Disruptive changes to the natural environment resulting from the climate crisis are causing fundamental shifts in behavior and raising greater concerns about the future health of the planet and global population. Whether it’s sea-level rise, droughts, wildfires, or increasing frequency of extreme weather events, every part of the world has been impacted and forced to confront the implications to current and future generations. The importance of clean air, water and food are obvious, but what sets regions apart are the investments they make to secure these needs now and in the future.
Increased wildfires and droughts. 2019 saw record wildfires in California and Australia due to precipitation changes caused by a rise in average global temperatures.153 These changes in rainfall have caused droughts in many areas, making the spread of wildfires more dramatic.
Sea-level rise. Sea levels are currently approximately 9 inches above their pre-industrial Revolution levels154 and will continue rising as the globe continues to warm. Governments and militaries are investing in protections from the ensuing flood waters.155 Miami and New York City are among those U.S. coastal cities affected by these increases and plan to invest in infrastructure to protect themselves. The price tag for various proposed New York City mitigation projects is estimated at $14 billion to $119 billion.
UN Climate Action Summit. The US has officially pulled out of the Paris Agreement as of Nov 4th, 2020, the 2019 UN Climate Action Summit exemplified the limited ability of international governments to create a unified global approach to mitigate climate change. The European Union remains united in policies regarding climate action, but developing countries feel the cost of meeting those standards puts an unfair burden on their ability to develop their economies. The 2020 conference was postponed to 2021 amid COVID-19 concerns, further setting back international efforts to curtail global emissions.
Carbon tariffs. The European Union has increasingly indicated they will impose carbon tariffs on goods imported from countries lacking appropriately stringent carbon mitigation laws. This would both encourage participation in these global efforts and help their local industries, which face a carbon tax, remain competitive.
Investment firms incorporate climate risk. As evidenced by the 2018 letter to CEOs sent by BlackRock founder and CEO Larry Fink, many in the investment community are increasingly calling for the incorporation of climate risk into their traditional portfolios. It is becoming increasingly accepted that businesses failing to account for climate risk will not survive long term.
Climate change will continue as previous measures to reduce carbon emissions have not taken a strong enough hold to appropriately mitigate the continued average global temperature increase, which is at 1.1 degrees C above pre-industrial levels as of 2019.156 Under these conditions, the world will continue to see precipitation change leading to a heightened risk for large wildfires, hurricanes and droughts. Ocean temperatures will also increase, leading to sea-level rise and necessary investments in infrastructure to manage it. Climate change initiatives will continue as partnerships between the public and private sectors, with multinational companies setting many of the more stringent goals for curtailing emissions due to their need to operate across multiple regulatory spaces.
However, focus will likely shift in the near term due to the economic impacts of COVID-19. Governments and companies faced with budget shortfalls due to the economic impact of the virus may no longer have the financial where - withal to follow through on many of their previous pledges, despite the need. Despite such pullbacks, corporations managing climate-based changes to their operating environments will find it imperative to invest in disaster-proofing and climate-mitigating infrastructure. This might include supply-chain redundancy, support for physical infrastructure near facilities or developing contingency plans for climate risk. Furthermore, investment companies will continue to factor climate risk into their portfolios, which will reward companies that take steps to plan for and mitigate climate change.