$650 Billion and Rising: The Current Cost of Climate Change
The Gist: Businesses need to move to protect themselves from the devastating effects of climate change, according to a new report from Morgan Stanley. Climate disasters have cost $650 billion in just the past three years, according to the investment bank. Much of that damage has hit North America, where hurricanes and wildfires have been persistent.
Morgan Stanley urged businesses to prepare for a world with intense weather events, infectious disease and rising sea levels.
“We expect the physical risks of climate change to become an increasingly important part of the investment debate for 2019,” Morgan Stanley equity strategists Mark Savino, Jessica Alsford and Victoria Irving said.
By the numbers: There were plenty of sobering statistics released by Morgan Stanley:
- $650 billion: the cost of climate disasters in the past three years.
- $415 billion: the cost of those disasters in North America. That’s 0.66 percent of the North American GDP.
- $54 trillion: the potential cost of damages due to global warming by 2040.
Billion-dollar disasters are becoming commonplace and risk professionals are concerned: The report comes on the heels of the National Oceanic and Atmospheric Administration reporting that 2018 had 14 disasters causing $1 billion or more — making it the eighth consecutive year with eight or more billion-dollar disasters. The NOAA reported that 2018 was the fourth hottest year on record.
Global warming is becoming an increasing concern for risk professionals. In fact, a 2019 AXA survey found that 63 percent identified climate change as a key concern, compared to just 39 percent the year before. Helene Chauveau, head of emerging risks for AXA, told Risk & Insurance®: “The risk respondents felt that the level of awareness associated with this risk is not satisfactory; meaning that people don’t take enough global action that is needed to fight this climate change. ”
Big risks in the short- and long-term: Morgan Stanley says climate change will negatively affect dozens of industries like agriculture and oil-and-gas production in the short-term — and real estate, leisure and consumer retail in the long-term. Currently, climate change is affecting food supply chains for products like chocolate, vanilla, avocados, coffee and wine, changing how fine art is protected, and transforming the energy industry.
Nearly every sector seems to be affected.
Worth the read: It’s not easy, but there are steps business leaders can take to put themselves in a better position to face climate change and the natural disasters they bring. McKinsey released this expansive report detailing how businesses can adapt to climate change, while Inc. offered six ways to climate change your business. &