Climate Change is Risky For Business
Risky Business, an organization founded by Tom Steyer, Hank Paulson, and Michael Bloomberg, three giants of the business world, released a report detailing the extraordinary risks that climate change poses to the nation’s economy and to the future business climate in the United States. One of the key conclusions of the report is that it’s time to move quickly from climate risk assessment to risk management.
“it is time for all American business leaders and investors to get in the game and rise to the challenge of addressing climate change. The fact is that just as the investments and economic choices we made over the past several decades have increased our current vulnerability to climate change, so will the choices we make today determine what our nation looks like in 15 years, at mid-century, and by 2100.”
The Risky Business report found that sea level rise and the increased damages from storm surges are likely to lead to an additional $2 - $3.5 billion in property losses each year by the year 2030. In interior parts of the country, particularly the Midwest and Southwest, extreme heat will have big impacts on labor productivity, which will affect agriculture and other industries. These extreme spikes in temperature will also cause big problems for electricity grids and generation, increasing demand for power in the summertime.
The impacts of climate change documented in Risky Business are nothing new, in fact they mirror the impacts documented in the recently release National Climate Assessment and the findings of the International Panel on Climate Change. What is different about Risky Business is that the impacts on American businesses are being brought to light.
The report urges a range of actions to be taken by businesses, investors and public policy makers. Risky Business strongly urges each sector to begin factoring future climate impacts into their decisions (particularly where major capital investments are involved), adopting practices that will make our economy and businesses more resilient to the impacts of climate change, and to adopt policies that anticipate, mitigate, and adapt to the impacts of climate change.
NRDC couldn’t agree more with this assessment and we have identified three critical areas where action today can help avoid some of them most dramatic consequences of climate change for businesses and communities across the country.
First, investments in water infrastructure need to take into account future climate impacts to ensure adequate supply for industry and continued economic growth. The $125 billion in public financing that has been made available for drinking water, wastewater, and stormwater infrastructure needs to be focused on dealing with future climate impacts. We have to make sure that these federally-capitalized and state-managed revolving loan funds for water infrastructure are making climate preparedness a top priority for funding.
Second, we need to make sure private insurers and the federally backed National Flood Insurance Program recognize the inherent risks we face due to climate change. Because of the increased flooding risk there is a long-term need to relocate out of flood prone areas, especially in coastal areas threatened by sea level rise. Federal flood insurance for small businesses has adopted risk based pricing. Further reforms are needed to discourage development in areas vulnerable to sea level rise and flooding. Private insurers should also do more to work with commercial and industrial clients to recognize these risks and encourage siting of facilities in safer locations. President Obama and high-level officials are meeting today with insurance officials to discuss how to make that happen, according to a report in Politico.
Finally, we have to begin integrating climate impacts into our planning for future natural disasters. States and municipalities develop disaster plans that are intended to anticipate future natural disasters like floods, wildfires, and droughts, but the impacts of climate change are not adequately factored into those plans. Businesses and investors would benefit from integrating climate risks into state and municipal disaster plans so they know how local governments are preparing for the future, before they make major capital investments.