Climate risk
Encyclopedia
Climate risk means a risk resulting from climate change
and affecting natural and human systems and regions.
In the course of increasing global temperature and extreme weather phenomena
the Intergovernmental Panel on Climate Change
(IPCC) has been founded by the United Nations Environmental Programme (UNEP) and the World Meteorological Organization
(WMO) for a better understanding of climate change
and meeting concerns of these observations. Its main aim is evaluating climate risks and exploring strategies for the prevention of these risks.
the following future effects have to be expected:
While affecting all economic sectors, the effect on single continents will differ. Beside these direct physical climate risks there are also indirect derived ones:
, fishing
, forestry
, health care
, real estate
and tourism
. For example storms and floodings damage buildings and infrastructure, whereas hot summers with less precipitation cause crop failure.
. By this instrument the value of emissions can be quantified monetarily, approximating the value of avoiding hazardous substances. This value shall be internalized by companies and considered in investment decisions. By considering emission costs the prices for i.e. energy and transport can increase and therefore change consumer demand. The insecurity of legislation leads to indefinite adjournation of projects and investments.
, industries producing excessive greenhouse gases are exposed to the risk of an increasing number of lawsuits, if damages can be traced back to emissions, i.e. for floodings, crop failure, etc.
Climate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
and affecting natural and human systems and regions.
In the course of increasing global temperature and extreme weather phenomena
the Intergovernmental Panel on Climate Change
Intergovernmental Panel on Climate Change
The Intergovernmental Panel on Climate Change is a scientific intergovernmental body which provides comprehensive assessments of current scientific, technical and socio-economic information worldwide about the risk of climate change caused by human activity, its potential environmental and...
(IPCC) has been founded by the United Nations Environmental Programme (UNEP) and the World Meteorological Organization
World Meteorological Organization
The World Meteorological Organization is an intergovernmental organization with a membership of 189 Member States and Territories. It originated from the International Meteorological Organization , which was founded in 1873...
(WMO) for a better understanding of climate change
Climate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
and meeting concerns of these observations. Its main aim is evaluating climate risks and exploring strategies for the prevention of these risks.
Climate risks
As per current projections of IPCCIntergovernmental Panel on Climate Change
The Intergovernmental Panel on Climate Change is a scientific intergovernmental body which provides comprehensive assessments of current scientific, technical and socio-economic information worldwide about the risk of climate change caused by human activity, its potential environmental and...
the following future effects have to be expected:
- Continuous increase of temperature
- Cumulation of extreme weatherExtreme weatherExtreme weather includes weather phenomena that are at the extremes of the historical distribution, especially severe or unseasonal weather. The most commonly used definition of extreme weather is based on an event's climatological distribution. Extreme weather occurs only 5% or less of the time...
phenomena - Bumper crops and crop failure
- Polar cap melting
- Changes of the planet’s ecology
- Spreading diseases
- Attenuation of the North Atlantic DriftNorth Atlantic DriftNorth Atlantic Drift is:* An ocean current that continues from the North Atlantic Current* An album by Ocean Colour Scene: North Atlantic Drift this doesn't make any goddamn sense....
While affecting all economic sectors, the effect on single continents will differ. Beside these direct physical climate risks there are also indirect derived ones:
- Physical risks
- RegulationRegulationRegulation is administrative legislation that constitutes or constrains rights and allocates responsibilities. It can be distinguished from primary legislation on the one hand and judge-made law on the other...
al risks - Litigational risks
- CompetitionCompetitionCompetition is a contest between individuals, groups, animals, etc. for territory, a niche, or a location of resources. It arises whenever two and only two strive for a goal which cannot be shared. Competition occurs naturally between living organisms which co-exist in the same environment. For...
risks - ProductionProduction, costs, and pricingThe following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...
risks - ReputationReputationReputation of a social entity is an opinion about that entity, typically a result of social evaluation on a set of criteria...
risks
Physical risks
Direct risks of climate change are expected especially for branches, which strongly depend on natural resources like agricultureAgriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
, fishing
Fishing
Fishing is the activity of trying to catch wild fish. Fish are normally caught in the wild. Techniques for catching fish include hand gathering, spearing, netting, angling and trapping....
, forestry
Forestry
Forestry is the interdisciplinary profession embracing the science, art, and craft of creating, managing, using, and conserving forests and associated resources in a sustainable manner to meet desired goals, needs, and values for human benefit. Forestry is practiced in plantations and natural stands...
, health care
Health care
Health care is the diagnosis, treatment, and prevention of disease, illness, injury, and other physical and mental impairments in humans. Health care is delivered by practitioners in medicine, chiropractic, dentistry, nursing, pharmacy, allied health, and other care providers...
