Climate Change and Big Business: Bridging the Gap

Of the 10 most expensive hurricanes in US history, eight occurred within the past decade. To a lot of people, the increased severity of storms points directly at climate change.

Personally, I’m fascinated by the effect of climate change on various U.S. industries. Many are big, powerful, and now vulnerable. Some of these sectors rely on weather patterns. After suffering through droughts, flooding, and superstorms such as Hurricane Sandy; big business sectors, I believe, are starting to see the need to engage more fully in the climate change discussion. I would like to discuss three industries today and why I think they should be more actively engaged in finding solutions to climate change.

Insurance

I work in insurance, and I know firsthand that climate change is a direct threat to our industry. We deal with risk on a daily basis, and one of the largest risks insurers have to consider is severe weather. Hurricane Sandy and Irene caused nearly $100 billion worth of damage, and about a third of that was paid out by insurers. Insurance companies exist to protect people and businesses and they are fully prepared when severe weather strikes a community. However, more frequent, stronger storms and unpredictable weather aren’t good for business.

In June 2013, an insurance research group called the Geneva Association release a report called “Warming of the Oceans and Implications for the (Re)insurance Industry.” The report explained that rising ocean temperatures are shifting climate patterns. The report also called for a “paradigm shift” in the way the insurance industry calculate risk.

Traditionally, insurers have predicted the future by studying the past, but due to climate change the past can no longer reliably predict the future. Consider 2013, which many models predicted would be a record year for strong hurricanes: At peak season, we’ve seen very little activity. This is obviously a good thing, but with predictions being so out of whack, it says to me that insurers need updated risk models.

Many insurance providers have embraced the topic of climate change. With updated risk models, they can work closely with regulators to set more accurate price signals to balance both risk and consumer needs. Insurance companies can also help communities plan better for climate change and encourage more durable, sustainable homes and buildings.

Agriculture

The relationship between climate change and agriculture is a bit more complicated. The glaring reason for this is that the agriculture industry directly contributes to the problem of climate change by producing tons of carbon emissions. Globally, the agriculture industry accounts for roughly one-third of our greenhouse gas emissions, according to a report released in 2012 by the Consultative Group on International Agricultural Research. But while contributing largely to the problem, the agricultural industry relies heavily on weather patterns for growing crops. Droughts, floods and other severe weather can cripple farms leading to lost profit, food shortages and potentially famine.