Lessons in managing climate risks from some most familiar with financial ones
Put Republican Hank Paulson, Independent Mike Bloomberg, and Democrat Tom Steyer together, and out comes one of the more unusual – and unusually impactful – climate reports.
Tri-partisan coalition tackles climate change
The report is significant, first, because we have a tri-partisan group spanning George W. Bush’s treasury secretary Paulson, former mayor of New York Bloomberg, and environmentalist investor Steyer – all joining forces to get a message through.
That list of names alone should make one sit up and listen.
Last time a similar coalition came together was in the dog days of 2009, when Senators Lindsay Graham, Joe Lieberman, and John Kerry were drafting the to-date last viable (and ultimately unsuccessful) Senate climate bill.
Global warming is hitting home
Next, Risky Business is important because it shows how climate change is hitting home. No real surprise there for anyone paying attention to globally rising temperatures, but the full report goes into much more granular details than most, focusing on impacts at county, state and regional levels.
Risky Business employs the latest econometric techniques to come up with numbers that should surprise even the most hardened climate hawks and wake up those still untouched by reality. Crop yield losses, for example, could go as high as 50 to 70 percent (!) in some Midwestern and Southern states, absent agricultural adaptation.
The report is also replete with references to heat strokes, sky-rocketing electricity demand for air conditioning, and major losses from damages to properties up and down our ever-receding coast lines.
Not precisely uplifting material, yet this report does a better job than most in laying it all out.
Financial markets can teach us a climate lesson
Finally, and perhaps most significantly, Risky Business gets the framing exactly right: Climate change is replete with deep-seated risks and uncertainties.
In spite of all that we know about the science, there’s lots more that we don’t. And none of that means that climate change isn’t bad. As the report makes clear, what we don’t know could potentially be much worse.
Climate change, in the end, is all about risk management.
Few are better equipped to face up to that reality than the trio spearheading the effort; Paulson, Bloomberg and Steyer have made their careers (and fortunes) in the financial sector. In fact, as United States Treasury secretary between 2006 and 2009, Paulson was perhaps closest of anyone to the latest, global example of what happens when risks get ignored.
We cannot – must not – ignore risk when it comes to something as global as global warming. After all, for climate, much like for financial markets, it’s not over ‘til the fat tail zings.