The article in the url below is interesting not because it reports on firm's attempts to quantify the impact of climate change, but because it shows how bad they are currently at doing just that. First, the article shows how firms are trying to become more realistic in their estimations:
"In 2018, more than 7,000 companies submitted [climate change risk] reports to CDP, formerly known as the Carbon Disclosure Project. And, for the first time, CDP explicitly asked firms to try to calculate how a warming planet might affect them financially. After analyzing submissions from 215 of the world's 500 biggest corporations, CDP found that these companies potentially faced roughly $1 trillion in costs related to climate change in the decades ahead unless they took proactive steps to prepare. By the companies' own estimates, a majority of those financial risks could start to materialize in the next five years or so."
Second, however, the article provides concrete evidence that the range of possibilities is so vast as to render even genuine efforts meaningless:
"[It remains challenging for firms] to take scientific reports about rising temperatures and weather extremes and say what those broad trends might mean for specific companies in specific locations. Previous studies, based on computer climate modeling, have estimated that the risks of global warming, if left unmanaged, could cost the world's financial sector between $1.7 trillion to $24.2 trillion in net present value terms."
And, of course, given a range of possibilities, firms are still vastly under-estimating the potential impact:
"In its report to CDP last year, PG&E said that the rise in wildfire risk in the American West, partly driven by global warming, could create significant financial costs if the utility were held liable for the fires. PG&E estimated the "potential financial impact" from wildfires at around $2.5 billion, based on claims that the utility had paid out in 2017. However, that turned out to be overly optimistic: This past January, PG&E filed for bankruptcy protection and said it now faced up to $30 billion in fire liabilities shortly after its power lines sparked what became California's deadliest wildfire yet last fall."
The encouraging takeaway from the article, therefore, is that large numbers of firms are finally becoming serious about estimating the business risks associated with climate change. The discouraging takeaway is that they do not have the ability (either knowledge or willpower) to come close to their likely impact. Beyond this, however, two interesting (discouraging?) points stand out. First, that in estimating impact, some firms see a benefit to climate change:
"Some 225 of the world's largest corporations highlighted roughly $2.1 trillion of possible opportunities in a warming world, with the majority expected to materialize within the next five years. Eli Lilly, a drug maker in the United States, cited research suggesting that rising temperatures could drive the spread of infectious diseases — a problem the company was well-positioned to help address."
And second, that there remains a substantive geographical/cultural disparity in how firms deal with this challenge:
"The CDP report found that companies headquartered in the European Union are much more likely to detail the potential financial effects of global warming, in part because local regulations often require them to do so. By contrast, companies in the United States, China, Brazil and Mexico were far less likely to report significant financial risks."
Take care
David
David Chandler
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Companies Expect to Feel Climate Change's Bite in 5 Years
By Brad Plumer
June 5, 2019
The New York Times
Late Edition – Final
B4