, real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
and tourism
Tourism
Tourism is travel for recreational, leisure or business purposes. The World Tourism Organization defines tourists as people "traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes".Tourism has become a...
. For example storms and floodings damage buildings and infrastructure, whereas hot summers with less precipitation cause crop failure.
Regulational risks
The governmental endeavours to reduce climate costs have direct effects on economy. For example the targets regarding emissions within the Kyoto-Protocol shall be realised by implementing emissions tradingEmissions trading
Emissions trading is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants....
. By this instrument the value of emissions can be quantified monetarily, approximating the value of avoiding hazardous substances. This value shall be internalized by companies and considered in investment decisions. By considering emission costs the prices for i.e. energy and transport can increase and therefore change consumer demand. The insecurity of legislation leads to indefinite adjournation of projects and investments.
Litigational risks
Similar to the tobacco industryTobacco industry
The tobacco industry comprises those persons and companies engaged in the growth, preparation for sale, shipment, advertisement, and distribution of tobacco and tobacco-related products. It is a global industry; tobacco can grow in any warm, moist environment, which means it can be farmed on all...
, industries producing excessive greenhouse gases are exposed to the risk of an increasing number of lawsuits, if damages can be traced back to emissions, i.e. for floodings, crop failure, etc.
Competition risks
If companies do not take measures to reduce climate risks they are competitively disadvantaged. This might lead to increasing production costs caused by obsolete technologies and therefore to decreasing profits.Production risks
Production shortfalls can result from direct or indirect climate risks. I.e. hurricanes damaging oil production facilities can lead to a scarcity of oil and increasing prices. Also the price for energy will rise, because heatwaves cause water scarcity and therefore the supply for cooling water of power plants becomes short.Reputation risks
Companies who are publicly criticized for their environmental policy or high emission rates, might lose customers, because of negative reputation. This risk is currently subordinate.Climate opportunities
Besides climate risks also opportunities can derive from climate change for some branches and innovative companies, i.e. for the automobile and renewable energy sectors. Especially energy-intensive sectors can reduce energy costs by using more efficient technologies, which necessarily have to be developed in near future.See also
- Climate changeClimate changeClimate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
- Effects of global warmingEffects of global warmingThis article is about the effects of global warming and climate change. The effects, or impacts, of climate change may be physical, ecological, social or economic. Evidence of observed climate change includes the instrumental temperature record, rising sea levels, and decreased snow cover in the...
- Emission
- Greenhouse gasGreenhouse gasA greenhouse gas is a gas in an atmosphere that absorbs and emits radiation within the thermal infrared range. This process is the fundamental cause of the greenhouse effect. The primary greenhouse gases in the Earth's atmosphere are water vapor, carbon dioxide, methane, nitrous oxide, and ozone...
External links
- The Stern Review – extensive analysis of the economical effects of climate change
- Mainstreaming of climate risks and opportunities in the financial sector - A research project with background information, issuing the effects of climate risks on the financial sector Ein Forschungsprojekt, das sich mit Auswirkungen der Klimarisiken auf den Finanzsektor beschäftigt mit weiteren Hintergrundinformationen.
- Carbon Disclosure Project – Disclosure of climate exposure and climate risks of the world’s largest companies
- Climate Risk Analysis
- Climate Risk Pty Ltd
Sources
- Allianz Umweltstiftung – Lesemappe Klima. München 2007.
- Investor Network on Climate RiskInvestor Network on Climate RiskThe Investor Network on Climate Risk is a network of investors and financial institutions that promotes better understanding of the financial risks and investment opportunities posed by climate change...
http://www.incr.com (INCR) & CeresCeres (organization)Ceres is a non-profit, American network of investors, environmental organizations and other public interest groups working with companies and investors to address sustainability challenges, such as global climate change....
http://www.ceres.org/: Global Framework for Climate Risk Disclosure - A statement of investor expectations for comprehensive corporate disclosure. October 2006 - The Center for Health and the Global Environment & Harvard Medical School: Climate Change Futures - Health, Ecological and Economic Dimensions, September 2006
- Onischka M. Klimawandel und Finanzmärkte. factorY. 02/2007.
- Carbon Disclosure Project - Carbon Finance and the Global Equity Markets, February 2003,
- Germanwatch. Frischer Wind bei Klimarisiken und –chancen. Juli 2005. http://www.germanwatch.org/rio/si05hg.pdf
- IPCC: Third Assessment, Climate Change 2001 - Report on Impacts, Adaptation and Vulnerability (Policymakers Summary)
- 4th Assessment Report (AR4) of the IPCC (2007) issuing climate changes
- Climate Risk Group of companies http://www.climaterisk.net
- Climate Risk Glossary http://www.climate-risk-analysis.com/glossary/