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Climate Change Is “Risky Business”
By Logan Coffman

Many reports on the negative implications of increasing greenhouse emissions have been released over the years by entities such as the UN Intergovernmental Panel on Climate Change (IPCC) and the American Association for the Advancement of Science (AAAS). But for the most part, these reports have failed to truly pinpoint the long-term economic drawbacks of climate change.

That is why a recent report commissioned by a plethora of investors, business leaders, and policy-makers including former New York City Mayor, Michael Bloomberg, former Secretary of the Treasury, Hank Paulson, and hedge-fund billionaire, Tom Steyer, has begun to create serious traction in promoting the conversation about climate change risks among business leaders across industries and around the world.

The long-term effects of inaction far outweigh the short-term costs of action.

 

The report, aptly titled Risky Business: The Economic Risks of Climate Change, focuses on the long-term economic effects of climate change through the year 2100. The message is clear: The long-term effects of inaction on greenhouse emissions far outweigh the short-term costs of action.

The Risky Business Report assumes no new national policy or global action to mitigate climate change and an absence of investments aimed at improving our resilience to future climate impacts.

The three key risk areas magnified by the research were:

  • Large-scale losses of coastal property and infrastructure
  • Extreme heat across the nation—especially in the Southwest, Southeast, and Upper Midwest—threatening labor productivity, human health, and energy systems
  • Shifting agricultural patterns and crop yields, with likely gains for Northern farmers offset by losses in the Midwest and South

We have already begun to see the slow onset of some of these climate change triggered events. The record heat across the U.S. the past few summers is only the beginning. The negative impacts of climate change are predicted to grow materially in the next 25 years and are likely to create a ripple effect throughout the economy.

Some of the studies key findings:

  • By the end of this century we will likely see 45 to 96 days per year over 95°F in the U.S.
  • By 2050, between $66 billion and $106 billion worth of coastal property will likely be below sea level, rising to $238 billion to $507 billion by 2100.
  • Labor productivity, of outdoor workers, such as in construction, utility maintenance, landscaping and agricultureparticularly in the Southeast, could shrink by as much as three percent due to the projected number of days with temperatures topping 95°F.

While the challenges we face are quite daunting, few are trying desperately to instigate change. In a recent interview with The Nation, Gregory Page, one of the members of the Risky Business Committee, as well as the executive chairman of Cargill, openly expressed his concern: “I have had a fair amount of experience over my career in attempting to understand and manage risk,” said Page, alluding to the 2008 financial collapse. “In many ways the climate bubble is actually more cruel and more perverse.”

While advocacy from an executive like Page is a step in the right direction, it is apparent that his values differ from the politicians who Cargill supports with campaign contributions. Cargill is one of the biggest funding resources for a wide range of climate change detractors, including Senator John Boehner, who opposes the EPA having the power to regulate greenhouse emissions.

This is truly unfortunate, because in almost every scenario when the government can establish a regulatory framework in which businesses can operate and thrive, the country has experienced economic success. The closest thing we currently have to uniform regulatory practices is the Interpretive Guidance that was developed by the Securities and Exchange Commission in 2010, giving companies some idea of how to consider their “material” risks. According to sources however, as of 2013, more than 40% of companies listed on the Standard & Poor’s 500 Index were still not voluntarily disclosing climate risks.

As investors and citizens, looking forward, whether it’s evaluating infrastructure projects with a multi-decade lifespan, or making investments in new power plants and pipelines, we must take into account the implications that a changing climate is likely to have upon long-term value.

We have a choice whether to accept the climate risks so clearly illustrated in the Risky Business Report or whether we get on another path. This is not a problem for another day. The investments we make today—this week, this month, this year—will determine our economic future.

 

At First Affirmative, we understand that the ways we save, spend, and invest can dramatically influence both the fabric and consciousness of society. We believe that in addition to the benefits of ownership, investors bear responsibility for the impact our money has in the world. Are you making conscious decisions about the impact of your consumer purchase and investment decisions?

Mention of specific companies or securities should not be considered an endorsement or a recommendation to buy or sell that security. Past performance is no guarantee of future results.

 

Posted: September 3, 2014