’s emissions that reflects carbon prices outside the organisation. In 2017, nearly 1400 companies were actively using internal carbon pricing or planning to do so. The authors of the research note that by putting your own price on carbon, your company can better evaluate investments, manage risk, and forge strategy.

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