On top of all this year’s crises, 2020 is on target to be another record-breaking year for climate change. According to the National Oceanic and Atmospheric Administration (NOAA), climate disasters have already cost the United States nearly $50 billion, tying previous record-holding years (2011 and 2017) - and we haven’t even reached Halloween.
While storms and fires steal the spotlight—a record-breaking 25 named storms and California’s first “gigafire” (burning over one million acres)— slow-burn, climate-related disasters continue apace. Nearly half of the country is in drought, including portions of the Northeast, Hawaii and much of the western U.S. And while the Southeast is one of the few spots not currently in a drought, it suffered a scorching heat wave this summer during rising cases of COVID-19. Put another way, every part of the U.S. is already feeling the impacts of climate change, and that is affecting both regional and national economic prosperity.
Climate disasters and the long-term impact on the economy
According to the World Economic Forum, environmental threats comprised the top five global risks in 2020 for the first time. The number one risk in terms of impact is climate action failure and the additional likely threats that loom over the planet are extreme weather followed by climate inaction.
To that end, over 200 firms have determined that inaction on climate will cost them $1 trillion, so opportunities abound to invest in mitigation to reduce those economic risks.
Economic sectors are already feeling the burn from climate change. As the impacts worsen, the hardest-hit industries include insurance, agriculture, food and beverage, infrastructure, buildings, energy and tourism; in short, virtually every facet of modern life.
In the United States alone, climate-related costs are estimated to equal 10 percent of the national Gross Domestic Product by the end of this century if climate change is left unchecked. Looking past the next decade or so, insurance in particular will be hard hit as the damage from extreme weather mounts and sectors such as the mortgage market in vulnerable areas could be dealt a fatal blow if homes become uninsurable.
There's still time to invest in climate action
Fortunately, the window for action is still open.
Unfortunately, it’s a small window. The federal government and most state governments are in reaction mode: doling out necessary disaster relief funds, but not doing much on the front end to mitigate the risk of future climate disasters. And while some companies are establishing serious climate goals, many are not. Effective action will require efforts by every strata of society. Companies with foresight will be better positioned in the future by investing in climate solutions now to reduce their monetary risk later.
Depending on the industry, those investments can take many forms. As a first step, every company should be quantifying risk in their direct operations and supply chains. The building sector, for example, could invest in more efficient and resilient building codes. The National Institute of Building Science found that building beyond code to a “code-plus” mitigation level would return $4 for every dollar spent.
Watch for a shift in one sector in particular
The energy industry is at the center of the climate discussion. A recent study by the Imperial College London and the International Energy Agency found that investments in renewable energy in the U.S. yielded 200.3 percent returns, as opposed to 97.2 percent for fossil fuels. That, on top of the fact that renewable energy is a low- or no-carbon energy source and some, like solar PV and wind, use little to no water to generate electricity - a significant concern in a world riddled with drought and heatwaves. Further, investments in distributed generation have proved to be both a mitigation and adaptation technology in extreme weather events like hurricanes.
The companies that are leaders in acting on climate change will likely end up be leaders in weathering the impacts these ongoing climate disasters as well. Decades ago, we said that investing in climate solutions was like an insurance policy in case something happened. Now we see the outcomes occurring in real time with likely even more intense impacts in the future. Investing in climate solutions is now both insurance for the likely future as well as, to put it simply, smart business.
Image credit: Pxhere
Kate is a writer and policy wonk, with a focus on water, clean energy, climate change and environmental security. She spent over a decade running energy-water nexus and energy efficiency programs at Environmental Defense Fund as well as time at the U.S. Departments of Energy and Defense, U.S. Government Accountability Office, and state and federal legislatures. She serves as an Advisory Board member of CleanTX, which aims to accelerate the growth of the clean tech industry in Texas.