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Is Ruapehu Alpine Lifts the latest business to feel the burn of Climate Transition Risk?


It was very sad to see Ruapehu Alpine Lifts go into voluntary administration this week. This blog is not intended to exploit the situation; but rather to highlight the gravity of what this may point to in the future.


There is no doubt that the 2020/21 years of COVID have been the catalyst for this voluntary administration at Ruapehu Alpine Lifts Limited. However, if you look at the detail, you see how unseasonal levels of rain and warmer temperatures this year have contributed to a major decline in snow levels – a deterrent to the mass volume of visitors needed to generate an economic return.


The questions on our minds at The Bridge are:

  • Is there any hope of trading out of this administration process, given we’re at the end of the season with uncertainty about climate impacts next year?

  • Would you be prepared to buy the business? If not, who would - and how much would these future climate impacts be factored into due diligence and any purchase price?

  • Is this the first big casualty of climate transition risk in Aotearoa, New Zealand?

  • What other sectors may be impacted by climate transition risk here in the next few years?

Ramifications


In terms of the gravity of the situation, it goes beyond the tragic situation of an iconic tourism business becoming insolvent. Being able to ski and enjoy the snow in the North Island may potentially end up being a memory for current and past generations; and something that our future generations are deprived of. This insolvency may also have major economic impacts on the many restaurants and tourism-based businesses in the surrounding areas of Mt Ruapehu, such as Ohakune and Turangi. What also happens to the future value of house prices and other related assets in the region? In essence, you can see how climate transition risk directly relates to the notion of stranded assets at all levels of the economy.


What’s next?


We posted just two months ago about the implications of Rabobank taking the bold step to downgrade the creditworthiness of its of its entire €10.3 billion dairy farm loan portfolio (see here). There are numerous other examples of stranded assets in sectors such as oil & gas, coal and tourism, that are playing out right now. Climate transition risk could become apparent in many more areas that we may not yet appreciate.


Unfortunately, in the case of Ruapehu Alpine Lifts, we don’t have a solution or quick fix here at The Bridge. We are currently looking at how the property and construction sectors need to be thinking about climate transition risk and the implications for the built environment.


Lastly, one comment we often hear in our discussions with businesses is that “we are just a drop in the ocean and anything we do won’t make a material difference to the levels of global carbon emissions compared to the big offshore emitters.” This response fails to appreciate the global connectivity many of you now have and the power of advocacy and collective influence to set new expectations. If it became the norm for every single organisation to take active steps to scrutinise and address its business model along these lines for the benefit of the next generation, what would that do to mitigation on a global scale?

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