Resilience to climate change: impacts on infrastructure availability and users

The UK, in 2023 to 2024, experienced the wettest winter in 130 years with eight named storms (Sodden Britain in the grips of wettest winter in 130 years, Independent), whilst a new record-high time temperature of 40.3°C in Lincolnshire was recently recorded in the summer of 2022 (Record high temperatures verified, Met Office). Climate change exacerbates extreme events, such as droughts, flooding, and heatwaves, pushing infrastructure outside of its designed operating tolerances. Crucially these impacts are already ‘baked in’ regardless of the UK’s decarbonisation pathway (UK Climate Projections: Headline Findings, Met Office). Almost all organisations own, manage, or rely upon infrastructure systems for transport, energy, water, accommodation, and communications. Infrastructure owners face increasing pressure to maintain the availability of ageing infrastructure (most of the UK’s existing infrastructure was designed and built in the Victorian era) to meet growing customer demands in a changing climate, and all within the context of challenging financial pressures.

Climate change impacts our economic and societal systems, for example extreme weather events pose a risk to essential services, such as water and energy supplies, transportation, and communication networks, with knock on impacts for public health and the economy (Preparing for climate change, House of Lords Library). Customers will have to accept a reduction in the availability of infrastructure, without further investment in increasingly costly maintenance and adaptation. At the same time asset owners must explore low-cost options for mitigating the impacts of climate events on customers, such as proactively managing customer journeys via alerts for weather events informing customers of any expected disruptions in advance. In a changing world, infrastructure will also be used differently. Changing work habits and technological advancements, accelerated by the COVID-19 pandemic, have reduced the impact of infrastructure failure. For example, transport disruptions are somewhat mitigated by the widespread adoption of home working.

The effects of climate change and the UK’s legally binding commitment to achieve net zero by 2050 place increasing strain on the UK’s infrastructure (The Rise of Resilience, KPMG). Asset owners and customers are exposed to two distinct types of climate risks:

1. Physical risks associated with climate change, such as extreme temperatures, strong winds and higher rainfall could accelerate infrastructure degradation and failure.
2. Transition risks, stemming from the shift to a net zero economy, also affect existing business models, as demands for products and services evolve with a lower carbon economy. 

Asset owners and customers, including corporate organisations, can be severely impacted by climate change events. In 2015, Storm Desmond, with a return period of less than 1 in 2,200 years, caused unprecedented flooding in the UK. Despite a £7.9m investment in flood defences since 2009, the impacts of the flooding on the local area were severe, with the economic impact exceeding £400-500 million. Infrastructure failures included damaged bridges, disrupted traffic lights, and power outages, affecting critical services like hospitals and schools. Lancaster experienced cascading failures due to power loss, impacting essential services, communication, and education. The incident highlights that our focus needs to shift from looking at road, rail, power and other systems separately and instead pay further attention to the interconnected nature of our infrastructure systems, their vulnerabilities, and the need for effective risk management and resilience in the face of climate change (Understanding Emergent Behaviour within the Economic Infrastructure System-of-Systems, University of Bristol).

If asset owners and their supply chain do not effectively manage the risks posed by climate change, then the likelihood of infrastructure failure and the impact this has will be increased. In August 2020, Stonehaven witnessed a fatal rail crash, highlighting the importance of effective climate risk management. An inadequately managed drainage system, was overwhelmed by heavy rain, triggering the worst British railway accident in 18 years. It was found that the drainage system had not been adequately maintained or inspected, reducing its ability to deal with gravel displaced by heavy rainfall. Consequently, Network Rail received a £6.7m fine (reduced from £10m) and have since pleaded guilty to maintenance and inspection failures which led to the death of three people (HMA v Network Rail Infrastructure Ltd, Judiciary of Scotland). This incident underscores the human and economic toll of neglecting climate-related risks, as well as the legal responsibilities of asset owners for the service they provide to their customers. Network Rail has now committed to spending £2.8bn, over its next 5-year control period, starting in April 2024, on activities and technology to help it adapt to the impacts of extreme weather and climate change (£45bn rail improvement plan puts climate change firmly in its sights, Network Rail). Other corporate leaders must prioritise comprehensive infrastructure resilience to mitigate such crises, protecting lives and safeguarding business continuity (Derailment of passenger train at Carmont, UK Government).

The repercussions of infrastructure systems failure are profound for organisations. Beyond the immediate disruption to operations, the economic fallout can be substantial. Financial losses stemming from infrastructure failures during climate events, as seen in Storm Desmond, can extend into the hundreds of millions. Beyond the monetary penalties, there is a broader impact on market perception, investor/public confidence, and the overall standing of the organisation within the business ecosystem. Moreover, the reputational damage resulting from inadequate climate risk management, exemplified in the Stonehaven rail crash, can have lasting effects.

