The word of the year for 2018 in climate risk was underestimated. This past year saw investors and corporate managers acknowledging that they are underestimating (sometimes vastly) the financial impacts of climate.
The word appeared in many recent headlines. Some of the most notable were: Mark Buchanan's article in Bloomberg: “Underestimating Climate Change Cheats Investors”; Jane C. Hu's article in Quartz: “Companies are seriously underestimating how climate change will affect business” and Adele Peters' article in Fast Company: “Companies are vastly underestimating how badly they’ll be hurt by climate change”. All three pieces tie back to an article in Nature: “The private sector’s climate risk and adaptation blind spots”.
The Nature article describes a detailed review of more than 1,600 corporate adaptation strategies. The study analyzed how these companies assessed their climate change impacts and what strategies they developed to manage them. It found that companies report the costs of physical climate change impacts and the associated management strategies both “sporadically” and “inconsistently”. Significantly, the strategies reflect only a narrow view of risk that underestimates supply chain and broader societal impacts. The study flags the presence of pervasive and potentially material “blind spots” within the private sector.
As a provider of climate analytic services, we are seeing first-hand a real awakening and are receiving calls for help to understand climate risks. We are seeing leaders step up and begin wrestling with the seemingly simple question: How does climate change affect me?
Leaders from financial services and corporations alike are seeing the financial opportunity created by the megatrend of climate change. They want to be able to conduct ongoing climate risk analysis and incorporate climate risk reduction into their everyday decision-making.
This forward-thinking group of leaders no longer finds the “blind spot” acceptable. As Jane C. Hu clearly articulated in Quartz: “If you can’t adequately predict climate change’s effects, that likely means you can’t adequately prepare for them, either”.
This forward-thinking group of leaders no longer finds climate “blind spots” acceptable. As Jane C. Hu clearly articulated in Quartz: “If you can’t adequately predict climate change’s effects, that likely means you can’t adequately prepare for them, either”.
The team at The Climate Service is 100% focused on helping these corporate leaders see into their blind spots. Our ClimanomicsTM cloud-based climate risk analytics solution enables subscribers to measure, manage, and monitor their climate risk to inform business decisions. It provides impacts in financial terms (not just exposure) so that the output is decision-relevant. It provides point-and-click scenario analysis across multiple scenarios, multiple hazards, and multiple time periods for any location on Earth.
As we head into 2019, there is no longer any room for blind spots. There is no longer room to underestimate, nor should we overestimate the business challenge of climate change.
That’s why the 2019 climate risk word of the year is quantified, because it’s now possible to quantify estimates of financial climate risk. Quantified impacts finally enable investors and corporations to incorporate climate change into existing risk management processes. Looking into our crystal ball for 2019, we anticipate a surge of interest from leaders in financial services and corporate sustainability in quantifying climate risk.
It’s time to step out of the blind spot. It’s time to incorporate climate risks into financial decisions. It’s time to move from underestimated to quantified. We would love to partner with you as you take that step.
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