Climate change poses increasing and varied risks to the U.S. economy, according to a newly released report by prominent business leaders Michael Bloomberg, Hank Paulson, and Tom Steyer (which you can download here).
The Risky Business report quantifies the financial risk of climate change in different regions – from flooding to decreased labor productivity and crop loss – if business proceeds as usual.
“Because we’re such a large, geographically diverse country, the impacts of climate change are not going to be uniform across the United States,” said Matt Lewis, director of communications for the Risky Business Project, on a recent conference call for business leaders hosted by Business Forward.
On the call, Lewis and Dr. Robert Kopp, the lead scientist behind Risky Business, were joined by Frank Nutter, CEO of the Reinsurance Association of America, to discuss the report’s findings and the possibility of extreme weather events becoming the “new normal.”
Measuring the Impacts
Kopp first explained how the financial impacts of climate change were quantified.
Researchers used models to determine how much these risks might affect the economy. The report predicts significant changes in crop yield and labor productivity from higher temperatures and decreased water availability.
“We’ve come up with a framework for estimating the probability of different temperature and precipitation and sea level outcomes around the United States,” Kopp said.
One of the largest economic impacts will be lost outdoor labor productivity from more extremely hot days, which could amount to at least a percentage point of GDP over the century.
Climate Change Could Cost American Taxpayers
Frank Nutter discussed the financial strain that severe weather places on the federal government and insurance companies.
The U.S. government currently has about $1 billion per year budgeted for disaster assistance.
According to Nutter, however, “the federal cost expenditures looking forward should be about $20 billion a year, on average, for the next 75 years.”
For context, Congress approved $51 billion in federal assistance for Superstorm Sandy, along with another $9 billion for flood insurance.
Providing coverage from natural disasters is also a challenge for the private insurance industry: 12 of the 16 most expensive insured catastrophes have happened in the past decade.
A Chance for Businesses to Lead
While the effects of climate change across regions have catastrophic potential, business leaders have the choice to recognize the risk and invest in a sound economic future.
“We really feel that the business community is in a far better position than anyone else to sort of look at the data, and understand the implications for your business and what you might need to do,” Lewis said.