Organisations, particularly those reliant on critical infrastructure, must recognise the urgency of proactive measures. By comprehensively assessing risks, strategically investing in modernisation, and empowering corporate risk functions, organisations can navigate the challenges posed by climate change. 

Navigating the complexities of climate change demands a proactive and strategic approach focused on understanding physical and transition risks to identify a path forward. Accelerating action to build resilience and protect assets, whilst acknowledging that our understanding of risks and the impact they will have will evolve over time. The UK Climate Change Committee emphasises the cost-effectiveness of early action, revealing a benefit-cost ratio for adaptation ranging between 2:1 and 10:1 (The Costs of Adaptation, and the Economic costs and Benefits of Adaptation in the UK, Climate Change Committee). However, with finite resources, funding must still be allocated strategically to ensure that solutions are provided without compromising the needs of customers or the financial position of infrastructure owners. This requires an approach that effectively manages risks without trying to gold plate and future proof through every solution.

Corporate risk functions are critical in combatting the effects of climate change. Responsible for assessing, managing, and mitigating risks, the corporate risk function must consider the effects of physical and transition risks, whilst applying systems thinking. Reconsidering our approach to risk management in the context of infrastructure resilience to climate change is a first step towards proactively managing climate related impacts. Organisations can reduce the physical impacts of climate change on their infrastructure and react to the transition to a net zero economy through effective risk and opportunity management. 

We encourage organisations to adopt a risk-based mindset, accepting there is a need to transform and taking on the challenge. Developing a deep understanding of climate risks and establishing an appetite to tolerate these risks will provide a basis for decision making. Based on our research and experience with infrastructure owners, we have identified the following steps for achieving asset and infrastructure resilience. These steps are interlinked but can be completed in isolation or together to enhance your risk capabilities and ability to predict and respond to the impacts of climate change.

1. Comprehensive Risk Assessment:

Undertake a thorough assessment to identify and prioritise both physical and transition risks associated with climate change. The risk assessment must also consider the criticality of each asset in maintaining the levels of service expected by customers. This foundational step involves creating a heatmap of vulnerable infrastructure via an understanding of regional climate patterns and modelling of potential future scenarios. The insights gained then form the basis for targeted and effective resilience strategies.

2. Strategic Investment in Modernisation and Adaptation:

Allocate resources for the modernisation and adaptation of critical infrastructure assets. Prioritise vulnerable and/or critical assets identified in the risk assessment to minimise the impact of extreme weather events and support the transition to a net zero economy. Strategic investments can help ensure long-term sustainability and resilience against climate-related challenges. However, infrastructure owners must understand that there are no bullet proof solutions and continuous risk management will be required to proactively identify when climate change may again push assets out of their safe operating tolerances. Asset owners can also consider proactive management of the customer journey to reduce demands on infrastructure during intense climate-events, for example, using proactive alerts to promote remote working during storm events.

3. Empower Corporate Risk Functions and Integrate Climate Resilience:

Elevate the importance of risk appetite and tolerance on the executive board’s agenda. Strengthen the corporate risk function to be at the forefront of climate risk management. Provide risk teams with tools and training to assess, manage, and mitigate both physical and transition risks. Integrate climate resilience considerations into corporate strategy and decision-making processes, ensuring alignment with the organisation’s net zero commitment. 

As climate change continues to reshape our environment, the need for resilient infrastructure will only increase. The intersection of climate risks and our reliance on infrastructure systems demands strategic foresight and a commitment to proactive measures. Organisations must develop a deep understanding of the physical and transition climate risks impacting their infrastructure, the effect this has on customers and what appropriate infrastructure availability looks like in a changing world. Crucially asset owners have a responsibility not just to provide a service to customers, but also as the Stonehaven example highlighted, a legal responsibility to keep their customers safe.

A focus on ensuring that the impact of climate change on the customer experience is mitigated in a cost-effective way must be considered alongside an understanding that not all assets can be protected against the impacts of climate change. But by managing risks effectively infrastructure owners can proactively engage customers to minimise the impacts of climate events. Asset owners must also consider how they manage customer expectations and demonstrate progress by communicating the impact that climate change has on their infrastructure and the steps they are taking to improve reliability and resilience. Finally, by understanding risks, making balanced investments in modernisation and adaptation, and empowering risk management, asset owners and operators can enhance infrastructure resilience whilst contributing to a sustainable future.