The World Economic Forum’s Global Risks Perception Survey in 2019 rated extreme weather events and failure of climate-change mitigation as the two most likely global risks.
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North American wildfires were not the only extreme weather event in 2018. A prolonged drought in Australia reduced water supplies and impaired agriculture and associated industries, while 72 tropical cyclones in the northern hemisphere brought devastation to several areas of the world. Meanwhile, there were dramatic floods in eastern Africa, Japan, and in Kerala, India –the last of which displaced more than a million people. Just a year before, in 2017, North America saw one of its worst storm seasons economically, with three of the five costliest hurricanes ever in history occurring within a span of a month and a half.
The exact impact of future events may be hard to predict yet, but experts have managed to connect a warming world with the growing number and intensity of extreme weather events. Continued greenhouse gas emissions are likely to cause further warming of the world, which could lead to more extreme weather events in the short term and troubling economic and social consequences in the longer term.
Businesses are beginning to worry.
IMPACT ON BUSINESS
There are several ways in which businesses and economies can be affected by extreme weather events – including physical consequences, regulatory impacts, national security issues, and technological changes.
If average global temperatures continue to rise, certain areas of the world may end up becoming uninhabitable because of flooding and infrastructure damages caused by rising sea levels, changes in agricultural patterns, ocean acidification and loss to marine life, curtailed natural water supply, diseases and other health concerns, etc. Insurance is one way to mitigate the risk from these scenarios.
At the same time, nations are working toward fulfilling the goals of The Paris Agreement to achieve net zero carbon emissions in the second half of this century and to try limit the increase in global average temperatures to less than 2ºC. This would mean lessening use of fossil fuel resources and a move toward cleaner energy solutions, which are increasingly becoming both cost efficient and more widely available. This could negatively affect organizations in the coal, oil, and natural gas space, while helping create opportunities for firms engaged in cleaner energy solutions or those working in climate change adaptation. According to a report by the Task Force on Climate-Related Financial Disclosures, a move toward a lower-carbon economy could require $1 trillion in investments annually.
The increasing physical and financial risks to businesses from climate change need to be identified and addressed. The threat is real, and the time to act is now.
Landsat imagery courtesy of NASA Goddard Space Flight Center and U.S. Geological Survey.