I am not a naturally pessimist person (despite the title of my blog). But when it comes to climate change, I often have a sense that mankind is sleep-walking toward a holocaust of its own making. Any optimism? Well, at the risk of clutching at straws, I am heartened by the fact that elements of the private sector have joined the fray.
So we see this call to arms, for example, in Pricewaterhouse Coopers (PWC)’s most recent Low Carbon Economy Index (LCEI) report entitled “Two late for 2 degrees?” which came out in November 2012:
Business leaders have been asking for clarity in political ambition on climate change. Now one thing is clear: businesses, governments and communities across the world need to plan for a warming world – not just 2°C, but 4°C, or even 6°C.
The vast majority of my career has been spent in the private sector: a resume peppered with representatives of capitalism red in tooth and claw: Dun & Bradstreet, Sumitomo Bank, Nomura Securities, Deutsche Bank and Henderson/Gartmore Asset Management.
For the employees of this type of global company, climate change rarely penetrates the consciousness. Continue reading
The Financial Times has an interesting chart based on data from the reinsurance company Munch Re (click for larger image):
Note: roughly speaking you could substitute ‘drought’ for the world ‘climatological’; ‘storms’ for the word ‘meteorological’; and ‘floods’ for ‘hydrological’. ‘Geophysical’ are mostly ‘earthquakes’.
In financial terms, Munich Re sees catastrophe losses coming to $160 billion in aggregate, led by Hurricane Sandy at $25 billion (here). Overall, the US accounted for 67% of overall losses, or $107 billion. To put this in context, US GDP was around $15.8 trillion in 2012, so such losses were 0.67% of GDP. We have to be a little careful here, however, since GDP is a flow concept (like earnings) and catastrophe losses are a stock concept (like wealth).
United States net wealth didn’t growth by $15.8 trillion since you need to take into account depreciation of household, corporate and public-sector assets. The best approach would be to find a figure for the annual change in net wealth and then compare this with projected catastrophe losses going forward (which will almost certainly follow an exponential curve upward). I will return to this theme in future posts.