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| Credit: Cirm.in |
consequences that can occur after bad weather and natural disasters. Insurance companies, food companies such as MARS candy, and many other companies are hiring weather risk managers so that they can be better prepared for the future and make sound financial decisions.
However, these events are usually short-term, only lasting a few days or possibly up to a week. For instance, they would try to figure out the risks associated with a hurricane that was going to impact the coast. But now, climate scientists and meteorologists should be looking at the broader picture and considering where climate change fits into the puzzle. Decisions need to be made as to what needs to be done in order to prepare properly financially so that our economy can withstand the effects climate change will have on it over many years to come.
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| Climate Change Risk Management Steps - Credit: Four Twenty Seven |
Those that haven't jumped on board yet are being left behind and, in the case of the Commonwealth Bank of Australia (CBA), facing lawsuits. The CBA is being sued for misleading shareholders over the risks climate change presents to their business interests. The claim argues that climate change causes financial risks to the bank, both as a business and to its customers, and they failed to report these risks to investors. This demonstrates an important shift in the world's understanding of climate change. A few years ago we would have been debating about the existence of climate change and if it is something we should actually be worrying about. Now that most of the world has come to accept that climate change is real, companies and banks are expected to think about the risks and outcomes associated with climate change and how that will impact the business and the consumer.
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| Energy efficient buildings - Credit: CMFE News |
However, there are still the countries and people out there that don't have climate change anywhere on their radar since they don't think that it will be a problem that will affect them personally. For instance, many people who are saving for retirement aren't aware of a possible risk of a climate-induced financial crisis and therefore aren't allocating funds for this purpose just in case. Similarly, some countries have a very short-term approach, so they don't necessarily see the benefits of doing things today that might not benefit them until 25 or 30 years into the future.
If we take a look at some of the impacts that climate change has on our economies today we realize that the costs associated with extreme weather events are increasing. Hurricanes Harvey, Maria, and Irma are all now in the top five in terms of the costliest hurricanes on record. Climate scientists are fairly confident that climate change will cause an increase in the severity and possibly even the number of extreme weather events, creating even higher costs for natural disasters, such as hurricanes, moving forward.
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| Sea-level rise simulation - Credit: GLOBE-Net |
The economic impacts go on and on... including higher temperatures driving up electricity bills and contributing to droughts and coastal cities having to possibly relocate. The connection between the science and the economics of climate change is rather clear. Now, something just needs to be done about it.
On a visit to Hong Kong this winter, I was told that the Municipal government is constantly trying to combat rising sea levels by filling in the ocean. These investments generally cost billions of dollars and luckily, the city of Hong Kong can afford it. But what about cities like Dhaka? The economic costs that you are talking about are very real, not only for developed countries.
ReplyDeleteIt's good that financial companies are becoming aware of the risks of climate change and creating financial incentives in sustainable industries. I am curious about the other economic risks brought on by climate change such for food and other industries people rely on. I would be hesitant to claim that the economic effects of climate change are clear. While it is true that people are realizing the risks it poses, the extent of them and how other things like climate induced migration and drought will affect the economy is not known.
ReplyDeleteIts really interesting to find out and read more about weather risk management. I never even knew that this was a possible major here at Penn State. Its good we have majors like this to properly prepare for the weather in terms of business. Its very real that climate change has huge economic impacts on our lives. I think that it is also important to take this claim and make it more known to the public, especially developing countries and those who do not have any type of climate change radar.
ReplyDeleteHonestly I have never thought too much about the impact that climate change has on the global economy but it is astonishing to think about. As climate change continues to become a more prevalent issue our economy is certainly going to take a big hit. It is hard to prepare for because there isn't exactly a perfect solution for how to handle this. No matter what we do to prepare ourselves for this, it is probably coming at us faster than we can handle. In the case of the rising sea level wiping out entire coastal cities, there is not much we can do to prevent or subsidize that. Unfortunately, we can't relocate those cities, so we should just prepare ourselves for the reality of it instead of being in denial.
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