Not a week goes by without more evidence of climate change wreaking havoc across the world. From wildfires in Greece and Turkey, to Hurricane Henri hitting the East Coast of the U.S., and this week’s announcement of the climate change-exacerbated water shortages in the Colorado River,1 there’s no escaping the deleterious impacts of continued warming.
The proximate impacts on communities are acute and the indirect effects on businesses and consumers are extensive: wildfires are limiting the availability of lumber and drought is hindering agricultural production of commodities like coffee, chocolate, and rice. Global supply chains and entire industries are increasingly vulnerable to severe climate-generated disruptions.2
“It’s as if the planet is putting an exclamation point on a pivot away from business as usual, as we now acknowledge the physical and economic risks of climate change accruing to all sectors of the global economy.”3
From a public sector perspective, municipalities hard hit by physical climate impacts may find it increasingly difficult to borrow for climate-related projects and other expenditures. The drought conditions in the Western U.S., for example, may lead to reduced “income from their water systems because there’s less to sell or they may have higher costs to provide adequate supplies.”4 Conversely, “cities need to limit development in areas prone to flooding, for example, but also need the property tax revenue from building on valuable land.”4 The situation is so serious that, climate data company, risQ, calls climate risk “an existential threat to the municipal debt ecosystem.”5 So, look out for the credit downgrades.
As the Sustainability Accounting Standards Board (SASB) explains, “[i]nvestors can’t simply diversify away from climate risk; instead, they must focus on managing it….”6 Managing such far-reaching and complex risks requires a level of collaboration across the financial services industry, governments, and other stakeholders that we’ve never before attempted. As stated in a piece co-authored by Michelle Dunstan of AllianceBernstein, “[f]inding solutions to any global challenge to humanity is a marathon, not a sprint. More precisely, it’s a collective marathon, run by governments and social, cultural, and economic constituencies, sometimes in competition, but often in collaboration.”7
An important (rhetorical) question is: are we adequately prepared for this marathon? Generally speaking, people don’t just show up and run 26 miles without having first completed intensive training and planned their nutrition and hydration. AllianceBernstein is looking to help prepare the financial services industry in its collaboration with Columbia University in launching the Columbia Climate School.
Gitterman Asset Management is also working to create an immersive and educational experience through our conference, The Great Repricing: Financial Advice in the Age of Climate Change. We’re partnering with an impressive lineup of expert speakers and organizations to bring you four days of climate-focused content that you can access for 12 months after the event. Join us now and be part of humanity’s most important marathon.
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[1] https://www.nytimes.com/2021/08/16/climate/colorado-river-water-cuts.html
2 https://www.cnbc.com/2021/08/19/climate-change-supply-chain-disruptions-how-to-prepare.html
6 https://www.sasb.org/knowledge-hub/climate-risk-technical-bulletin/